EXHIBIT 10.51
LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 13, 2001
BETWEEN
PUMPKIN LTD.
AS BORROWER
AND
LASALLE BUSINESS CREDIT, INC.,
AS LENDER
$10,000,000
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this 13th
day of June, 2001, by and between LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("Lender"), with its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and PUMPKIN LTD., a Delaware corporation, with its
principal office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower").
WITNESSETH:
WHEREAS, from time to time Borrower may request Lender to make
loans and advances to and extend certain credit accommodations to Borrower, and
the parties wish to provide for the terms and conditions upon which such loans,
advances and credit accommodations shall be made;
NOW, THEREFORE, in consideration of any loans, advances and
credit accommodations (including any loans by renewal or extension) hereafter
made to Borrower by Lender, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by Borrower, the
parties agree as follows:
1. DEFINITIONS.
(a) GENERAL DEFINITIONS
"ABN AMRO" shall mean ABN AMRO North America, Inc. and ABN
AMRO Bank, N.V.
"ACCOUNT DEBTOR" shall mean the Person who is obligated on or
under an Account.
"ACCOUNTS" shall mean all of Borrower's presently existing and
hereafter arising accounts, accounts receivable, contract rights, instruments,
documents, chattel paper, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods or the rendition of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guarantees, letters of credit and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower, and all products and
proceeds of the foregoing.
"ACCOUNTS ADVANCE RATE" shall have the meaning set forth in
paragraph 2(b)(A) hereof.
"ACCOUNTS TRIAL BALANCE" shall have the meaning set forth in
paragraph 12(c) hereof.
"ADVANCE RATES" shall mean collectively, the Accounts Advance
Rate and the Inventory Advance Rate.
"AFFILIATE" means any Person: (a) directly or indirectly
controlling, controlled by, or under common control with, Borrower; or (b)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in Borrower; or (c) five percent (5%) or more of whose voting stock or
other equity interest having ordinary voting power for the election of directors
or the power to direct or cause the direction of management, is directly or
indirectly owned or held by Borrower; or (d) which has a senior executive
officer who is also a senior executive officer of Borrower. For purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with") means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of
a Person, whether through the ownership of voting securities or other equity
interest, or by contract or otherwise.
"AUTHORITY" shall have the meaning set forth in paragraph
15(r)(iv) hereof.
"BANK" shall mean LaSalle Bank National Association.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of
1978, as amended, including amendments made by The Bankruptcy Reform Act of
1994, as codified in Title 11 of the United States Code.
"BENEFIT PLAN" shall mean an employee pension benefit plan
sponsored, maintained or contributed to by Borrower or an ERISA Affiliate, as
defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA.
"BORROWER" shall have the meaning set forth in the
introductory paragraph hereof.
"BORROWING BASE" shall have the meaning specified in paragraph
2(b) hereof.
"BORROWING BASE CERTIFICATE" shall mean a certificate duly
executed by an officer of Borrower appropriately completed and in substantially
the form of EXHIBIT C hereto.
"BREAKAGE COSTS" shall have the meaning specified in paragraph
7(c)(iv) hereof.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or such other day as banks in Illinois or London, England are authorized
or required to be closed for business.
"CAPITAL ADEQUACY CHARGE" shall have the meaning specified in
paragraph 6(i) hereof.
"CAPITAL ADEQUACY DEMAND" shall have the meaning specified in
paragraph 6(i) hereof.
"CAPITAL EXPENDITURES" shall mean, with respect to any period,
the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including expenditures for capitalized lease obligations) by
Borrower during such period that are required by GAAP to be included in or
reflected by the property, plant or equipment or similar fixed asset accounts
(or in intangible accounts subject to amortization) in the balance sheet of
Borrower.
"CASH EQUIVALENTS" shall mean (a) securities with maturities
of one year or less from the date of acquisition which are issued or fully
guaranteed or insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition and overnight bank deposits of the Lender
or of any commercial bank having capital and surplus in excess of $500,000,000,
or (c) repurchase obligations of Lender or of any commercial bank satisfying the
requirements of CLAUSE (b) of this definition, having a term of not more than 30
days with respect to securities issued or fully guaranteed or insured by the
United States Government.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 ET
SEQ.
"CHANGE OF CONTROL" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in an acquisition of control
of Borrower by a Person who is not an Original Owner or directly controlled by
an Original Owner or (b) any merger or consolidation of or with Borrower or sale
of all or substantially all of the property or assets of Borrower. For purposes
of this definition, "control of Borrower" shall mean the power, direct or
indirect to direct or cause the direction of the management and policies of
Borrower by contract or otherwise.
"CHATTEL PAPER" shall mean a writing or writings which
evidence both a monetary obligation and a security interest in or a lease of
specific goods.
"CLOSING DATE" shall mean the date upon which the initial Loan
is made.
"CLOSING DOCUMENT LIST" shall have the meaning specified in
paragraph 16(a)(i) hereof.
"COLLATERAL" shall mean all of the personal property of
Borrower described in paragraph 8 hereof and all other real or personal property
of any Obligor or any other Person now or hereafter pledged to Lender to secure,
either directly or indirectly, repayment of any of the Liabilities.
"COMMITMENT PERCENTAGE" of any Purchasing Lender shall mean
the percentage set forth for such Purchasing Lender in the applicable Commitment
Transfer Supplement as the same may be adjusted upon any assignment pursuant to
paragraph 24 hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a document in the
form of EXHIBIT 24(B) attached hereto and made a part thereof, properly
completed and otherwise in form and substance satisfactory to Lender by which a
Purchasing Lender purchases and assumes a portion of the obligation of Lender to
make Loans under this Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
paragraph 27(e) hereof.
"CONTINUATION" shall have the meaning specified in paragraph
7(c)(i) hereof.
"CONTRACT YEAR" shall mean each period of twelve (12)
consecutive months during the Term, commencing on the Closing Date and on each
of the first two anniversaries thereof.
"CONTROLLED GROUP" shall mean all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with Borrower, are treated as a single
employer under Section 414 of the IRC.
"CONVERSION" shall have the meaning specified in paragraph
7(c)(ii) hereof.
"CUSTOMER LISTS" shall mean the customer lists of Borrower
attached hereto as EXHIBIT B and made a part hereof, as same shall be updated
pursuant to paragraph 12(i) hereof.
"CUSTOMS" shall have the meaning set forth in paragraph 4(e)
hereof.
"DEBT SERVICE COVERAGE RATIO" shall mean, with respect to any
applicable fiscal period, the following for Borrower: the ratio of (A) EBITDA,
MINUS, taxes deducted from the calculation of net income for such period, MINUS
non-financed Capital Expenditures made during such period, TO (B) principal
payments of long term debt paid or scheduled to be paid during such period,
capitalized leases paid or scheduled to be paid during such period and
Additional Payments pursuant to and as defined in the Asset Purchase Agreement
dated June 27, 1997 among Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., Borrower,
Pumpkin Masters Holdings, Inc. and Security Capital Corporation paid or
scheduled to be paid during such period and interest expense.
"DEFAULT" shall mean any event, condition or default which
with the giving of notice, the lapse of time or both would be an Event of
Default.
"DOCUMENTS" shall mean the term "documents" as such term is
defined under Article 9 of the UCC.
"DOLLAR" and the sign "$" shall mean lawful money of the
United States.
"EBITDA" shall mean, with respect to any applicable fiscal
period, the following for Borrower each calculated for such period: net income
before taxes for such period (excluding pre-tax gains or losses on the sale of
assets (other than the sales of Inventory in the ordinary course of business)
and excluding other pre-tax extraordinary gains) PLUS interest expense,
depreciation, amortization and other non-cash charges deducted in determining
net income for such period, MINUS interest income calculated in determining net
income for such period.
"ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower
which is acceptable to Lender in its reasonable discretion for lending purposes.
Lender shall consider an Account to be an Eligible Account if it meets, and so
long as it continues to meet, the following requirements:
(i) it is genuine and in all respects is what it
purports to be;
(ii) it is owned by Borrower and Borrower has the
right to subject it to a security interest in
favor of Lender;
(iii) it arises from (A) the performance of
services by Borrower and such services have
been fully performed and acknowledged and
accepted by the Account Debtor thereunder or
(B) the sale or lease of Goods by Borrower,
and such Goods have been completed in
accordance with the Account Debtor's
specifications (if any) and delivered to and
accepted by the Account Debtor, and such
Account Debtor has not returned or offered
to return any of the Goods which are the
subject of such Account, and Borrower has
possession of, or has delivered to Lender at
Lender's request, shipping and delivery
receipts evidencing delivery of such Goods;
(iv) if the Account Debtor thereunder is not an
Extended Term Customer, it is evidenced by an
invoice rendered to the Account Debtor
thereunder, does not remain unpaid more than
sixty (60) days after the stated due date
thereof and does not remain unpaid more than
ninety (90) days past the stated invoice date
thereof; PROVIDED, HOWEVER, that if more than
twenty-five percent (25%) of the aggregate
dollar amount of invoices owing by a particular
Account Debtor remain unpaid for more than (A)
sixty (60) days past the respective stated due
dates thereof or (B) ninety (90) days past the
respective invoice dates thereof, then all
Accounts owing to Borrower by that Account
Debtor shall be deemed ineligible;
(v) if the Account Debtor thereunder is an
Extended Term Customer, it is evidenced by an
invoice rendered to the Account Debtor
thereunder and does not remain unpaid more than
thirty (30) days after the stated due date
thereof; PROVIDED, HOWEVER, that if more than
twenty-five percent (25%) of the aggregate
dollar amount of invoices owing by particular
Extended Term Customer remain unpaid for more
than thirty (30) days past the respective stated
due dates thereof, then all Accounts owing to
Borrower by that Extended Term Customer shall be
deemed ineligible;
(vi) it is not subject to any prior assignment,
claim, lien, security interest, offset or
encumbrance whatsoever, other than Liens in
favor of Lender;
(vii) it is a valid, legally enforceable and
unconditional obligation of the Account Debtor
thereunder, and is not subject to setoff,
counterclaim, credit, allowance or adjustment by
such Account Debtor, or to any claim by such
Account Debtor denying liability thereunder in
whole or in part;
(viii) it does not arise out of a contract or
order which fails in any material respect to
comply with the requirements of applicable law;
(ix) the Account Debtor thereunder is not a director,
officer, employee or agent of Borrower, or a
Subsidiary, Parent or Affiliate of Borrower;
(x) it is not an Account with respect to which the
Account Debtor is the United States of America
or any department, agency or instrumentality
thereof, unless Borrower assigns its right to
payment of such Account to Lender pursuant to,
and in full compliance with, the Assignment of
Claims Act of 1940, as amended;
(xi) it is not an Account with respect to which the
Account Debtor is located in a state which
requires Borrower, as a precondition to
commencing or maintaining an action in the
courts of that state, either to (A) receive a
certificate of authority to do business and be
in good standing in such state, or (B) file a
notice of business activities report or similar
report with such state's taxing authority,
unless (x) Borrower has taken one of the actions
described in clauses (A) or (B), (y) the failure
to take one of the actions described in either
clause (A) or (B) may be cured retroactively by
Borrower at its election, or (z) Borrower has
proven, to Lender's satisfaction, that it is
exempt from any such requirements under any such
state's laws;
(xii) it is an Account which arises out of a sale made
in the ordinary course of Borrower's business;
(xiii) the Account Debtor is a resident or citizen of,
and is located within, the United States of
America, provided that Accounts as to which the
Account Debtor is a resident or citizen of, and
is located within Canada may be included up to a
maximum of $1,000,000.00;
(xiv) it is not an Account with respect to which the
Account Debtor's obligation to pay is
conditional upon the Account Debtor's approval
of the Goods or services (unless such approval
has been obtained) or is otherwise subject to
any repurchase obligation or return right, as
with sales made on a ▇▇▇▇-and-hold, guaranteed
sale, sale on approval, sale or return or
consignment basis;
(xv) it is not an Account (A) with respect to which
any representation or warranty contained in this
Agreement is untrue or (B) which violates any of
the covenants of Borrower contained in this
Agreement;
(xvi) it is not an Account which, when added to a
particular Account Debtor's other indebtedness
to Borrower, exceeds the lesser of (A) ten
percent (10%) of the aggregate of Borrower's
Accounts or (B) a credit limit determined by
Lender in its reasonable credit judgment for
that Account Debtor as set forth on EXHIBIT E
attached hereto; PROVIDED, HOWEVER, that
Accounts excluded from Eligible Accounts solely
by reason of this subparagraph (xvi) shall be
Eligible Accounts to the extent of such credit
limit; PROVIDED, FURTHER, that EXHIBIT E may be
amended by Lender from time to time to reflect
credit limits for new Account Debtors and
changes in credit limits for Account Debtors;
(xvii) it is not an Account with respect to which the
prospect of payment or performance by the
Account Debtor is or will be impaired, as
determined by Lender in its sole and reasonable
discretion;
(xviii) it is not an Account arising from progress
▇▇▇▇▇▇▇▇, invoices for deposits, samples or
tooling;
(xix) it is not an Account with respect to which the
sale is on an installment basis, lease or,
except for Extended Term Customers, other
extended payment basis;
(xx) it is not that portion of an Account
representing late fees, service charges or
interest; and
(xxi) any and all insurance thereon shall have been
assigned to Lender.
"ELIGIBLE INVENTORY" shall mean Inventory held for sale by
Borrower, normally and currently saleable in the ordinary course of Borrower's
business and Inventory consisting of raw materials of types and quality and in
amounts usable by Borrower in the production of its finished goods in the
ordinary course of Borrower's business, and which in all cases and at all times
pertinent hereto is of good and merchantable quality, free from defects, as to
which Inventory Lender has a perfected first priority security interest and
which Inventory is subject to no other Lien other than Liens in favor of Lender,
and which is located at the locations set forth in EXHIBIT A of this Agreement
and is either not in transit or, if in transit, is the subject of a negotiable
document issued by the party in possession thereof which negotiable document, if
so requested by Lender, has been delivered to Lender, as that Exhibit may, from
time to time, be amended or supplemented in accordance with the terms of this
Agreement, and as to which Borrower has satisfied all terms, conditions,
warranties and representations of this Agreement and the Other Agreements
pertinent thereto; but Eligible Inventory shall not include any of the
following: (a) catalogs and other promotional materials of any kind; (b)
returned items (other than items the return of which was authorized in advance
by Borrower and which are free from material defects and able to be sold in the
ordinary course of Borrower's business); (c) work-in-process; (d) damaged,
defective or recalled items; (e) obsolete items; (f) items used as
demonstrators, prototypes or salesmen's samples; (g) items of Inventory which
have been consigned to Borrower or as to which a Person claims a security
interest, prior assignment claim or encumbrance whatsoever other than Liens in
favor of Lender; (h) items of Inventory which have been consigned by Borrower to
a consignee; (i) Inventory located on premises leased by Borrower from a
landlord with whom Lender has not entered into a landlord's waiver on terms
satisfactory to Lender; (j) Inventory located at a warehouse premises with
respect to which Lender has not received (1) a bailee letter, acceptable in all
respects to Lender, executed by the bailee of such warehouse or (2) evidence
satisfactory in all respects to Lender of such bailee's receipt of a bailee
letter acceptable in all respects to Lender; (k) Inventory which in the
reasonable judgment of Lender after good faith consultation with Borrower is
considered to be slow moving or otherwise not merchantable; (l) Inventory which
is subject to a license agreement unless Lender shall have entered into a
licensor consent letter with the licensor in form and substance satisfactory to
Lender; and (m) any Inventory that Lender after good faith consultation with
Borrower has reasonably determined is not acceptable due to age, type, category
or quantity.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in
paragraph 15(r)(iv) hereof.
"ENVIRONMENTAL LAWS" shall mean all applicable federal, state and
local laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, binding decisions, binding orders and
binding directives of federal, state and local governmental agencies and
authorities with respect thereto.
"EQUIPMENT" shall mean the machinery and equipment of Borrower,
including without limitation processing equipment, data processing and computer
equipment with software and peripheral equipment, and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, molds, dies, attachments, accessories,
automotive equipment, trailers, trucks, motor vehicles, tanks, cylinders and
other equipment of every kind and nature, and fixtures, all whether now owned or
hereafter acquired, and wheresoever situated, together with all additions and
accessions thereto, replacements therefor, all parts therefor, and all manuals,
drawings, instructions, warranties, and rights with respect thereto, and all
products and proceeds of the foregoing, and condemnation awards and insurance
proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all references to sections thereof shall include such
sections and any predecessor and successor provisions thereto.
"ERISA AFFILIATE" shall mean each person which together with the
Borrower would be deemed to be a single employer as determined under Section
414(b) or (c) of the IRC, and for the purpose of Section 302 of ERISA and/or
Section 412, 4971, 4977 and/or each "applicable section" under Section 414(t)(2)
of the IRC, as determined under Section 414(b), (c), (m), or (o) of the IRC.
"EVENT OF DEFAULT" shall have the meaning specified in paragraph
17 hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination
by Lender, the excess, if any, of (i) the lesser of (a) the Revolving Loan
Commitment and (b) the Borrowing Base over (ii) the outstanding Revolving Loans,
in each case as of the close of business on such date. For purposes of
calculating Excess Availability of Borrower and the amount of the Borrowing Base
relating thereto, Lender may, in the exercise of its sole discretion, establish
a reserve in an aggregate amount based on the sum of (a) Borrower's outstanding
trade payables which are not current or which are past due beyond Borrower's
normal trade terms in any material respect, PLUS (b) any taxes due and unpaid to
any taxing authority, in each case as of such date of determination, to the
extent thereof.
"EXCESS CASH FLOW" for any Fiscal Year shall mean an amount equal
to (a) the net income of Borrower for such Fiscal Year MINUS (b) non-cash
extraordinary gains and extraordinary losses PLUS (c) depreciation and
amortization which were deducted in determining net income for such Fiscal Year
PLUS (d) long term debt incurred for Capital Expenditures made during such
period MINUS (e) Capital Expenditures made during such Fiscal Year MINUS (f)
scheduled payments of principal and prepayments on indebtedness for such Fiscal
Year, to the extent such payments are permitted under this Agreement.
"EXHIBIT A" shall mean the exhibit entitled Exhibit A - Business
and Collateral Locations which is attached hereto and made a part hereof.
"EXHIBIT D" shall mean the exhibit entitled Exhibit D-Officer's
Certificate which is attached hereto and made a part hereof.
"EXTENDED TERM CUSTOMER" shall mean any Account Debtor to which
Borrower has granted extended dating terms acceptable to Lender and which Lender
has agreed in writing to treat as an Extended Term Customer hereunder. The
Extended Term Customers and the extended dating terms approved by Lender are
listed on EXHIBIT F attached hereto; PROVIDED, FURTHER, that EXHIBIT F may be
amended by Lender from time to time to reflect new Extended Term Customers and
the approved payment terms therefor, the deletion of existing Extended Term
Customers
and the approved payment terms therefor, the deletion of exisitng Extended Term
Customers or a change in payment terms for an existing Extended Term Customer.
"FISCAL YEAR" shall mean with respect to Borrower, the twelve (12)
month accounting period of Borrower commencing January 1st of each calendar year
and ending December 31st of such calendar year.
"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time.
"GENERAL INTANGIBLES" shall mean all of Borrower's present and
future general intangibles and other personal property, any and all rights of
Borrower to all choses or things in action, tax refund claims, credits, claims,
claims against carriers and shippers, guarantee claims, contract rights,
security interests, security rights and any rights to indemnification, demands,
goodwill, licenses, franchise agreements, subscription costs, patents, patent
applications, design rights, trade names, trademarks, trademark applications,
copyrights, registrations, rights to royalties, blueprints, drawings, customer
lists, purchase orders, computer programs, computer discs, computer tapes,
literature, reports, catalogs, methods, sales literature, video tapes,
confidential information and trade secrets, consulting agreements, employment
agreements, leasehold interests in real and personal property, insurance
policies, deposits with insurers relating to worker's compensation liabilities,
deposit accounts and tax refunds, other than Equipment, Inventory, Investment
Property and Accounts, as well as Borrower's books and records relating to any
of the foregoing, and all products and proceeds of the foregoing.
"GOODS" shall mean all of Borrower's tangible assets and tangible
properties which are moveable at the time the security interest attaches or
which are fixtures.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in
paragraph 15(r)(iv) hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances as
defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, ET SEQ.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.
"HAZARDOUS WASTES" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"INDEMNIFIED PARTY" shall have the meaning specified in paragraph
19 hereof.
"INSTRUMENTS" shall mean a negotiable instrument or a certificated
security or any other writing which evidences a right to the payment of money.
"INTEREST PERIOD" shall mean for any LIBOR Rate Loan the period
commencing on the date of the borrowing thereof (or the date of the Continuation
or Conversion thereof as described below) and ending one, three or six months
thereafter, provided, however, that Borrower may not select any Interest Period
that ends after the Term. Whenever the last day of an Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
PROVIDED, that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day.
"INVENTORY" shall mean all present and future inventory in which
Borrower has any interest, including, but not limited to, goods held by Borrower
for sale or lease or to be furnished under a contract of service and all of
Borrower's present and future raw materials, work in process, finished goods,
supplies and packing and shipping materials, wherever located, and any documents
of title representing any of the above.
"INVENTORY ADVANCE RATE" shall have the meaning set forth in
paragraph 2(b)(A) hereof.
"INVESTMENT PROPERTY" shall have the meaning set forth in the UCC,
and shall mean and include all of Borrower's now owned or hereafter acquired
securities, whether certificated or uncertificated, securities entitlements,
securities accounts, commodity and futures contracts and commodity and futures
accounts.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"KIND" shall mean, with respect to any Loan, whether such Loan is
a Revolving Loan or a Term Loan.
"L/C ISSUER" shall mean the Bank or such other bank as may be
selected by Lender in its sole discretion.
"LENDER" shall have the meaning set forth in the introductory
paragraph hereof.
"LETTER OF CREDIT FEE" shall have the meaning set forth in
paragraph 6(d) hereof.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn amount of all Letters of
Credit and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit.
"LETTERS OF CREDIT" shall mean those documentary letters of credit
issued for Borrower's account in accordance with the terms of paragraph 4
hereof.
"LIABILITIES" shall mean all Loans and any and all other
obligations, liabilities and indebtedness of Borrower to Lender or to the Bank
or to ABN AMRO of any and every kind and nature, howsoever created, arising or
evidenced and howsoever owned, held or acquired, and any and all other Loans,
obligations, liabilities and indebtedness of Borrower of any kind and nature,
howsoever created, arising or evidenced under this Agreement and/or the Other
Documents, in each
case whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.
"LIBOR RATE" shall mean, with respect to the Interest Period
applicable to the borrowing of a LIBOR Rate Loan, the rate obtained (rounded
upwards to the nearest 1/100 of 1%) by dividing (i) the rate of interest per
annum offered to Bank in the London interbank foreign currency deposits market
as of approximately 9:00 A.M. (Central Standard time) two (2) Business Days
prior to the commencement of such Interest Period for U.S. dollar deposits of
amounts in immediately available funds comparable to the principal amount of the
LIBOR Rate Loan for which the LIBOR Rate is being determined with maturities
comparable to the Interest Period for which such LIBOR Rate will apply, by (ii)
a percentage equal to 1 minus the stated reserve (expressed as a decimal), if
any, required to be maintained against "Eurocurrency liabilities" as specified
in Regulation D of the Board of Governors of the Federal Reserve System as from
time to time shall be in effect (or against any other category of liabilities,
which includes deposits, by reference to which the interest rate on LIBOR Rate
Loans is determined or any category of extensions of credit on other assets,
which includes loans by a non-U.S. office of Bank to U.S. Residents). In the
absence of manifest error, each determination by Bank of the applicable LIBOR
Rate shall be deemed conclusive.
"LIBOR RATE LOAN" shall mean a LIBOR Rate Revolving Loan or a
LIBOR Rate Term Loan.
"LIBOR RATE REVOLVING LOAN" shall mean a Revolving Loan that bears
interest based on the LIBOR Rate.
"LIBOR RATE TERM LOAN" shall mean a Term Loan that bears interest
based on the LIBOR Rate.
"LOAN" OR "LOANS" shall mean any and all Revolving Loans or the
Term Loan made by Lender to Borrower pursuant to paragraphs 2 and 3 hereof and
all other loans, advances and financial accommodations made by Lender to or on
behalf of Borrower hereunder.
"LOCK BOX" and "BLOCKED ACCOUNT" shall have the meanings specified
in paragraph 11(a) hereof.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse change in,
or a material adverse effect upon the business, property, assets, operations,
condition (financial or otherwise) or prospects of Borrower taken as a whole,
related to any event, act, condition or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related.
"MAXIMUM TERM LOAN AMOUNT" shall mean an amount equal to TWO
MILLION, FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($2,500,000.)
"MULTIEMPLOYER PLAN" shall mean a plan described in Section
4001(a)(3) of ERISA which covers employees of Borrower or any ERISA Affiliate.
"NET WORTH" shall mean with respect to any applicable fiscal
period, the following for Borrower, each calculated for such period:
shareholders' equity (including retained earnings) and less prepaid expenses,
reasonably determined by Lender on a consistent basis, plus the amount of any
debt subordinated to Lender on terms and conditions reasonably acceptable to
Lender in its sole judgment, all as determined in accordance with GAAP,
consistently applied.
"NOTE" shall mean individually and collectively, the Revolving
Note and Term Note.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to Lender or to any parent, affiliate or subsidiary of
Lender in connection with the Liabilities or the transactions contemplated
hereby.
"ORIGINAL OWNER" shall mean Pumpkin Masters Holdings, Inc., a
Delaware Corporation.
"PARENT" shall mean any Person now or at any time or times
hereafter owning or controlling (alone or with any other Person) at least a
majority of the issued and outstanding stock of Borrower or any Subsidiary.
"PARTICIPANT" shall mean each Person who shall be granted the
right by any Lender to participate in any of the Loans in accordance with
Paragraph 24.
"PAYMENT OFFICE" shall mean initially ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and thereafter such other office of Lender, if any,
which Lender may designate by notice to Borrower to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor agency.
"PERMITTED LIENS" shall mean (i) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder, (ii) liens or security interests in favor of
Lender, (iii) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of Real Property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business, (iv) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (v) liens incurred or deposits made in the ordinary
course of Borrower's business in connection with capitalized leases or purchase
money security interests for purchase of, and applying only to, Equipment
included in the permitted borrowings under paragraph 14(q)(ii) or permitted as
Capital Expenditures under paragraph 15(o)(iii), the documents relating to such
liens
to be in form and substance acceptable to Lender, (vi) liens securing
indebtedness owing by any Subsidiary to Borrower to the extent such indebtedness
is permitted under paragraph 14(q), or to any other Subsidiary of Borrower,
(vii) deposits to secure performance of bids, trade contracts, leases and
statutory obligations (to the extent not excepted elsewhere herein); (viii)
liens specifically permitted by Lender in writing as set forth on SCHEDULE 1(a)
attached hereto; (ix) any lien arising out of the refinancing, extension,
renewal or refunding of any indebtedness secured by any lien permitted by any of
the foregoing sections (v), (vi) and (viii) PROVIDED THAT (a) such indebtedness
is not secured by any additional assets, and (b) the amount of such indebtedness
is not increased; (x) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation; (xi)
grants of security and rights of setoff in deposit accounts, securities and
other properties held at banks or financial institutions to secure the payment
or reimbursement under overdraft, acceptance and other facilities, and (xii)
rights of setoff, banker's lien and other similar rights arising solely by
operation of law.
"PERSON" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party or foreign or
United States government (whether federal, state, county, city, municipal or
otherwise), including, without limitation, any instrumentality, division,
agency, body or department thereof.
"PRIME RATE" shall mean the publicly announced prime rate of the
Bank, in effect from time to time. The Prime Rate is not intended to be the
lowest or most favorable rate of the Bank in effect at any time.
"PRIME RATE LOAN" shall mean a Prime Rate Revolving Loan, or a
Prime Rate Term Loan.
"PRIME RATE REVOLVING LOAN" shall mean a Revolving Loan that bears
interest based on the Prime Rate.
"PRIME RATE TERM LOAN" shall mean a Term Loan that bears interest
based on the Prime Rate.
"PRO FORMA BALANCE SHEET" shall have the meaning specified
paragraph 14(a)(i).
"PROHIBITED TRANSACTION" shall mean a prohibited transaction
described in Section 406 of ERISA or Section 4975 of the IRC.
"RCRA" shall mean the Resource Conservation and Recovery Act 42
U.S.C.Sections 6901 ET SEQ., as same may be amended from time to time.
"REAL PROPERTY" shall mean all of Borrower's right, title and
interest in and to the owned and leased premises identified on SCHEDULE 1(b)
hereto.
"RELEASE" shall have the meaning set forth in paragraph
14(aa)(iii) hereof.
"REPORTABLE EVENT" shall mean a reportable event described in
Section 4043(c) of ERISA or the regulations promulgated thereunder for which the
30-day notice of such event has not been waived pursuant to such regulations.
"REVOLVING LOANS" shall have the meaning specified in paragraph 2
hereof.
"REVOLVING LOAN COMMITMENT" shall mean the sum of SEVEN MILLION,
FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($7,500,000.)
"REVOLVING NOTE" shall mean the promissory note(s) in the
aggregate original principal amount of the Revolving Loan Commitment, executed
by Borrower to the order of Lender for its benefit, dated as of the Closing
Date, together with all replacements and substitutions thereof.
"SEASONAL OVERADVANCE AMOUNT" shall mean for the period from the
date hereof through July 31, 2001, both inclusive, $1,000,000.00; for the period
from April 1, 2002 through July 31, 2002, both inclusive, $750,000.00; and for
the period from April 1, 2003 through July 31, 2003, both inclusive,
$500,000.00.
"SETTLEMENT DATE" shall mean the Closing Date and thereafter every
Wednesday of each Week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"SUBSIDIARY" shall mean any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time stock of any other class of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by Borrower or by any partnership or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by Borrower.
"TERM" shall have the meaning specified in paragraph 13 hereof.
"TERMINATION EVENT" shall mean (i) a Reportable Event with respect
to any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or
any ERISA Affiliate from a Benefit Plan or Multiemployer Plan during a plan year
in which such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a
Benefit Plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan; (v) any event or condition (a) which might reasonably
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (b) that may reasonably result in termination of a Multiemployer Plan
pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal
within the meaning of Section 4203 or 4205 of ERISA, respectively of Borrower or
an ERISA Affiliate from a Multiemployer Plan.
"TERM LOAN" shall have the meaning specified in paragraph 3
hereof.
"TERM NOTE" shall mean the promissory note(s) in the aggregate
original principal amount equal to the Maximum Term Loan Amount, executed by
Borrower to the order of Lender for its benefit, as applicable, and dated as of
the Closing Date, together with all replacements and substitutions thereof.
"TOTAL CREDIT FACILITY" shall mean the sum of TEN MILLION AND
00/100 DOLLARS ($10,000,000.00).
"TOXIC SUBSTANCE" shall mean any material present on the Real
Property which has been shown to have significant adverse effect on human health
which is subject to regulation under the Toxic Substances Control Act (TSCA), 15
U.S.C. Sections 2601 ET seq., applicable state law, or any other applicable
Federal or state laws relating to toxic substances. "Toxic Substance" includes
but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"TRANSACTIONS" shall mean the transactions contemplated by this
Agreement.
"TRANSFEREE" shall have the meaning set forth in paragraph 24(a)
hereof.
"TYPE" shall mean, with respect to (i) any Revolving Loan, whether
such Revolving Loan is a LIBOR Rate Revolving Loan or a Prime Rate Revolving
Loan, and (ii) the Term Loan, whether such Term Loan is a LIBOR Rate Term Loan
or a Prime Rate Term Loan.
"UCC" shall mean the Uniform Commercial Code as in effect on the
date hereof in the State of Illinois, as amended from time to time, and any
successor statute.
"WEEK" shall mean the time period commencing with a Wednesday and
ending on the following Tuesday.
(b) ACCOUNTING TERMS AND DEFINITIONS. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Borrower to Lender on or before the
Closing Date. All accounting determinations for purposes of determining
compliance with the financial covenants contained in paragraph 15(o) shall be
made in accordance with GAAP as in effect on the Closing Date and applied on a
basis consistent in all material respects with the audited financial statements
of Borrower delivered to Lender by Borrower on or before the Closing Date. The
financial statements required to be delivered hereunder from and after the
Closing Date, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
financial statements delivered to Lender by Borrower on or before the Closing
Date, the certificates required to be delivered pursuant to paragraph 12
demonstrating compliance with the covenants contained herein shall include, at
the election of Borrower or upon the request of Lender, calculations setting
forth the adjustments necessary to demonstrate how Borrower is in compliance
with the financial covenants based upon GAAP as in effect on the Closing Date.
2. REVOLVING LOANS. Subject to the terms and conditions of
this Agreement and the Other Agreements, during the Term, absent the existence
of a Default or Event of Default:
(a) REVOLVING LOAN COMMITMENT. Lender shall make such revolving
loans and advances (the "Revolving Loans") to Borrower, as Borrower shall from
time to time request, in accordance with the terms of paragraph 2(b) hereof. The
aggregate unpaid principal amount of all Revolving Loans outstanding at any one
time made to Borrower shall not exceed the lesser of (A) the Borrowing Base and
(B) the Revolving Loan Commitment minus the outstanding amount of all Letter of
Credit Obligations. All Revolving Loans shall be repaid in full upon the earlier
to occur of (i) the end of the Term and (ii) the acceleration of the Liabilities
pursuant to paragraph 18 of this Agreement. If at any time the outstanding
principal balance of the Revolving Loans made to Borrower exceeds (A) the
Borrowing Base or (B) the Revolving Loan Commitment, in each case minus the
outstanding Letter of Credit Obligations, Borrower shall immediately, and
without the necessity of a demand by Lender, pay to Lender such amount as may be
necessary to eliminate such excess, and Lender shall apply such payment against
the outstanding principal balance of the Revolving Loans. In addition, if at any
time the sum of (i) the outstanding principal balance of the Loans and (ii) the
outstanding Letter of Credit Obligations exceeds the Total Credit Facility,
Borrower shall immediately and without the necessity of a demand by Lender pay
to Lender such amount as may be necessary to eliminate such excess, and Lender
shall apply such payment against the outstanding principal balance of the Loans
in such order as Lender shall determine in its sole discretion. Borrower hereby
authorizes Lender to charge any of Borrower's accounts to make any payments of
principal or interest required by this Agreement. All Revolving Loans shall, in
Lender's sole discretion, be evidenced by one or more Revolving Notes in
substantially the form attached hereto as EXHIBIT 2(a). However, if such
Revolving Loans are not so evidenced, such Revolving Loans may be evidenced
solely by entries upon the books and records maintained by Lender.
(b) BORROWING LIMITS. Lender shall make Revolving Loans to Borrower
in an amount equal to the lesser of clause (A) or (B) below, the amount
calculated pursuant to clause (A) below being the "Borrowing Base":
A. an amount equal to the sum of (i) up to eighty-five percent
(85%)(the "Accounts Advance Rate") of the face amount of Eligible
Accounts, PLUS (ii) the lesser of (x) $3,000,000, or (y) the sum of up
to sixty percent (60%) (the "Inventory Advance Rate") of the value of
Eligible Inventory calculated on the basis of the lower of cost or
market value on a first in, first out basis plus fifty percent (50%)
of the aggregate undrawn amount of all outstanding Letters of Credit
issued in connection with Borrower's purchase of inventory from the
beneficiaries thereof, PLUS (iii) the Seasonal Overadvance Amount, if
any, MINUS (iv) such reserves as Lender may establish from time to
time in the exercise of its sole and reasonable discretion, MINUS (v)
the full outstanding amount of all Letter of Credit Obligations; or
B. the Revolving Loan Commitment, minus the outstanding amount
of all Letter of Credit Obligations.
3. TERM LOAN. On the Closing Date, Lender shall make a term loan (the
"Term Loan") to Borrower in an amount up to the Maximum Term Loan Amount.
Principal payable on account of the Term Loan shall be payable in successive
monthly installments payable, (i) on the first day of each month, the first of
which installments shall be due and payable on the first day of
the month immediately following the 30th day after the Closing Date and (ii) in
equal and level payments of ONE HUNDRED FOUR THOUSAND ONE HUNDRED SIXTY SEVEN
AND 00/100 DOLLARS ($104,167.00) each month during the Term until the Term Loan
is repaid in full, PROVIDED, HOWEVER, that the entire unpaid principal balance
of the Term Loan shall be due and payable in full on July 1, 2003.
Notwithstanding anything hereinabove to the contrary, the entire unpaid
principal balance of the Term Loan, and any accrued and unpaid interest thereon,
shall be immediately due and payable upon the earlier to occur of (i) the last
day of the Term and (ii) the acceleration of the Liabilities pursuant to
paragraph 18 of this Agreement. The Term Loan shall be evidenced by one or more
Term Notes in substantially the form attached hereto as EXHIBIT 3(a).
4. LETTERS OF CREDIT. (a) Subject to the terms and conditions hereof,
Lender shall (a) from time to time issue Letters of Credit for the account of
Borrower; PROVIDED, HOWEVER, that Lender will not be required to issue or cause
to be issued any Letters of Credit to the extent that the issuance of such
Letters of Credit would then cause the sum of (i) the outstanding Revolving
Loans PLUS (ii) the Letter of Credit Obligations (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) to
exceed the lesser of (x) the Revolving Loan Commitment or (y) the Borrowing Base
in effect prior to the issuance of the requested Letter of Credit. The maximum
amount of outstanding Letters of Credit shall not exceed TWO MILLION AND 00/100
DOLLARS ($2,000,000.00) in the aggregate at any time. Each disbursement or
payment by the Lender related to Letters of Credit shall be deemed to be a
Revolving Loan and shall bear interest as a Prime Rate Revolving Loan. Letters
of Credit that have not been drawn upon shall not bear interest.
(b) Borrower may from time to time upon notice not later than 12:00
Noon, Central Standard Time, at least three (3) Business Days in advance,
request Lender to assist Borrower in establishing or opening a Letter of Credit
by delivering to Lender at the Payment Office, the Lender's standard form of
letter of credit application (the "Letter of Credit Application") completed to
the satisfaction of the Lender; and, such other certificates, documents and
other papers and information as Lender may reasonably request.
(c) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts when presented for honor thereunder in accordance
with the terms thereof and when accompanied by the documents described therein
and (ii) have an expiry date not later than twelve (12) months after such Letter
of Credit's date of issuance and in no event later than the last day of the
Term. Each Letter of Credit Application and each Letter of Credit shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof and, to the extent not inconsistent therewith,
the laws of the State of Illinois.
(d) In connection with the issuance of any Letter of Credit, Borrower
shall indemnify, save and hold Lender harmless from any loss, cost, expense or
liability, including, without limitation, payments made by Lender and expenses
and reasonable attorneys' fees incurred by Lender arising out of, or in
connection with, any Letter of Credit to be issued for the account of Borrower.
Borrower shall be bound by the Lender's regulations and good faith
interpretations of any Letter of Credit issued or created for Borrower's
account, although this interpretation may be different from Borrower's own; and,
neither Lender, nor any of its correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrower's instructions or those contained in any Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing or paying any
Letter of Credit, except for Lender's or such correspondents' gross (not mere)
negligence or willful misconduct.
(e) In connection with all Letters of Credit issued or caused to be
issued by Lender under this Agreement, Borrower hereby appoints Lender, or its
designee, as its attorney, with full power and authority exercisable after the
occurrence of an Event of Default (i) to sign and/or endorse Borrower's name
upon any warehouse or other receipts, letter of credit applications and
acceptances; (ii) to sign Borrower's name on bills of lading; (iii) to clear
Inventory through the United States of America Customs Department ("Customs") in
the name of Borrower or Lender or Lender's designee, and to sign and deliver to
Customs officials powers of attorney in the name of Borrower for such purpose;
(iv) to complete in the name of Lender, or Lender's designee, any order, sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds thereof; (v) to clear and resolve any questions of non-compliance
of documents; (vi) to give any instructions as to acceptance or rejection of any
documents or goods; (vii) to execute any and all applications for steamship or
airways guarantees, indemnities or delivery orders; (viii) to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents; and (ix) to agree to any amendments,
renewals, extensions, modifications, changes or cancellation of any of the terms
or conditions of any of the applications, Letters of Credit, drafts or
acceptances; all in Lender's sole name. Neither Lender nor its attorneys will be
liable for any acts or omissions nor for any error of judgment or mistakes of
fact or law, except for Lender's or its attorney's gross (not mere) negligence
or willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(f) Lender shall not be responsible for: the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; any differences or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; the validity, sufficiency or genuineness
of any documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, insufficient, fraudulent, or
forged; the time, place, manner or order in which shipment is made; partial or
incomplete shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or documents; any deviation from
instructions, delay, default, or fraud by the shipper and/or any one else in
connection with the Collateral or the shipping thereof; or any breach of
contract between the shipper or vendors and Borrower.
(g) Any necessary import, export or other licenses or certificates for
the import or handling of the Collateral will have been promptly procured; all
foreign and domestic governmental laws and regulations in regard to the shipment
and importation of the Collateral or the financing thereof will have been
promptly and fully complied with; any certificates in that regard that Lender
may at any time request will be promptly furnished. In this connection, Borrower
warrants and represents that all shipments made under any such Letters of Credit
are in accordance with the governmental laws and regulations of the countries in
which the shipments originate and terminate, and are not prohibited by any such
law and regulations. Borrower assumes all risk, liability and responsibility
for, and agrees to pay and discharge all present and future local, state,
federal or foreign taxes, duties, or levies. Any embargo, restriction, laws,
customs or regulations of any country, state, city or other political
subdivision where the Collateral is or may be located or wherein payments are to
be made or wherein drafts may be drawn, negotiated, accepted, or paid shall be
solely at Borrower's risk, liability and responsibility.
(h) Lender may establish a reserve against the Revolving Loan for all
amounts that may be payable by Lender pursuant to that certain letter agreement
by and between Lender and Banc of America Commercial Finance Corporation dated
on or about June 13, 2001 pertaining to reimbursement with respect to letter of
credit No. B-209354, as determined by Lender in its sole discretion. Borrower
(i) consents to such agreement and any and all payments by Lender thereunder;
(ii) agrees that Lender may make payments pursuant to such agreement without
further consent of or notice to Borrower and notwithstanding any contrary
instructions from Borrower; and (iii) agrees that all such payments by Lender
shall constitute Prime Rate Revolving Loans.
5. MANDATORY PREPAYMENTS.
(a) SALE, DAMAGE, DESTRUCTION, ETC. If Borrower sells any Equipment,
or if any of the Collateral is damaged, destroyed or taken by condemnation,
Borrower shall pay to Lender for its benefit, unless otherwise specifically
provided herein or otherwise agreed to by Lender, as and when received by
Borrower and as a mandatory prepayment of the Loans, to be applied first against
the last maturing installments of principal of the Term Loan in the inverse
order thereof, and then to the Revolving Loans, subject to Borrower's ability to
reborrow Revolving Loans in accordance with the terms hereof (or, at Lender's
option, such of the other Liabilities of Borrower as Lender may elect), a sum
equal to the proceeds received by Borrower from (i) such sale or (ii) such
damage, destruction or condemnation, PROVIDED, HOWEVER, that without Lender's
consent, unless and until an Event of Default has occurred and is continuing:
(i) obsolete or worn out Equipment may be sold or otherwise
disposed of by Borrower and the proceeds thereof may be
retained by Borrower, so long as the fair market value of
any such Equipment sold or otherwise disposed of in any
single transaction is less than $100,000.00, and the fair
market value, in the aggregate, of all such Equipment sold
or otherwise disposed of by Borrower during any twelve-month
period is less than $250,000.00; and
(ii) proceeds of Collateral arising from the damage,
destruction or condemnation thereof may be retained by
Borrower and used by Borrower to repair, restore or replace
such Collateral, as the case may be, so long as the fair
market value of any such Collateral damaged, destroyed or
condemned in any single incident is less than $100,000.00
and the fair market value, in the aggregate, of all such
Collateral owned by Borrower and damaged, destroyed or
condemned during any twelve-month period is less than
$250,000.00; PROVIDED FURTHER that, if the Term Loan has
been fully repaid and no Seasonal Overadvance Amount is in
effect, notwithstanding herein to the contrary, proceeds of
Collateral comprised of Inventory which arise from any of
the events described in clause (ii) and which exceed the
amounts permitted to be retained by Borrower and used in
accordance with the terms thereof shall be applied to the
Revolving Loans and subject to Borrower's ability to
reborrow Revolving Loans in accordance with the terms
hereof.
(b) EXCESS CASH FLOW RECAPTURE.
(i) Borrower shall, each Fiscal Year, pay to Lender for its
benefit a prepayment of the outstanding amount of the Loans
in an amount equal to twenty-five percent (25%) of Excess
Cash Flow for the immediately preceding Fiscal Year
commencing with the Fiscal Year ending December 31, 2001
payable upon delivery of the annual financial statements to
Lender referred to in and required by paragraph 12(d) for
the applicable Fiscal Year but in no event later than ninety
(90) days after the end of such Fiscal Year. Such payments
shall be applied first against the last maturing
installments
of principal of the Term Loan in the inverse order thereof
until the Term Loan is paid in full, and then to the
Revolving Loans, subject to Borrower's ability to reborrow
Revolving Loans in accordance with the terms hereof. In the
event that the annual financial statements referred to and
required by paragraph 12(d) are not timely delivered, then a
calculation based upon estimated amounts shall be made by
Lender upon which calculation Borrower shall make the
prepayment required by this paragraph 5(b), subject to
adjustment, as applicable, when the annual financial
statements are delivered to Lender as required hereby. The
calculation made by Lender shall not be deemed a waiver of
any rights Lender may have as a result of the failure of
Borrower to deliver such financial statements.
(ii) After the annual computation of Excess Cash Flow and
payment to Lender of a portion thereof pursuant to and in
accordance with clause (i) above, Borrower may distribute up
to fifty (50%) percent of Excess Cash Flow in such manner
and to such Persons as Borrower may reasonably determine,
including without limitation payments on the Earnout Amount
(as defined in the Asset Purchase Agreement dated June 27,
1997 among Pumpkin Ltd. d/b/a/ Pumpkin Masters, Inc.,
Borrower, Pumpkin Masters Holdings, Inc. and Security
Capital Corporation) payable to PCG, Inc., shareholder
distributions or other distributions; PROVIDED, HOWEVER,
that no such distribution shall be permitted after the
occurrence of an Event of Default hereunder or if such
distribution would cause an Event of Default hereunder.
Borrower shall retain on an annual basis as working capital
an amount equal to or greater than twenty-five (25%) percent
of Excess Cash Flow.
(c) LIFE INSURANCE PROCEEDS. If Borrower receives any proceeds of life
insurance on the life of Gay ▇▇▇▇▇, as and when received by Borrower, as
applicable, Borrower shall apply such proceeds as a mandatory prepayment of the
Loans, to be applied first against the last maturing installments of principal
of the Term Loan until the Term Loan is paid in full, and then to the
outstanding Revolving Loans as a permanent reduction in the Revolving Loan
Commitment.
6. INTEREST, FEES AND CHARGES.
(a) RATES OF INTEREST. Interest accrued on the Loans shall be due on
the earliest of (i) in the case of a LIBOR Rate Loan, the first day of each
month (for the immediately preceding month), computed through the last calendar
day of the preceding month and at the end of the Interest Period applicable
thereto, and in the case of a Prime Rate Loan, the first day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of the Liabilities,
or (iii) termination of this Agreement pursuant to paragraph 13 hereof. Interest
shall accrue on (1) the principal amount of the Revolving Loans made to Borrower
outstanding at the end of each day at (A) with respect to Prime Rate Revolving
Loans, a fluctuating rate per annum equal to the Prime Rate or (B) with respect
to
LIBOR Rate Revolving Loans, a fixed rate per annum equal to two and one-half
percent (2.5%) above the LIBOR Rate, (2) the unpaid principal balance of the
Term Loan at (A) with respect to Prime Rate Term Loans, a fluctuating rate per
annum equal to the Prime Rate or (B) with respect to LIBOR Rate Term Loans, a
fixed rate per annum equal to two and one half percent (2.5%) above the LIBOR
Rate. The rate of interest payable on Prime Rate Loans shall increase or
decrease by an amount equal to any increase or decrease in the Prime Rate,
effective as of the opening of business on the day that any such change in the
Prime Rate occurs. Upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of all Loans shall bear
interest on demand at a rate per annum equal to the rate of interest then in
effect under this paragraph 6(a) plus two percent (2%).
(b) COMPUTATION OF INTEREST AND FEES. Interest and collection charges
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year consisting of three hundred and sixty (360) days.
For the purpose of computing interest hereunder, all items of payment received
by Lender shall be deemed applied by Lender on account of the =Liabilities
(subject to final payment of such items) on the second Business Day after
receipt by Lender of good funds in Lender's account located in Chicago,
Illinois.
(c) MAXIMUM INTEREST. It is the intent of the parties that the rate of
interest and the other charges to Borrower under this Agreement shall be lawful;
therefore, if for any reason the interest or other charges payable under this
Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Lender may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
(d) LETTER OF CREDIT FEES. Borrower shall remit to Lender for its own
account a letter of credit fee equal to one and three quarters percent (1.75%)
per annum (the "Letter of Credit Fee") on the aggregate undrawn face amount of
all outstanding Letters of Credit issued for the account of Borrower, which fee
shall be payable monthly in arrears on each day that interest is payable
hereunder. Borrower shall also pay on demand the normal and customary
administrative charges for issuance, amendment, negotiation, renewal or
extension of any Letter of Credit imposed by the L/C Issuer. Upon the occurrence
and during the continuance of an Event of Default, all Letter of Credit Fees
shall be payable on demand at a rate equal to three and three quarters percent
(3.75%) per annum on the aggregate undrawn face amount thereof.
(e) CLOSING FEE. Borrower shall pay to Lender for its own account a
closing fee of FIFTY THOUSAND AND 00/100 DOLLARS ($50,000.00), which fee shall
be deemed fully earned, nonrefundable and due on the Closing Date.
(f) UNUSED LINE FEE. Borrower shall pay to Lender for its benefit, at
the end of each month, in arrears, and on the last day of the Term an Unused
Line Fee equal to one half of one percent (.50%) per annum on the daily average
amount by which the Revolving Loan Commitment exceeds the sum of (i) the
outstanding principal balance of the Revolving Loans, and (ii) the outstanding
Letter of Credit Obligations. The Unused Line Fee shall accrue from the Closing
Date until the last day of the Term.
(g) COLLATERAL MANAGEMENT FEE. Borrower shall pay to Lender for its
own account an annual collateral management fee of FIFTEEN THOUSAND AND 00/100
DOLLARS ($15,000.00) per annum payable on the Closing Date and on each
anniversary thereafter, subject to the earlier termination of this Agreement,
which fee shall be deemed earned in full on the Closing Date and on each
anniversary thereafter and shall not be subject to rebate or proration for any
reason.
(h) EXAMINATION AND APPRAISAL FEES. In addition to the collateral
management fees described in paragraph 6(g) hereof, Borrower shall reimburse
Lender for all out-of-pocket costs and expenses incurred by Lender in connection
with each examination performed by or at Lender's direction of Borrower's books
and records and Collateral and such other matters as Lender shall deem
appropriate in its commercially reasonable judgment, each such fee to be paid
upon the completion of each such examination.
(i) CAPITAL ADEQUACY CHARGE. If Lender shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority enacted
after the Closing Date, does or shall have the effect of reducing the rate of
return on Lender's capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration Lender's policies with respect to
capital adequacy) by a material amount, then from time to time, after submission
by Lender to Borrower of a written demand therefor ("Capital Adequacy Demand")
together with the certificate described below, Borrower shall pay to Lender such
additional amount or amounts ("Capital Adequacy Charge") as will compensate
Lender for such reduction, such Capital Adequacy Demand to be made with
reasonable promptness following such determination. A certificate of Lender
claiming entitlement to payment as set forth above shall be conclusive in the
absence of manifest error. Such certificate shall set forth the nature of the
occurrence giving rise to such reduction, the amount of the Capital Adequacy
Charge to be paid to Lender, and the method by which such amount was determined.
In determining such amount, Lender may use any reasonable averaging and
attribution method, applied on a non-discriminatory basis.
7. LOAN ADMINISTRATION.
(a) LOAN REQUESTS. (1) A request for a Revolving Loan shall be made or
shall be deemed to be made, each in the following manner: (i) Borrower shall
give Lender same day notice, no later than 10:30 A.M. (Central Standard time) of
such day, of its intention to borrow, a Prime Rate Revolving Loan, and at least
three (3) Business Days prior notice of its intention to borrow a LIBOR Rate
Revolving Loan, in which notice Borrower shall specify the amount of the
proposed borrowing and the proposed borrowing date, PROVIDED, however, that no
such request may be made at a time when there exists a Default or an Event of
Default; and (ii) the coming due of any amount required to be paid under this
Agreement or any Note, whether on account of interest or for any other
Liability, shall be deemed irrevocably to be a request for a Prime Rate
Revolving Loan on the due date thereof in the amount required to pay such
interest or other Liability. As an accommodation to Borrower, Lender may permit
telephone requests for Revolving Loans and electronic transmittal of
instructions, authorizations, agreements or reports to Lender by Borrower.
Unless Borrower specifically directs Lender in writing not to accept or act upon
telephonic or electronic communications from Borrower, Lender shall not have any
liability to Borrower for any loss or damage suffered by Borrower as a result of
Lender's honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to it
telephonically or electronically and purporting to have been sent to Lender by
Borrower and Lender shall have no duty to verify the origin of any such
communication or the authority of the Person sending it. Each notice of
borrowing shall be irrevocable by and binding on Borrower, and if such notice
requests the borrowing of a LIBOR Rate Revolving Loan, such notice shall state
the Interest Period with respect thereto. Borrower, at its option, may choose
Prime Rate Revolving Loans or LIBOR Rate Revolving Loans, provided that any
LIBOR Rate Revolving Loan shall be in a minimum amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof, and provided further that the
right of Borrower to choose any LIBOR Rate Loan is subject to the provisions of
paragraph 7(c) hereof.
(b) DISBURSEMENT. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Loan requested by Borrower, or deemed to
be requested by Borrower, as follows: (i) the proceeds of each Revolving Loan
requested under paragraph 7(a)(i) shall be disbursed by Lender in lawful money
of the United States of America in immediately available funds, in the case of
the initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Lender from
time to time, or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Revolving Loan requested under paragraph 7(a)(ii)
shall be disbursed by Lender by way of direct payment of the relevant interest
or other Liability.
(c) NOTICE OF CONTINUATION AND NOTICE OF CONVERSION.
(i) Subject to the provisions of clause (iii) hereof and
PROVIDED no Event of Default shall have occurred hereunder,
Borrower may elect to maintain any borrowing by it
consisting of the same Kind of LIBOR Rate Loans, or any
portion thereof, as a LIBOR Rate Loan by selecting a new
Interest Period for such borrowing, which new Interest
Period shall commence on the last day of the then existing
Interest Period. Each selection of a new Interest Period (a
"Continuation") shall be made on three (3) Business Days
prior notice, given by Borrower to Lender not later than
9:30 A.M. (Central Standard time) on the third Business Day
preceding the date of any proposed Continuation. If Borrower
elects to maintain more than one borrowing consisting of
LIBOR Rate Loans of the same Kind by combining such
borrowings into one borrowing and selecting a new Interest
Period pursuant to this clause, each of the borrowings so
combined shall consist of Loans of the same Kind having
Interest Periods ending on the same date. If Borrower shall
fail to select a new Interest Period for any borrowing by it
consisting of LIBOR Rate Loans of the same Kind in
accordance with this clause, such LIBOR Rate Loans will
automatically convert into Prime Rate Loans.
(ii) Subject to the provisions of clause (iii) hereof,
Borrower may on three (3) Business Days prior notice given
to Lender convert the entire amount of or a portion of all
Loans of the same Kind and Type into Loans of the same Kind
and another Type (a "Conversion"); PROVIDED that no Default
or Event of Default shall have occurred
hereunder, and PROVIDED FURTHER that any Conversion of any
LIBOR Rate Loans into Prime Rate Loans may only be made on
the last day of the Interest Period for such LIBOR Rate
Loans, and upon Conversion of any Prime Rate Loans into
LIBOR Rate Loans, Borrower shall pay accrued interest to the
date of Conversion on the principal amount converted on the
first day of the following month. Each such notice shall be
given not later than 9:30 A.M. (Central Standard time) on
the third Business Day preceding the date of any proposed
Conversion. Each Conversion of a Prime Rate Loan into a
LIBOR Rate Loan shall be in an aggregate amount of not less
than $1,000,000 or an integral multiple of $100,000 in
excess thereof. Each partial Conversion of a LIBOR Rate Loan
into a Prime Rate Loan shall be in such an amount so that
the remaining unconverted portion of such LIBOR Rate Loan
shall be in an aggregate amount not less than $1,000,000.00
or an integral multiple of $100,00.00 in excess thereof.
Borrower may elect to convert the entire amount of or a
portion of all Loans made to Borrower of the same Kind and
Type comprising more than one borrowing into Loans of the
same Kind and another Type by combining such borrowings into
one borrowing consisting of Loans of the same Kind and
another Type; PROVIDED, HOWEVER, that if the
borrowings so combined consist of LIBOR Rate Loans, such
LIBOR Rate Loans shall have Interest Periods ending
on the same date.
(iii) Notwithstanding anything contained in clauses (i) and
(ii) above to the contrary:
A. if Lender is unable to determine the LIBOR Rate for LIBOR
Rate Loans comprising any requested borrowing, Continuation or
Conversion, the right of Borrower to select or maintain LIBOR
Rate Loans for such borrowing or any subsequent borrowing shall
be suspended until Lender shall notify Borrower that the
circumstances causing such suspension no longer exist, and each
Loan comprising such borrowing shall be automatically converted
into a Prime Rate Loan;
B. if at any time Lender shall notify Borrower that the
LIBOR Rate for Loans comprising such borrowing by Borrower will
not adequately reflect the cost to Lender of making such Loans,
the right of Borrower to select, maintain, continue or convert to
LIBOR Rate Loans for such borrowing shall be suspended until
Lender shall notify Borrower that the circumstances causing such
suspension no longer exist, and each Loan comprising such
borrowing shall be automatically converted into a Prime Rate
Loan;
C. there shall not be outstanding at any one time more than
an aggregate of four (4) LIBOR Rate Loans;
D. any LIBOR Rate Loan shall be in a minimum amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof;
E. interest shall be calculated and paid by Borrower on the
full amount of each LIBOR Rate Loan borrowed by Borrower at the
commencement of the applicable Interest Period, regardless of any
reductions in the principal amount of such LIBOR Rate Loan which
occur during such Interest Period, and Borrower shall not be
credited for any part of such interest until such interest is
actually paid by Borrower. To the extent the aggregate repayments
of principal on Revolving Loans received by Lender during the
pendency of an Interest Period applicable to a then outstanding
LIBOR Rate Revolving Loan exceed the aggregate unpaid principal
amount of all Prime Rate Revolving Loans outstanding during such
Interest Period, Lender shall, to the extent of such excess,
credit to a special suspense account the amount of such
repayments received during such Interest Period, and at the
expiration of such Interest Period, Lender shall apply all such
amounts credited to such account against the unpaid principal
balance of the LIBOR Rate Revolving
Loans then outstanding. Borrower shall not earn interest on any
credit balance which may be deemed to exist in favor of Borrower
by virtue of this clause (E); and
F. there shall not be outstanding at any time LIBOR Rate
Loans with an outstanding principal amount exceeding eighty
percent (80%) of the outstanding principal amount of all Loans.
(iv) Each notice of Continuation or Conversion shall be
irrevocable and binding on Borrower. In the case of (w) any
borrowing of a Loan, Continuation, or Conversion that the
related notice of borrowing, notice of Continuation or
notice of Conversion specifies is to be comprised of LIBOR
Rate Loans, or (x) any payment of principal of, or
Conversion or Continuation of, any LIBOR Rate Loan made
other than on the last day of the Interest Period for such
Loan as a result of a payment, prepayment, Conversion or
Continuation of such Loan or acceleration of the maturity of
any of the Liabilities pursuant to paragraph 18 hereof, or
for any other reason, then in any such case, upon Lender's
demand, Borrower shall pay to Lender and indemnify Lender
from and against the following (collectively "Breakage
Costs"): (y) any loss, cost or expense incurred by Lender as
a result of any failure to fulfill, on or before the date
for such borrowing, Continuation or Conversion, the
applicable conditions set forth in paragraph 16(b) hereof,
and (z) any additional losses, costs or expenses which
Lender may reasonably incur as a result of such payment,
including, without limitation in each such case, any loss
(excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or redeployment of
deposits or other funds acquired by Lender to fund the Loan
to be made as part of such borrowing, Continuation or
Conversion.
(d) Each payment (including each prepayment) by Borrower on account of
the principal of and interest on the Revolving Note or Term Note shall be
applied to the Revolving Loans and Term Loans as applicable. Except as expressly
provided herein, all payments (including prepayments) to be made by Borrower on
account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to Lender to the Payment Office, in each case on
or prior to 1:00 P.M. (Central Standard time), in Dollars and in immediately
available funds.
8. GRANT OF SECURITY INTEREST TO LENDER. As security for the payment of
all Loans now or in the future made by Lender to Borrower hereunder and for the
payment or other satisfaction of all other Liabilities, Borrower hereby assigns
and grants to Lender for its benefit a continuing security interest in the
following property of Borrower, whether now or hereafter owned, existing,
acquired or arising and wherever now or hereafter located: (a) all Accounts
(whether or not Eligible Accounts) and all Goods whose sale, lease or other
disposition by Borrower has given rise to Accounts and have been returned to or
repossessed or stopped in transit by Borrower; (b) all Chattel Paper,
Instruments, Documents and General Intangibles; (c) all Inventory (whether or
not Eligible Inventory); (d) all Goods (other than Inventory) including, without
limitation, Equipment, vehicles and fixtures; (e) all deposits and cash and any
other property of Borrower now or hereafter in the possession, custody or
control of Lender or any agent
or any parent, affiliate or subsidiary of Lender or any participant with Lender
in the Loans for any purpose (whether for safekeeping, deposit, collection,
custody, pledge, transmission or otherwise); (f) all Investment Property; (g)
all Customer Lists; (h) all Real Property, (i) all of Borrower's right, title
and interest, present and future, in and to (1) all patents, trademarks,
copyrights, trade names, trade styles, service marks, prints and labels on which
said patents, trademarks, copyrights, trade names, trade styles and service
marks have appeared or appear, designs and general intangibles of like nature,
now existing or hereafter adopted or acquired, all right, title and interest
therein and thereto, and all registrations and recordings thereof, including,
without limitation, applications, registrations, and recordings in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, and State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Borrower,
(2) all reissues, extensions or renewals thereof and all licenses thereof ("(1)"
and "(2)" collectively called "Intellectual Property"), and (3) the goodwill of
the business symbolized by each of the Intellectual Property, and all customer
lists and other records of Borrower relating to the distribution of products
bearing the Intellectual Property; and all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of Borrower's books and records
relating to any of the foregoing and to Borrower's business.
9. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall, at Lender's request, at any time and from time to time,
execute and deliver to Lender such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by Lender) and do
such other acts and things as Lender may deem necessary or desirable in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender for its benefit (free and clear of all other
liens, claims and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Liabilities, and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to execute such financing statements, documents and
other agreements and instruments and do such other acts and things as may be
reasonably necessary to preserve and perfect Lender's security interest in the
Collateral. Borrower further agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement.
10. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of
Default has occurred, Borrower shall have the right, except as otherwise
provided for in this Agreement, in the ordinary course of Borrower's business,
to (a) sell, lease or furnish under contracts of service any of Borrower's
Inventory normally held by Borrower for any such purpose, (b) use and consume
any raw materials, work in process or other materials normally held by Borrower
for such purpose, PROVIDED, HOWEVER, that a sale in the ordinary course of
business shall not include any transfer or sale in satisfaction, partial or
complete, of a debt owed by Borrower; and (c) continue to use the Collateral for
any lawful purposes consistent with past practices of Borrower.
11. COLLECTIONS.
(a) ESTABLISHMENT OF LOCKBOX AND BLOCKED ACCOUNT. Borrower shall
direct all of its Account Debtors to make all payments on the Accounts directly
to a post office box ("Lock Box") with a financial institution acceptable to,
and in the name and under exclusive control of Lender. Borrower shall establish
an account ("Blocked Account") in Lender's name for the benefit of Borrower with
a financial institution acceptable to Lender, into which all payments received
in the Lock Box shall be deposited, and into which Borrower will immediately
deposit all payments made for Inventory or services sold, leased or rendered by
Borrower and received by Borrower in the identical form in which such payments
were made, whether by cash or check. If Borrower, any Affiliate or Subsidiary of
Borrower, or any shareholder, officer, director, employee or agent of Borrower
or any Affiliate or Subsidiary, or any other Person acting for or in concert
with Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as proceeds of Accounts or other Collateral, Borrower and each
such Person shall receive all such items in trust for, and as the sole and
exclusive property of, Lender for its benefit and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to the
Blocked Account. Each financial institution with which a Lock Box or Blocked
Account is established shall acknowledge and agree, in a manner satisfactory to
Lender for its benefit that the amounts on deposit in such Lock Box and such
Blocked Account are the sole and exclusive property of Lender, that such
financial institution has no right to setoff against such Lock Box or Blocked
Account or against any other account maintained by such financial institution
into which the contents of such Blocked Account are transferred, and that such
financial institution shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to Lender, funds deposited in the Blocked Account
on a daily basis as such funds are collected. Borrower agrees that all payments
made to the Blocked Account established by Borrower or otherwise received by
Lender, whether in respect of the Accounts of Borrower or as proceeds of other
Collateral of Borrower or otherwise, will be applied on account of the Revolving
Loans and also on account of such other due and payable Liabilities of Borrower
as Lender shall determine in accordance with the terms of this Agreement.
Borrower agrees to pay all fees, costs and expenses which Borrower incurs in
connection with opening and maintaining a Lock Box and Blocked Account. All of
such fees, costs and expenses which remain unpaid by Borrower pursuant to any
Lock Box or Blocked Account Agreement with Borrower, to the extent same shall
have been paid by Lender hereunder, shall constitute Revolving Loans hereunder,
shall be payable to Lender for its benefit by Borrower upon demand, and, until
paid, shall bear interest at the highest rate then applicable to Revolving Loans
hereunder. All checks, drafts, instruments and other items of payment or
proceeds of Collateral delivered to Lender in kind shall be endorsed by Borrower
to Lender, and, if that endorsement of any such item shall not be made for any
reason, Lender is hereby irrevocably authorized to endorse the same on
Borrower's behalf. For the purpose of this paragraph, Borrower irrevocably
hereby makes, constitutes and appoints Lender (and all Persons designated by
Lender for that purpose) as Borrower's true and lawful attorney and
agent-in-fact (i) to endorse Borrower's name upon said items of payment and/or
proceeds of Collateral of Borrower and upon any Chattel Paper, document,
instrument, invoice or similar document or agreement relating to any Account of
Borrower or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; (iii) to have access to any lock box or
postal box into which any of Borrower's mail is deposited; and (iv) open and
process all mail addressed to Borrower and deposited therein, PROVIDED, HOWEVER,
that Lender shall not exercise any such powers described in clauses (ii) and
(iv) unless and until an Event of Default has occurred.
(b) COLLECTION OF ACCOUNTS. Lender may, at any time and from time
to time after the occurrence of an Event of Default, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any of Borrower's Accounts or
contract rights by suit or otherwise; (ii) exercise all of Borrower's rights and
remedies with respect to proceedings brought to collect any Accounts; (iii)
surrender, release or exchange all or any part of any Accounts of Borrower, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any Account of
Borrower upon such terms, for such amount and at such time or times as Lender
deems advisable; (v) prepare, file and sign Borrower's name on any proof of
claim in bankruptcy or other similar document against any Account Debtor
indebted on an Account of Borrower; and (vi) do all other acts and things which
are necessary, in Lender's sole discretion, to fulfill Borrower's obligations
under this Agreement and to allow Lender to collect the Accounts. In addition to
any other provision hereof, Lender may at any time on or after the occurrence of
an Event of Default, at Borrower's expense, notify any parties obligated on any
of the Accounts of Borrower to make payment directly to Lender of any amounts
due or to become due thereunder.
(c) APPLICATION OF PROCEEDS. Lender shall, within two (2) Business
Days after receipt by Lender at its office in Chicago, Illinois of cash or other
immediately available funds from collections of items of payment and proceeds of
any Collateral, apply the whole or any part of such collections or proceeds
against the Liabilities in such order as Lender shall determine in its sole
discretion.
(d) ACCEPTANCE OF ASSIGNMENT. In its sole credit judgment, without
waiving or releasing any obligation, liability or duty of Borrower under this
Agreement or the Other Agreements or any Event of Default, at any time or times
hereafter, Lender may (but shall not be obligated to) pay, acquire or accept an
assignment of any security interest, lien, encumbrance or claim asserted by any
Person in, upon or against the Collateral. All sums paid by Lender in respect
thereof and all costs, fees and expenses (including without limitation
reasonable attorney fees, all court costs and all other charges relating
thereto) incurred by Lender shall constitute Revolving Loans, payable by
Borrower to Lender on demand and, until paid, shall bear interest at the highest
rate then applicable to Revolving Loans hereunder.
(e) DELIVERY OF DOCUMENTS AND INSTRUMENTS. Immediately upon
Borrower's receipt of any portion of the Collateral evidenced by an agreement,
Instrument or Document including, without limitation, any Chattel Paper,
Borrower shall deliver the original thereof to Lender together with an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or
assign the same on Borrower's behalf.
12. SCHEDULES AND REPORTS.
Borrower shall furnish or cause to be furnished to Lender the following:
(a) Borrower shall provide Lender with a written report by
Wednesday of each week, and on such more frequent basis (which may include
daily) as Lender shall request hereafter, reflecting the activity of Borrower
with respect to sales, collections of Accounts and credits issued
by Borrower for the immediately preceding week (or other period as requested by
Lender). Such report shall be in a form and with such specificity as is
satisfactory to Lender and shall contain such additional information as Lender
may reasonably require concerning Accounts and Inventory included, described or
referred to in such daily report and any other documents in connection therewith
requested by Lender, including without limitation but only if specifically
requested by Lender, copies of all invoices prepared in connection with such
Accounts.
(b) As soon as practicable and in any event within thirty (30) days
following the end of each calendar month, (i) statements of income and
statements of cash flow of Borrower for each such month and for the period from
the beginning of the then current Fiscal Year to the end of such month, (ii)
balance sheets of Borrower as of the end of such month, and (iii) with respect
to such statements of income and balance sheets, in comparative form, figures
for the corresponding periods in the preceding Fiscal Year, all in reasonable
detail and certified by the chief financial officer of Borrower that such
statements fairly present the financial condition of Borrower in accordance with
GAAP, subject to changes resulting from normal and recurring year-end
adjustments that individually and in the aggregate are not material to the
business of Borrower and the absence of footnotes, together with detailed
computations of Borrower's compliance with the covenants set forth in this
Agreement.
(c) As soon as practicable and in any event (1) on Tuesday of each
week, a Borrowing Base Certificate (which shall be calculated as of Saturday of
the immediately preceding week and which shall not be binding upon Lender or
restrictive of Lender's rights under this Agreement), and (2) within fifteen
(15) days following the end of each calendar month and at such other times as
may be requested by Lender from time to time (but, prior to the occurrence of an
Event of Default, not more frequently than twice in any calendar month), (i) a
schedule identifying by age each Account of Borrower together with copies of the
invoices when requested by Lender (with evidence of shipment attached)
pertaining to each such Account and a schedule identifying by age each account
payable of Borrower, (ii) a detailed aged trial balance of Borrower's Accounts
("Accounts Trial Balance") in form and substance satisfactory to Lender in its
reasonable discretion, including, without limitation, the names and addresses of
all Account Debtors of Borrower, (iii) a summary and detail of accounts payable
(such Accounts and accounts payable divided into such time intervals as Lender
may require in its reasonable discretion), including a listing of any held
checks, (iv) such additional schedules, certificates, reports and information
with respect to the Collateral as Lender may from time to time reasonably
require; (v) a copy of any statement received by Borrower in connection with the
Lockbox and/or the Blocked Account; (vi) an assignment of any or all items of
Collateral to Lender and (vii) the general ledger inventory account balance, a
perpetual inventory report and Lender's standard form of Inventory report then
in effect, for Borrower by each category of Inventory, together with a
description of the change in each category of Inventory, in each case, for such
immediately preceding month (or other applicable period). Lender, through its
officers, employees or agents, shall have the right, at any time and from time
to time in Lender's name, in the name of a nominee of Lender or in Borrower's
name, to verify the validity, amount or any other matter relating to any of
Borrower's Accounts, by mail, telephone, telegraph or otherwise. Borrower shall
reimburse Lender, on demand, for all reasonable costs, fees and expenses
incurred by Lender in this regard. Borrower shall immediately notify Lender of
any event causing material loss or depreciation in value of Borrower's Inventory
(other than normal depreciation occurring in the ordinary course of business).
(d) As soon as practicable and in any event within ninety (90) days
after the end of each Fiscal Year commencing with the Fiscal Year ending
December 31, 2001 (i) statements of income of Borrower for such Fiscal Year, and
a balance sheet of Borrower as of the end of such Fiscal Year, and (ii)
statements of cash flow of Borrower for such Fiscal Year, all setting forth in
comparative form, corresponding figures for the period covered by the preceding
annual audit and as of the end of the preceding Fiscal Year, such statements to
be presented in accordance with Borrower's normal method of accounting for
Inventory and (if Borrower uses the LIFO method) on a pre-tax FIFO basis, all in
reasonable detail and in accordance with GAAP and examined and reported on by
independent certified public accountants of recognized national standing
selected by Borrower and satisfactory to Lender, whose opinion shall be
unqualified and shall be in accordance GAAP, in form and substance reasonably
satisfactory to Lender.
(e) As soon as practicable and in any event not later than thirty
(30) days prior to the beginning of each Fiscal Year commencing with the Fiscal
Year ending December 31, 2002 projected balance sheets, statements of income and
cash flow for Borrower, for each of the twelve (12) months during such Fiscal
Year, which shall include the assumptions used therein, together with
appropriate supporting details as requested by Lender (hereinafter referred to
as "Projections").
(f) As soon as practicable and in any event within ten (10) days of
delivery to Borrower, a copy of any letter issued by Borrower's independent
public accountants or other management consultants with respect to Borrower's
financial or accounting systems or controls, including all so-called "management
letters".
(g) In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subparagraph (e) above, a letter signed by
the president or a vice president of Borrower and by the treasurer or chief
financial officer of Borrower, describing, comparing and analyzing, in detail,
all changes and developments between the anticipated financial results included
in such projections or budgets and the historical financial statements of
Borrower.
(h) As soon as practicable and in any event at the end of each
Fiscal Year or as Lender may otherwise reasonably request (but, prior to the
occurrence of an Event of Default, not more frequently than quarterly), a
complete and accurate update of the Customer Lists.
(i) With reasonable promptness, such other business or financial
data, reports, appraisals and projections as Lender may reasonably request.
All financial statements delivered to Lender pursuant to the
requirements of this paragraph (except where otherwise expressly indicated)
shall be prepared in accordance with GAAP as provided in this Agreement.
Together with each delivery of financial statements required by SUBPARAGRAPHS
(b) AND (d) above, Borrower shall deliver to Lender an officer's certificate in
the form attached hereto as EXHIBIT D, which shall include a calculation of
financial covenants in the schedule attached to such Officer's Certificate in
form satisfactory to Lender. Together with each delivery of annual financial
statements required by PARAGRAPH (d) above, Borrower shall deliver to Lender a
certificate of the accountants who performed the audit in connection with such
statements stating that in making the audit necessary to the issuance of a
report on such financial statements, they have obtained no knowledge of any
Event of Default, or, if such accountants have obtained
knowledge of an Event of Default, specifying the nature and period of existence
thereof and such certificates shall contain or have appended thereto
calculations which set forth Borrower's compliance with the financial covenants
set forth herein.
(j) All schedules, certificates, reports and assignments and other
items delivered by Borrower to Lender hereunder shall be executed by an
authorized representative of Borrower and shall be in such form and contain such
information as Lender shall reasonably request. Borrower shall deliver from time
to time such other schedules and reports pertaining to the Collateral of
Borrower as Lender may reasonably request.
13. TERM.
(a) This Agreement shall be in effect from the date hereof until
June 13, 2004 (the "Term") unless the due date of the Liabilities is accelerated
pursuant to paragraph 18 hereof, in which case this Agreement shall terminate on
the date thereafter that the Liabilities are paid in full, PROVIDED, HOWEVER,
that the security interests and liens created under this Agreement and the Other
Agreements shall survive such termination until the date upon which payment and
satisfaction in full of the Liabilities shall have occurred. At such time as
Borrower has repaid all of the Liabilities and this Agreement has terminated,
Borrower shall deliver to Lender a release, in form and substance reasonably
satisfactory to Lender, of all obligations and liabilities of Lender and its
officers, directors, employees, agents, parents, subsidiaries and affiliates to
Borrower, and if Borrower is obtaining new financing from another lender,
Borrower shall deliver such lender's indemnification of Lender, in form and
substance reasonably satisfactory to Lender, for checks which Lender has
credited to Borrower's account, but which subsequently are dishonored for any
reason.
(b) If, for any reason, this Agreement is terminated prior to the
end of the Term and Borrower prepays all or any portion of the Liabilities
(which prepayment by Borrower must be upon ninety (90) days' prior written
notice to Lender), Borrower agrees to pay to Lender for its benefit, as a
prepayment fee, in addition to the payment of all other Liabilities owing by
Borrower, an amount equal to (x) one percent (1%) of the Total Credit Facility
if this Agreement is terminated during the first Contract Year; and (y) one half
percent (.50%) of the Total Credit Facility if this Agreement is terminated
during the second Contract Year. In light of the extreme difficulty of
accurately calculating actual damages arising out of any early termination and
prepayment, Lender and Borrower have agreed that the prepayment fee provided for
above is a reasonable estimate of actual damages that would be incurred by
Lender.
14. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:
(a) (i) Borrower has furnished to Lender a balance sheet of
Borrower as of the Closing Date ("Pro Forma Balance
Sheet") as set forth on EXHIBIT 14(a)(i) attached
hereto and made a part hereof. The Pro Forma Balance
Sheet is accurate, complete and correct and fairly
reflects the financial condition of Borrower as of the
Closing Date after giving effect to the Transactions,
and has been prepared in accordance with GAAP,
consistently applied. The Pro Forma Balance Sheet has
been certified by the President and Chief Financial
Officer of Borrower as accurate, complete and correct
and fairly reflecting of the financial condition of the
Borrower on the
Closing Date after giving effect to the Transaction and
as prepared in accordance with GAAP, consistently
applied.
(ii) Borrower has furnished to Lender (1) balance sheets,
income statements and cash flow projections of Borrower
reflected monthly for the period beginning June 1, 2001
and ending May 31, 2002 as set forth on EXHIBIT
14(a)(ii)(1) attached hereto and made a part hereof,
(2) balance sheets, income statements and cash flow
projections of Borrower reflected annually for 2002,
2003 and the first six months of 2004 as set forth on
EXHIBIT 14(a)(ii)(2) attached hereto and made a part
hereof, and (3) an availability schedule for the period
ending May 31, 2001 in the form attached hereto as
SCHEDULE 14(a)(ii)(3). The financial statements
described in clauses (1) and (2) of the first sentence
of this paragraph were prepared by or under the
directions of the Controller of Borrower and reflect,
as of the Closing Date, the reasonable estimates of
Borrower of the information projected therein, based on
the assumptions accompanying such projections.
(b) the office where Borrower keeps its books, records and accounts
(or copies thereof) concerning the Collateral, Borrower's principal place of
business and all of Borrower's other places of business, locations of Collateral
(including locations where Borrower's raw materials, work in process and
finished goods are regularly or periodically manufactured, stored or otherwise
located) and post office boxes are as set forth in EXHIBIT A; Borrower shall
promptly (but in no event less than ten (10) days prior thereto) advise Lender
in writing of the proposed opening of any new place of business, the closing of
any existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower;
(c) the Collateral, including without limitation the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised Lender in writing consists of Collateral normally used in
more than one state) is and shall be kept, or, in the case of vehicles, based,
only at the addresses set forth on the first page of this Agreement or on
EXHIBIT A, and at other locations within the continental United States of which
Lender has been advised by Borrower in writing;
(d) Borrower shall immediately give written notice to Lender of any
use of any Goods in any state or county other than a state or county in which
Borrower has previously advised Lender such Goods shall be used, and such Goods
shall not, unless Lender shall otherwise consent in writing, be used outside of
the continental United States;
(e) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing Permitted Liens;
(f) each Account or item of Inventory which Borrower shall,
expressly or by implication, request Lender to classify as an Eligible Account
or as Eligible Inventory, respectively, shall, as of the time when such request
is made, conform in all respects to the requirements of such classification as
set forth in the respective definitions of Eligible Account and Eligible
Inventory and as otherwise established by Lender from time to time, and Borrower
shall promptly notify Lender in writing if any such Eligible Account or Eligible
Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Term be the
lawful owner of all Collateral now purportedly owned or hereafter purportedly
acquired by Borrower, free from all liens, claims, security interests and
encumbrances whatsoever, whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens;
(h) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, or Borrower's certificate of
incorporation, by-laws or other applicable documents relating to Borrower's
organization or to the conduct of Borrower's business, and Borrower's execution,
delivery and performance of this Agreement and the Other Agreements shall not
result in the imposition of any lien or other encumbrance upon any of Borrower's
property under any existing indenture, mortgage, deed of trust, loan or credit
agreement or other agreement or instrument by which Borrower or any of its
property may be bound or affected other than pursuant to this Agreement and the
Other Agreements;
(i) there are no actions or proceedings which are pending or, to
the best of Borrower's knowledge, threatened against Borrower which are
reasonably likely to have a Material Adverse Effect and Borrower shall, promptly
upon becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to Lender;
(j) Borrower has obtained all licenses, authorizations, approvals
and permits, the lack of which would have a material adverse effect on the
operation of its business, and Borrower is and shall remain in compliance in all
material respects with all applicable federal, state, local and foreign
statutes, orders, regulations, rules and ordinances (including, without
limitation, statutes, orders, regulations, rules and ordinances relating to
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety or
environmental matters), the failure to comply with which would be reasonably
likely to have a Material Adverse Effect;
(k) all written information now, heretofore or hereafter furnished
by Borrower to Lender is and shall be true and correct in all material respects
as of the date with respect to which such information was or is furnished
(except for financial projections, which have been prepared in good faith based
upon reasonable assumptions);
(l) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Liabilities remain outstanding) be owned by any Affiliate;
(m) Borrower's name has always been as set forth on the first page
of this Agreement and Borrower uses no tradenames or division names in the
operation of its business, except as otherwise set forth on Schedule (14)(m);
Borrower shall notify Lender in writing thirty (30) days prior to the change of
its name or the use of any tradenames or division names not set forth in
Schedule 14(m);
(n) with respect to Borrower's Equipment: (i) Borrower has good and
indefeasible and marketable title to and ownership of all Equipment; (ii)
Borrower shall keep and maintain all material Equipment in good operating
condition and repair and shall make all necessary replacements thereof and
renewals thereto so that the value and operating efficiency thereof shall at all
times be preserved and maintained, ordinary wear and tear excepted; (iii)
Borrower shall not permit any such items to become a fixture to real estate or
an accession to other personal property; (iv) from time to time Borrower may
sell, exchange or otherwise dispose of obsolete, unused or worn out Equipment,
but only to the extent provided in paragraph 5(a)(i) hereof; and (v) Borrower,
immediately on demand by Lender, shall deliver to Lender any and all evidence of
ownership of, including, without limitation, certificates of title and
applications of title to, any material Equipment;
(o) this Agreement and the Other Agreements to which Borrower is a
party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally;
(p) Borrower is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business, now owns property
having a value both at fair valuation and at present fair saleable value greater
than the amount required to pay its debts, and will not be rendered insolvent by
the execution and delivery of this Agreement or any of the Other Agreements or
by completion of the transactions contemplated hereunder or thereunder;
(q) Borrower is not now obligated, whether directly or indirectly,
for any loans or other indebtedness for borrowed money other than (i) the
Liabilities; (ii) indebtedness disclosed to Lender on SCHEDULE 14(q); (iii)
unsecured indebtedness to trade creditors arising in the ordinary course of
Borrower's business; and (iv) unsecured indebtedness arising from the
endorsement of drafts and other instruments for collection, in the ordinary
course of Borrower's business;
(r) Borrower does not own any margin securities, and none of the
proceeds of the Loans hereunder shall be used for the purpose of purchasing or
carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on SCHEDULE 14(s), Borrower has
no Parents, Subsidiaries or divisions, nor is Borrower engaged in any joint
venture or partnership with any other Person;
(t) Borrower is duly organized and in good standing in its state of
organization and Borrower is duly qualified and in good standing in all states
where the nature and extent of the business transacted by it or the ownership of
its assets makes such qualification necessary, except for such other states in
which the failure to so qualify would not have a Material Adverse Effect, and
Borrower has delivered to Lender true and complete copies of its Certificate of
Incorporation and By-Laws as in effect on the Closing Date;
(u) Borrower is not in default under any material contract,
lease or commitment to which it is a party or by which it is bound, nor does
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success and well-being of Borrower;
(v) there are no controversies pending or threatened between
Borrower and any of its employees, other than employee grievances arising in the
ordinary course of business which are not, in the aggregate, material to the
continued financial success and well-being of Borrower, and Borrower is in
compliance in all material respects with all federal and state laws respecting
employment and employment terms, conditions and practices, except where the
failure to so comply would not have a Material Adverse Effect;
(w) Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it and all of such items currently owned or
utilized by Borrower are listed on SCHEDULE 14(w);
(x) The proceeds of the Loans shall be used (i) to pay indebtedness
(including warrant obligations) of Borrower due to Bank of America in a maximum
aggregate amount of $3,800,000.00, and (ii) for Borrower's general working
capital purposes.
(y) Except to the extent that the failure of any of the following
to be true and accurate, would not be reasonably likely to result in a Material
Adverse Effect, no Benefit Plan was in violation in any material respect of any
of the provisions of ERISA or any of the qualification requirements of Section
401(a) of the IRC within the immediately preceding five year period, no
non-exempt Prohibited Transaction or Reportable Event has occurred with respect
to any Benefit Plan, no Benefit Plan has been the subject of a waiver of the
minimum funding standard under Section 412 of the IRC, no Benefit Plan has
experienced an accumulated funding deficiency under Section 412 of the IRC, no
Lien has been imposed upon the Borrower or any ERISA Affiliate under Section
412(n) of the IRC, no Benefit Plan has been amended in such a way that the
security requirements of Section 401(a)(29) of the IRC apply, no notice of
intent to terminate a Benefit Plan has been distributed to affected parties or
filed with the PBGC under Section 4041 of ERISA, no Benefit Plan has been
terminated under Section 4041(e) of ERISA, the PBGC has not instituted
proceedings to terminate, or appoint a trustee to administer, a Benefit Plan and
no event has occurred or condition exists which might reasonably constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan, neither Borrower nor any ERISA
Affiliate would be liable for any amount in the aggregate pursuant to Section
4062, 4063 or 4064 of ERISA if all Benefit Plans terminated as of the most
recent valuation dates of such Benefit Plans; neither Borrower nor any ERISA
Affiliate of Borrower maintains any employee welfare benefit plan, as defined in
Section 3(1) of ERISA, which provides any benefits to an employee or the
employee's dependents with respect to claims incurred after the employee
separates from service other than is required by applicable law; and neither
Borrower nor any ERISA Affiliate of Borrower has incurred or expects to incur
any withdrawal liability to any Multiemployer Plan and after the Closing Date,
none of the above-described events shall occur which are reasonably likely to
result in Material Adverse Effect;
(z) On the Closing Date, Borrower has no material liabilities
(accrued, absolute, contingent, unliquidated or otherwise, including, without
limitation, any tax, warranty or product liabilities) which are, or indebtedness
which is, not fully reflected or provided for in accordance with GAAP on the Pro
Forma Balance Sheet as of the Closing Date and the Borrower does not know of any
basis for the assertion against Borrower of any material liabilities of Borrower
which are not adequately reflected or reserved against on the Pro Forma Balance
Sheet;
(aa) Except as set forth on SCHEDULE 14(aa) attached hereto,
(i) Borrower is in compliance with, and its facilities,
business, assets, property, leaseholds and Equipment
are in compliance in all material respects with, the
applicable provisions of the Federal Occupational
Safety and Health Act, the Environmental Protection
Act, RCRA and all other applicable Environmental Laws;
there are no outstanding citations, notices or orders
of non-compliance issued to Borrower or relating to its
business, assets, property, leaseholds or Equipment
under any such laws, rules or regulations;
(ii) Borrower holds all required federal, state and local
licenses, certificates or permits required under
applicable Environmental Laws to operate its business;
(iii) (1) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to
as "Releases") of Hazardous Substances at, upon, under
or within any Real Property; (2) there are no
underground storage tanks or polychlorinated biphenyls
on the Real Property; (3) the Real Property has never
been used as a treatment, storage or disposal facility
of Hazardous Waste; and (4) no Hazardous Substances are
present on the Real Property or any premises leased by
Borrower, excepting such quantities as are handled in
accordance with all applicable manufacturer's
instructions and Environmental Laws and in proper
storage containers and as are necessary for the
operation of the commercial business of Borrower or of
its tenants; and
(bb) Borrower is not involved in any labor dispute, there are no
strikes or walkouts or union organization of Borrower's employees threatened or
in existence and no labor contract is scheduled to expire during the Term other
than as set forth on SCHEDULE 14(bb) attached hereto.
Borrower represents, warrants and covenants to Lender that all
representations, warranties and covenants of Borrower contained in this
Agreement (whether appearing in paragraphs 14 or 15 hereof or elsewhere) shall
be true at the time of Borrower's execution of this Agreement, shall survive the
execution, delivery and acceptance hereof by the parties hereto and the closing
of the transactions described herein or related hereto, shall remain true until
the repayment in full of all of the Liabilities and termination of this
Agreement, and shall (other than the representation set forth in clause (z)
above) be remade by Borrower at the time each Revolving Loan is made and each
Letter of Credit is issued pursuant to this Agreement.
15. COVENANTS. Until payment or satisfaction in full of all Liabilities
and termination of this Agreement, unless Borrower obtain Lender's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such
books, records and accounts, and any copies thereof, only at the addresses
indicated for such purpose on EXHIBIT A;
(b) Lender, or any Persons designated by it, shall have the right,
at any time (but, prior to the occurrence of an Event of Default, upon not less
than three (3) Business Days notice), in the exercise of its commercially
reasonable credit judgment, to call at Borrower's places of business at any
reasonable times during Borrower's normal business hours, and, without hindrance
or delay, to inspect the Collateral and to inspect, audit, check and make
extracts from Borrower's books, records, journals, orders, receipts and any
correspondence and other data relating to Borrower's business, the Collateral or
any transactions between the parties hereto, and shall have the right to make
such verification concerning Borrower's business as Lender may consider
reasonable under the circumstances. Borrower shall furnish to Lender such
information relevant to Lender's rights under this Agreement as Lender shall at
any time and from time to time reasonably request. Borrower authorizes Lender to
discuss the affairs, finances and business of Borrower with any officers or
directors of Borrower or any Affiliate, or with those employees of Borrower with
whom Lender has determined in its commercially reasonable judgment to be
necessary or desirable to converse, and to discuss the financial condition of
Borrower with Borrower's independent public accountants. Any such discussions
shall be without liability to Lender or to such accountants. Borrower shall pay
to or reimburse Lender for all reasonable fees, costs, and out-of-pocket
expenses incurred by Lender in the exercise of its rights hereunder (in addition
to the fees payable by Borrower pursuant to paragraph 6(g) hereof in connection
with Lender's examination of Borrower's books and records and Collateral) and
all of such costs, fees and expenses shall constitute Revolving Loans hereunder,
shall be payable on demand and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder;
(c) (i) Borrower shall: keep the Collateral properly stored and
shall keep the Collateral insured against such risks
and in such amounts as are customarily insured against
by Persons engaged in businesses similar to that of
Borrower with such companies, in such amounts and under
policies in such form as shall be reasonably
satisfactory to Lender. Originals or certified copies
of such policies of insurance have been or shall be
delivered to Lender on the Closing Date, together with
evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance
acceptable to Lender, showing loss under such insurance
policies payable to Lender. Such endorsement, or an
independent instrument furnished to Lender, shall
provide that the insurance company shall give Lender at
least thirty (30) days written notice before any such
policy of insurance is altered or cancelled and that no
act, whether willful or negligent, or default of
Borrower or any other Person shall affect the right of
Lender to recover under such policy of insurance in
case of loss or damage. Borrower hereby directs all
insurers under such policies of insurance to pay all
proceeds payable thereunder directly to Lender for its
benefit as their respective interests may appear.
Borrower irrevocably, makes, constitutes and appoints
Lender (and all officers, employees or agents
designated by Lender) as Borrower's true and lawful
attorney (and agent-in-fact) for the purpose of making,
settling
and adjusting claims under such policies of insurance,
endorsing the name of Borrower on any check, draft,
instrument or other item of payment for the proceeds of
such policies of insurance and making all
determinations and decisions with respect to such
policies of insurance, PROVIDED, HOWEVER, that Lender
shall exercise such rights only upon the occurrence of
an Event of Default;
(ii) Borrower shall maintain, at its expense, such public
liability and third party property damage insurance as
is customary for Persons engaged in businesses similar
to that of Borrower with such companies and in such
amounts, with such deductibles and under policies in
such form as shall be reasonably satisfactory to Lender
and originals or certified copies of such policies have
been or shall be delivered to Lender on the Closing
Date, together with evidence of payment of all premiums
therefor; each such policy shall contain an endorsement
showing Lender as additional insured thereunder and
providing that the insurance company shall give Lender
at least thirty (30) days written notice before any
such policy shall be altered or cancelled;
(iii) Borrower shall maintain at its expense, key person life
insurance on the life of Gay ▇▇▇▇▇ in the amount of at
least $1,000,000.00; such policy shall be assigned to
Lender for its benefit as collateral security for the
payment of the Liabilities pursuant to a collateral
assignment of life insurance policy in form and
substance acceptable to Lender, and such assignment
shall be duly recorded with the applicable life
insurance company; and
(iv) If Borrower at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in
part relating thereto, then Lender, without waiving or
releasing any obligation or default by Borrower
hereunder, may (but shall be under no obligation to)
obtain and maintain such policies of insurance and pay
such premiums and take such other actions with respect
thereto as Lender reasonably deems advisable. All sums
disbursed by Lender in connection with any such
actions, including, without limitation, court costs,
expenses, other charges relating thereto and reasonable
attorneys' fees, shall constitute Revolving Loans
hereunder and, until paid, shall bear interest at the
highest rate then applicable to Revolving Loans
hereunder;
(d) Borrower shall not use the Collateral, or any part thereof, in
any unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could reasonably be expected to result in
material damage to the environment or a violation of any applicable
environmental laws, rules or regulations; Borrower shall keep the Collateral in
good condition, repair and order, ordinary wear and tear excepted; Borrower
shall not permit the
Collateral, or any part thereof, to be levied upon under execution, attachment,
distraint or other legal process; Borrower shall not sell, lease, grant a
security interest in or otherwise dispose of any of the Collateral except as
expressly permitted by this Agreement; and Borrower shall not secrete or abandon
any of the Collateral, or remove or permit removal of any of the Collateral from
any of the locations listed on EXHIBIT A or in any written notice to Lender
pursuant to paragraph 14 hereof, except for the removal of Inventory sold in the
ordinary course of Borrower's business as permitted herein and sales or other
dispositions of Collateral contemplated by Paragraph 5(a);
(e) all monies and other property obtained by Borrower from Lender
pursuant to this Agreement will be used solely for the purposes set forth
herein;
(f) Borrower shall, at the request of Lender, indicate on its
records concerning the Collateral a notation, in form satisfactory to Lender, of
the security interest of Lender hereunder, and Borrower shall not maintain
duplicates or copies of such records at any address other than Borrower's
principal place of business set forth on the first page of this Agreement;
PROVIDED, HOWEVER, that Borrower, in the ordinary course of its business, may
furnish copies of such records to its accountants, attorneys and other agents or
advisors as it may determine to be necessary or desirable, in the exercise of
its commercially reasonable judgment;
(g) Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; PROVIDED, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) upon the
occurrence of an Event of Default, Borrower keeps on deposit with Lender (such
deposit to be held without interest) an amount of money which, in the sole
judgment of Lender, is sufficient to pay such taxes and any interest or
penalties that may accrue thereon, and (iv) if Borrower fails to prosecute such
contest with reasonable diligence, Lender may apply the money so deposited in
payment of such taxes. If Borrower fails to pay any such taxes and in the
absence of any such contest by Borrower, Lender may (but shall be under no
obligation to) advance and pay any sums required to pay any such taxes and/or to
secure the release of any lien therefor, and any sums so advanced by Lender
shall constitute Revolving Loans hereunder, shall be payable by Borrower to
Lender on demand, and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder;
(h) Borrower shall not (i) incur, create, assume or suffer to exist
any indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers arising on or after the Closing Date, and (C) any other indebtedness
described in paragraphs 14(q)(ii), (iii), and (iv) hereof; or (ii) assume,
guarantee or endorse, or otherwise become liable in connection with, the
obligations of any Person, except by endorsement of instruments for deposit or
collection or similar transactions in the ordinary course of business;
(i) Borrower shall not enter into any merger or consolidation, or
sell, lease or otherwise dispose of all or substantially all of its assets;
Borrower shall not create or acquire any new Subsidiary or Affiliate or issue
any shares of, or warrants or other rights to receive or purchase
any shares of, any class of its stock; Borrower shall not enter into any
transaction outside the ordinary course of Borrower's business;
(j) Except as otherwise permitted by paragraph 5(b)(ii) above,
Borrower shall not (i) except as otherwise permitted below declare or pay any
dividend or other distribution (whether in cash or in kind) on, purchase, redeem
or retire any shares of any class of its stock, or make any payment on account
of, or set apart assets for the repurchase, redemption, defeasance or retirement
of, any class of its stock; (ii) make any optional payment or prepayment on or
redemption (including without limitation by making payments to a sinking fund or
analogous fund) or repurchase of any indebtedness for borrowed money other than
indebtedness pursuant to this Agreement; (iii) pay any management or similar
fees to any Person, except for management fees to Security Capital Corporation
pursuant to that certain Management Advisory Services Agreement dated as of June
27, 1997 between Borrower and Security Capital Corporation; (iv) make any loan
in excess of $1,000.00 to any Person at any time except travel, entertainment
and relocation advances to Borrower's employees in the ordinary course of
business consistent with past practices; or (v) make any payment to PCG, Inc. or
any other party pursuant to the Asset Purchase Agreement dated June 27, 1997
among Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., Pumpkin Masters Holdings, Inc.
and Security Capital Corporation or the transactions contemplated thereby except
for Additional Payments pursuant to and as defined in such Asset Purchase
Agreement not to exceed $160,000 per year on an accrual basis. Notwithstanding
the foregoing, Borrower shall be permitted to make distributions to its
shareholders in lieu of taxes pursuant to, and in accordance with the terms of
the Consolidated Income Tax Sharing Agreement, dated as of May 17, 1996, by and
between Possible Dreams, Ltd. and Security Capital Corporation and the Joinder
Agreement dated as of June 27, 1997 among Security Capital Corporation, Pumpkin
Masters Holdings, Inc. and Borrower provided that (1) such distributions in lieu
of taxes shall be made in accordance with the following schedule: not more than
$100,000.00 at the end of Borrower's first fiscal quarter (provided that a
reserve against availability shall be established for such payment); not more
than an additional $100,000.00 at the end of Borrower's second fiscal quarter
(provided that a reserve against availability shall be established for such
payment) and the balance payable (and the above described reserves against
availability eliminated) at such time as Borrower has completed its seasonal
selling period and has realized (on a cash basis) the profits giving rise to
such distributions in lieu of taxes; (2) at the time of payment no Event of
Default shall have occurred hereunder at any time, and (3) the making of such
distribution in lieu of taxes shall not cause the aggregate outstanding balance
of the Revolving Loans to exceed the limits set forth in Section 2(b) above or
cause the Borrower to be out of compliance with any covenant or other
requirement or obligation contained herein. Notwithstanding the foregoing,
Borrower shall also be permitted to make payments to ▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇
▇▇▇▇▇▇▇ under employment and consulting agreements and in reimbursement of
reasonable business expenses incurred on behalf of Borrower in the ordinary
course of business, PROVIDED THAT such payments do not exceed $200,000.00 per
year in the aggregate;
(k) Borrower shall not make any investment in any Person, whether
in cash, securities or other property of any kind, other than investments in
Cash Equivalents;
(l) Borrower shall not amend its charter, by-laws or any
shareholder's agreement or change its Fiscal Year;
(m) Borrower shall not enter into or maintain any transaction or
agreement with its Affiliates, except in the ordinary course of business in a
manner and to an extent consistent with past practices of Borrower and necessary
or desirable for the prudent operation of its business and upon fair and
reasonable terms no less favorable to Borrower than would be obtained by
Borrower in a comparable arms-length transaction with a Person who is not an
Affiliate of Borrower;
(n) Borrower shall not (i) (x) maintain, or permit any ERISA
Affiliate to maintain, or (y) become obligated to contribute, or permit any
ERISA Affiliate to become obligated to contribute, to any Benefit Plan, (ii)
engage, or permit any ERISA Affiliate to engage, in any non-exempt "prohibited
transaction", (iii) incur, or permit any ERISA Affiliate to incur, any
"accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the IRC, (iv) terminate, or permit any ERISA Affiliate
to terminate, any Benefit Plan in a manner which could result in any material
liability of Borrower or any ERISA Affiliate or the imposition of a lien on the
property of Borrower or any ERISA Affiliate pursuant to Section 4068 of ERISA,
(v) assume, or permit any ERISA Affiliate to assume, any obligation to
contribute to any Multiemployer Plan, (vi) incur, or permit any ERISA Affiliate
to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail
promptly to notify Lender of the occurrence of any Termination Event, (viii)
fail to comply, in all material respects, or permit a ERISA Affiliate to fail to
comply, in all material respects, with the requirements of ERISA or IRC or other
applicable laws in respect of any Benefit Plan, (ix) fail to meet, or permit any
ERISA Affiliate to fail to meet, all minimum funding requirements under ERISA or
IRC or postpone or delay or allow any ERISA Affiliate to postpone or delay any
funding requirement with respect of any Benefit Plan except as permitted by
applicable laws, in each event set forth in clauses (i) through (ix) which would
be reasonably likely to result in a Material Adverse Effect;
(o) Borrower shall maintain and keep in full force and effect each
of the financial covenants set forth below. The calculation and determination of
each such financial covenant, and all accounting terms contained therein, shall
be so calculated and construed in accordance with GAAP, applied on a basis
consistent with the financial statements of Borrower delivered on or before the
Closing Date:
(i) Net Worth. Borrower shall maintain as of the end of (A)
the fiscal quarter ending June 30, 2001 (the "base
quarter") a Net Worth of not less than Four Million
Eight Hundred Fifty Thousand dollars ($4,850,000.00)
and (B) each fiscal quarter thereafter (each a "current
quarter"), a Net Worth of not less than the sum of (1)
Four Million Eight Hundred Fifty Thousand dollars
($4,850,000.00) and (2) an aggregate amount equal to
fifty percent (50%) of the net income after taxes of
Borrower for each fiscal quarter commencing with the
base quarter through and including the then current
quarter, provided, however, that such aggregate amount
shall not be reduced by the amount of any net loss
before taxes of Borrower for any preceding fiscal
quarter.
(ii) DEBT SERVICE COVERAGE RATIO. Borrower shall maintain as
of September 30, 2001 with respect to the three (3)
fiscal quarters then ended and, thereafter, as of the
end of each fiscal quarter with respect to the four (4)
fiscal quarters then ended a Debt Service Coverage
Ratio of not less than 1.0 to 1.0.
(iii) Capital Expenditures. Borrower shall not make Capital
Expenditures of an aggregate amount of more than Three
Hundred Thousand dollars ($300,000.00) during any
Fiscal Year.
(iv) Minimum EBITDA. Borrower shall maintain EBITDA of not
less than the amounts shown opposite such fiscal
quarter calculated on a rolling twelve-month basis
(except as otherwise noted below), for each
twelve-month period (except as otherwise noted below)
ending on the last day of each such fiscal quarter:
Fiscal Quarter Ended Minimum EBITDA
September 30, 2001 (9 month period) $ 3,500,000.00
December 31, 2001 $ 2,600,000.00
March 31, 2002 $ 2,600,000.00
June 30, 2002 $ 2,650,000.00
September 30, 2002 $ 2,865,000.00
December 31, 2002 and thereafter $ 2,865,000.00
(p) Borrower shall reimburse Lender for all reasonable costs and
expenses including, without limitation, legal expenses and reasonable attorneys'
fees (both in-house and outside counsel), incurred by Lender in connection with
the documentation and consummation of this transaction and any other
transactions between Borrower and Lender, including, without limitation, UCC and
other public record searches, lien filings, Federal Express or similar express
or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs, and in seeking to collect, protect or
enforce any rights in or to the Collateral or incurred by Lender in seeking to
collect any Liabilities and to administer and enforce any of Lender's rights
under this Agreement. Borrower shall also pay all normal and customary service
charges with respect to accounts maintained by Lender for the benefit of
Borrower. All such costs, expenses and charges shall constitute Revolving Loans
hereunder, shall be payable by Borrower to Lender on demand, and, until paid,
shall bear interest at the highest rate then applicable to Revolving Loans
hereunder;
(q) Borrower shall promptly notify Lender in writing of the
occurrence of a (i) Default or an Event of Default; (ii) any event, development
or circumstance whereby any financial statements furnished to Lender fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of Borrower as of the date
of such statements or whereby any reports furnished to Lender fail in any
material respect to present fairly the financial condition or operating results
of Borrower as of the date of such reports; (iii) any "accumulated funding
deficiency," as that term is defined in Section 302 of ERISA and Section 412 of
the IRC which, if such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the IRC, could subject Borrower to a
tax imposed by Section 4971 of the IRC; (iv) each and every default by Borrower
which could reasonably be expected to result in the acceleration of the maturity
of any indebtedness of Borrower, including the names and addresses of the
holders of such indebtedness with respect to which there is a default existing
or with respect to which the maturity has been or could be accelerated, and the
amount of such indebtedness; and (v) any other development in the business or
affairs of Borrower which could reasonably be expected to have a Material
Adverse Effect; in each case describing the nature thereof and the action
Borrower proposes to take with respect thereto;
(r) (i) Borrower shall ensure that the Real Property remains in
compliance with all Environmental Laws and shall not
place or permit to be placed any Hazardous
Substances on any Real Property except as not
prohibited by applicable law (including Environmental
Laws) or appropriate governmental authorities;
(ii) Borrower shall establish and maintain a system to
assure and monitor continued compliance with all
applicable Environmental Laws which system shall
include periodic reviews of such compliance;
(iii) Borrower shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to
maintain compliance with any applicable Environmental
Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and
with carriers that maintain valid permits under RCRA
and any other applicable Environmental Laws. Borrower
shall use its best efforts to obtain certificates of
disposal, such as hazardous waste manifest receipts,
from all treatment, transport, storage or disposal
facilities or operators employed by Borrower in
connection with the transport or disposal of any
Hazardous Waste generated at the Real Property;
(iv) In the event Borrower obtains, gives or receives notice
of any Release or threat of Release of a reportable
quantity of any Hazardous Substances at the Real
Property (any such event being hereinafter referred to
as a "Hazardous Discharge") or receives any notice of
violation, request for information or notification that
it is potentially responsible for investigation or
cleanup of environmental conditions at the Real
Property, demand letter or complaint, order, citation,
or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting
the Real Property or Borrower's interest therein (any
of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including
any state agency responsible in whole or in part for
environmental matters in the state in which the Real
Property is located or the United States Environmental
Protection Agency (any such person or entity
hereinafter the "Authority"), then Borrower shall,
within five (5) Business Days, give written notice of
same to Lender detailing facts and circumstances of
which Borrower is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information
is to be provided to allow Lender to protect its
security interest in the Real Property and is not
intended to create nor shall it create any obligation
upon Lender with respect thereto;
(v) Borrower shall promptly forward to Lender copies of any
request for information, notification of potential
liability, demand letter relating to potential
responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site
owned, operated or used by Borrower to dispose of
Hazardous Substances and shall continue to forward
copies of correspondence between Borrower and the
Authority regarding such claims to Lender until the
claim is settled. Borrower shall promptly forward to
Lender copies of all documents and reports concerning a
Hazardous Discharge at the Real Property that Borrower
is required to file under any Environmental Laws. Such
information is to be provided solely to allow Lender to
protect Lender's security interest in the Real Property
and the Collateral;
(vi) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all
necessary action in order to safeguard the health of
any Person and to avoid subjecting the Collateral or
Real Property to any lien. If Borrower shall fail to
respond promptly to any Hazardous Discharge or
Environmental Complaint or Borrower shall fail to
comply with any of the requirements of any
Environmental Laws, Lender may, but without the
obligation to do so, for the sole purpose of protecting
Lender's interest in Collateral: (A) give such notices
or (B) enter onto the Real Property (or authorize third
parties to enter onto the Real Property) and take such
actions as Lender (or such third parties as
directed by Lender) deem reasonably necessary or
advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental
Complaint. All reasonable costs and expenses incurred
by Lender (or such third parties) in the exercise of
any such rights, including any sums paid in connection
with any judicial or administrative investigation or
proceedings, fines and penalties, together with
interest thereon from the date expended at the Default
Rate for Prime Rate Revolving Loans shall be paid upon
demand by Borrower, and until paid shall be added to
and become a part of the Liabilities secured by the
liens created by the terms of this Agreement or any
other agreement between Lender and Borrower;
(vii) Promptly upon the written request of Lender from time
to time (but prior to the occurrence of an Event of
Default not more frequently than annually), Borrower
shall provide Lender, at Borrower's expense, with an
environmental site assessment or environmental audit
report prepared by an environmental engineering firm
acceptable in the reasonable opinion of Lender, to
assess with a reasonable degree of certainty the
existence of a Hazardous Discharge and the potential
costs in connection with abatement, cleanup and removal
of any Hazardous Substances found on, under, at or
within the Real Property. Any report or investigation
of such Hazardous Discharge proposed and acceptable to
an appropriate Authority that is charged to oversee the
clean-up of such Hazardous Discharge shall be
acceptable to Lender. If such estimates, individually
or in the aggregate, exceed $100,000, Lender shall have
the right to require Borrower to post a bond, letter of
credit or other security reasonably satisfactory to
Lender to secure payment of these costs and expenses;
(viii) Borrower shall defend and indemnify Lender and
hold Lender and its employees, agents, directors and
officers harmless from and against all loss, liability,
damage and expense, claims, costs, fines and penalties,
including reasonable attorney's fees, suffered or
incurred by Lender under or on account of any
Environmental Laws, including, without limitation, the
assertion of any lien thereunder, with respect to any
Hazardous Discharge, or the presence of any Hazardous
Substances affecting the Real Property, whether or not
the same originates or emerges from the Real Property
or any contiguous real estate, except to the extent
such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from
actions on the part of Lender or its employees, agents,
officers or directors. Borrower's obligations under
this paragraph 15(viii) shall arise upon the discovery
of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action
in connection with the presence of any Hazardous
Substances. Borrower's obligation and the
indemnifications hereunder shall survive the
termination of this Agreement; and
(ix) For purposes of paragraphs 14(aa) and 15(r), all
references to Real Property shall be deemed to include
all of Borrower's right, title and interest in and to
its owned and leased premises.
16. CONDITIONS PRECEDENT.
(a) The obligation of Lender to fund the Term Loan, to fund the
initial Revolving Loan on the Closing Date, and to co-sign as applicant for the
initial Letter of Credit, if any, on the Closing Date is subject to the
satisfaction or waiver on or before the Closing Date of the following conditions
precedent:
(i) Lender shall have received each of the agreements,
opinions, reports, approvals, consents, certificates
and other documents set forth on the closing document
list attached hereto as Schedule A (the "Closing
Document List").
(ii) Since March 31, 2001, no event shall have occurred
which has had or could reasonably be expected to have a
Material Adverse Effect, as determined by Lender in its
reasonable business judgment.
(iii) Lender shall have received payment in full of all fees
and expenses set forth herein payable to it by Borrower
on or before the Closing Date.
(iv) Lender shall have determined that immediately after
giving effect to (A) the making of the initial Loans
requested to be made on the Closing Date and (B) the
issuance of the initial Letters of Credit, if any,
requested to be made on the Closing Date and (C) the
payment or reimbursement by Borrower of Lender for all
closing costs and expenses incurred in connection with
the transactions contemplated hereby, on a pro forma
basis the Excess Availability of Borrower shall not be
less than Five Hundred Thousand Dollars ($500,000.00).
(v) Lender shall have received a certificate from
Borrower's chief executive officer or chief financial
officer, pursuant to which such officer shall certify
that in calculating the Excess Availability described
in clause (iv) above, the outstanding trade payables of
Borrower were and are current and not past due in any
material respect.
(vi) Borrower shall have executed and delivered to Lender
all documents which Lender determines are reasonably
necessary to consummate the transactions contemplated
hereby.
(vii) Lender shall have received duly executed agreements
establishing the Lock Box and Blocked Accounts with
Lender for the collection or servicing of the Accounts
and proceeds of the Collateral.
(viii) Lender shall have completed Collateral examinations,
the results of which shall be satisfactory in form and
substance to the Lender, of the Accounts, Inventory,
General Intangibles, Investment Property and Equipment
of Borrower and all books and records in connection
therewith.
(ix) Lender shall have received and be satisfied with the
audited financial statements of Borrower for the Fiscal
Year ended December 31, 2000.
(x) There shall exist no default in any obligations or in
compliance with any applicable legal requirement of
Borrower (other than those disclosed to Lender in
writing on or prior to the date hereof).
(xi) Lender shall be satisfied with its due diligence review
of the business and financial affairs of Borrower and
its management and its pre-closing audit of Borrower.
(xii) Lender shall have received the executed legal opinion
of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in form and substance
satisfactory to Lender which shall cover such matters
incident to the transactions contemplated by this
Agreement, the Notes, and related agreements as Lender
may reasonably require (including, without limitation,
enforceability and perfection issues with respect to
the Collateral and the Real Property) and Borrower
hereby authorizes and directs such counsel to deliver
such opinions to Lender.
(xiii) Lender shall have received landlord, warehouseman and
supplier agreements satisfactory to Lender with respect
to all premises leased by Borrower or any of its
customers or suppliers at which books and records,
Inventory and Equipment are located. Notwithstanding
the foregoing, Borrower shall only be required to use
its best efforts to deliver the landlord agreement
pertaining to the Borrower's facility located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ to Lender within
forty-five (45) days after the date hereof. Lender may
establish a reserve against the Revolving Loan of
$30,000.00 (which amount may be increased or decreased
by Lender from time to time in its reasonable business
judgment) until such agreement is received.
(xiv) Lender shall have received in form and substance
satisfactory to Lender, certified copies of Borrower's
casualty insurance policies, together with (on or
before June 20, 2001, TIME BEING OF THE ESSENCE) loss
payable endorsements on Lender's standard form of loss
payee endorsement naming Lender as lender loss payee,
certified copies of Borrower's liability insurance
policies, together with endorsements naming Lender as a
co-insured, and, within sixty (60) days after the date
hereof TIME BEING OF THE ESSENCE, certified copies of
Borrower's key person life insurance policies on the
life of Gay ▇▇▇▇▇, together with collateral assignments
of such policies and each such insurance policy shall
be in accordance with the requirements of Paragraph
15(c) of this Agreement. Without limiting the
generality of paragraph 17(b) below, failure by
Borrower to deliver any item required under this
paragraph within the time required hereunder shall
constitute an Event of Default. Borrower agrees that
any payment or proceeds received with respect to
Borrower's casualty insurance shall immediately be
delivered to
Lender in the form received, together with any
necessary endorsements.
(xv) Each document (including, without limitation, any
Uniform Commercial Code financing statement and filings
with the United State Patent and Trademark Office or
any similar state authority) required by this
Agreement, any Other Agreement or under law or
reasonably requested by the Lender to be filed,
registered or recorded in order to create, in favor of
Lender, a perfected security interest in or lien upon
the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so
required or requested, and Lender shall have received
an acknowledgment copy, or other evidence satisfactory
to it, of each such filing, registration or recordation
and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto.
(xvi) No litigation, investigation or proceeding before or
by any arbitrator or governmental body shall be
continuing or threatened against Borrower or against
the officers or directors of Borrower (A) in connection
with this Agreement or the Other Agreements or any of
the Transactions and which, in the reasonable opinion
of Lender, is deemed material or (B) which if adversely
determined, could, in the reasonable opinion of Lender,
have a Material Adverse Effect on Borrower; and (ii) no
injunction, writ, restraining order or other order of
any nature materially adverse to Borrower or the
conduct of its business or inconsistent with the due
consummation of the transactions contemplated by this
Agreement or the Other Agreements shall have been
issued by any governmental body.
(xvii) Lender shall have received all environmental studies
and reports requested by Lender and prepared by
independent environmental engineering firms regarding
the Real Property, the results of which shall be
satisfactory to Lender in all respects.
(xviii) Lender shall have reviewed all material contracts of
Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts,
license agreements and distributorship agreements and
such contracts and agreements shall be satisfactory in
all respects to Lender.
(xix) Borrower shall be in compliance with all applicable
laws and regulations.
(xx) No Default or Event of Default shall exist.
(xxi) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with
the transactions contemplated by this Agreement shall
be satisfactory in form and substance to Lender and its
counsel.
(xxii) Lender shall have received and reviewed the Pro Forma
Balance Sheet and monthly projections of the Borrower
for the first Contract Year, together with financial
projections for the second and third Contract Year,
calculated on an annual basis, and such balance sheet
and projections shall be in form and substance
satisfactory to the Lender.
(xxiii) All existing insurance on Borrower's Accounts shall be
assigned to Lender within thirty (30) days after the
date hereof pursuant to documentation satisfactory to
Lender.
(b) The obligation of Lender to make any requested Loan, or to
issue or cause the issuance of any requested Letter of Credit whether on or at
any time after the Closing Date, is subject to the satisfaction of the
conditions precedent set forth below. Each such request shall constitute a
representation and warranty that such conditions are satisfied:
(i) All representations and warranties contained in this
Agreement and the Other Agreements shall be true and
correct on and as of the date of such request, as if
then made, other than representations and warranties
that relate solely to an earlier date;
(ii) No Default or Event of Default shall have occurred, or
would result from the making of the requested Loan or
the issuance of the requested Letter of Credit, which
has not been waived in writing by Lender; and
(iii) Since March 31, 2001, no event has occurred which has
had or could reasonably be expected to have a Material
Adverse Effect.
17. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT" hereunder:
(a) the failure of Borrower to pay when due, declared due, or
demanded by Lender in accordance with the terms hereof, any of the Liabilities;
(b) the failure of Borrower to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements;
(c) (i) the making or furnishing by Borrower to Lender of any
representation, warranty, certificate, schedule, report or other communication
within or in connection with this Agreement or the Other Agreements or in
connection with any other agreement between Borrower and Lender, which is untrue
or misleading in any material respect, or (ii) the failure of any Borrower to
perform, keep or observe any of the covenants, conditions, promises, agreements
of such Borrower under any other agreement with any Person if such failure has
or is reasonably likely to have a Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than the Permitted Liens, or the making or any attempt to make any levy,
seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or
against Borrower, (ii) for the liquidation or reorganization of Borrower, (iii)
alleging that Borrower is insolvent or unable to pay its debts as they mature,
or (iv) for the readjustment or arrangement of any Borrower's debts, whether
under the United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
Borrower; PROVIDED, HOWEVER, that if such commencement of proceedings against
Borrower is involuntary, such action shall not
constitute an Event of Default unless such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for Borrower, for any
of the Collateral or for any substantial part of Borrower's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of Borrower which is a corporation
or a partnership; PROVIDED, HOWEVER, that if such appointment or commencement of
proceedings against Borrower is involuntary, such action shall notconstitute an
Event of Default unless such appointment is not revoked or such proceedings are
not dismissed within forty-five (45) days after the commencement of such
proceedings;
(g) the entry of any judgment or order in excess of $250,000
against Borrower which is not covered in full by insurance and which remains
unsatisfied or undischarged and in effect for forty-five (45) days after such
entry without a stay of enforcement or execution;
(h) the occurrence of a default or event of default under, or the
revocation or termination of, any agreement, instrument or document executed and
delivered by any Person to Lender pursuant to which such Person has guaranteed
to Lender for its benefit the payment of all or any of the Liabilities or has
granted Lender for its benefit a security interest in or lien upon some or all
of such Person's real and/or personal property to secure the payment of all or
any of the Liabilities;
(i) the occurrence of a default or event of default under any other
agreement or instrument evidencing indebtedness for borrowed money in excess of
$250,000.00 executed or delivered by Borrower or pursuant to which agreement or
instrument Borrower or its properties is or may be bound;
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect;
(k) the occurrence of a Change of Control;
(l) if any Reportable Event shall have occurred or any Benefit Plan
shall be terminated within the meaning of Title IV of ERISA, a trustee shall be
appointed by the appropriate United States District Court to administer any
Benefit Plan, the PBGC shall institute proceedings to terminate any Benefit
Plan, or there shall be a withdrawal from any Multiemployer Plan, and there
shall be a Material Adverse Effect in the case of any event described in this
paragraph 17(l);
(m) the occurrence of any event specified in Borrower's certificate
of incorporation or by-laws that could reasonably be expected to result in
Borrower's dissolution or liquidation or Borrower shall file a certificate of
dissolution or shall be liquidated, dissolved or wound-up or shall commence or
have commenced against it any action or proceeding for dissolution, winding up
or liquidation; or
(n) the operations of any facility manufacturing or processing
goods for sale by Borrower are interrupted (x) for more than ten (10)
consecutive Business Days during the period from April 1 through August 31, both
inclusive, of any year, or (y) at any other time and such interruption is
reasonably to likely have a Material Adverse Effect.
Notwithstanding anything contained in this paragraph 17 or
contained in any other provision of ths Agreement or the Other Agreements to the
contrary, in the event of the institution of any proceeding or appointment
described in paragraph 17(e) or paragraph 17(f) hereof against Borrower, Lender
shall not be obligated to make advances to Borrower during the forty-five (45)
day grace period provided in paragraph 17(e) or paragraph 17(f).
18. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in
paragraph 17(e) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all of the Liabilities may, at the
option of Lender, and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable.
(b) Upon the occurrence of an Event of Default, Lender may
exercise from time to time any rights and remedies available to it under UCC or
any other applicable law in addition to, and not in lieu of, any rights and
remedies expressly granted in this Agreement or in any of the Other Agreements
and all of Lender's rights and remedies shall be cumulative and non-exclusive to
the extent permitted by law. In particular, but not by way of limitation of the
foregoing, Lender may, without notice, demand or legal process of any kind, take
possession of any or all of the Collateral (in addition to Collateral of which
it already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter into any of Borrower's
premises where any of the Collateral may be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to store the same at any
of Borrower's premises without cost to Lender. At Lender's request, Borrower
shall, at Borrower's expense, assemble the Collateral and make it available to
Lender at one or more places to be designated by Lender and reasonably
convenient to Borrower. Borrower recognizes that if Borrower fails to perform,
observe or discharge any of its Liabilities under this Agreement or the Other
Agreements, no remedy at law will provide adequate relief to Lender, and
Borrower agrees that Lender shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages. Any notification of intended disposition of any of the Collateral
required by law will be deemed reasonably and properly given if given at least
ten (10) calendar days before such disposition. Any proceeds of any disposition
by Lender of any of the Collateral may be applied by Lender to the payment of
expenses in connection with the Collateral including, without limitation, legal
expenses and reasonable attorneys' fees (both in-house and outside counsel) and
any balance of such proceeds may be applied by Lender toward the payment of such
of the Liabilities, and in such order of application, as Lender may from time to
time elect.
19. INDEMNIFICATION. Borrower agrees to defend (with counsel
reasonably satisfactory to Lender), protect, indemnify and hold harmless Lender,
each Affiliate or subsidiary Lender, and each of their respective officers,
directors, employees, attorneys and agents (each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature (including, without limitation, the disbursements and the reasonable
fees of counsel for each Indemnified Party in connection with any investigative,
administrative or judicial proceeding, whether or not the Indemnified Party
shall be designated a party thereto), which may be imposed
on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations including, without limitation, securities, environmental and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loans or any Letters of
Credit or the use or intended use of the proceeds of the Loans or any Letters of
Credit; PROVIDED, HOWEVER, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party on demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Revolving Loans hereunder from the date incurred by each
Indemnified Party until paid by Borrower, be added to the Liabilities of
Borrower and be secured by the Collateral. The provisions of this paragraph 19
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
20. NOTICES. All written notices and other written communications
with respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered in person, and in the case of Lender shall be
sent to it at LaSalle Business Credit, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, Attention: District Credit Manager, (facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇)
with a copy to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ (facsimile (▇▇▇) ▇▇▇-▇▇▇▇)
and in the case of Borrower shall be sent to Borrower at its principal place of
business as set forth on the first page of this Agreement, Attention: Ms. Gay
▇▇▇▇▇ (facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇), with copies to Capital Partners, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇) and to ▇▇▇▇▇▇, ▇▇▇▇▇
& Bockius LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇▇ III (facsimile no. (▇▇▇) ▇▇▇-▇▇▇▇). Any notice, if mailed and
properly addressed with postage prepaid, shall be deemed given when received;
any notice, if transmitted by telecopy, shall be deemed given when transmitted,
provided receipt is confirmed.
21. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and
the Other Agreements are submitted by Borrower to Lender for Lender's acceptance
or rejection at Lender's principal place of business as an offer by Borrower to
borrow monies from Lender now and from time to time hereafter, and shall not be
binding upon Lender or become effective until accepted by Lender, in writing, at
said place of business. If so accepted by Lender, this Agreement and the Other
Agreements shall be deemed to have been made at said place of business. THIS
AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE STATE OF
NEW YORK AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT
LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING
PERFECTION OF THE SECURITY INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED
AND CONTROLLED BY THE LAWS
OF THE RELEVANT JURISDICTION. If any provision of this Agreement shall be held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
22. FORUM SELECTION AND SERVICE OF PROCESS. To induce Lender to
accept this Agreement, Borrower irrevocably agrees that, subject to Lender's
sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER
AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇. BORROWER HEREBY CONSENTS AND SUBMITS TO
THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN SAID CITY
AND STATE. Borrower hereby irrevocably appoints and designates the Secretary of
State of Colorado (or any other person having and maintaining a place of
business in such state whom Borrower may from time to time hereafter designate
upon ten (10) days written notice to Lender and who Lender has agreed in writing
in its sole discretion is satisfactory and who has executed an agreement in form
and substance satisfactory to Lender agreeing to act as such attorney and
agent), as Borrower's true and lawful attorney and duly authorized agent for
acceptance of service of legal process. Borrower agrees that service of such
process upon such person shall constitute personal service of such process upon
Borrower. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH
THIS PARAGRAPH.
23. MODIFICATION AND BENEFIT OF AGREEMENT.
(a) This Agreement and the Other Agreements may not be
modified, altered or amended except by an agreement in writing signed by
Borrower and Lender as provided in paragraph (b) below. Borrower may not sell,
assign or transfer this Agreement, or the Other Agreements or any portion
thereof including, without limitation, Borrower's rights, titles, interest,
remedies, powers or duties thereunder.
(b) Lender, with the consent in writing of the Borrower may,
subject to the provisions of this paragraph 23(b), from time to time enter into
written supplemental agreements to this Agreement, the Notes or the Other
Agreements executed by Borrower, for the purpose of adding or deleting any
provisions or otherwise changing, varying or waiving in any manner the rights of
Lender or Borrower thereunder or the conditions, provisions or terms thereof of
waiving any Event of Default thereunder, but only to the extent specified in
such written agreements.
Any such supplemental agreement shall be binding upon Borrower, Lender
and all future holders of the Liabilities. In the case of any waiver, Borrower
and Lender shall be restored to their former positions and rights, and any Event
of Default waived shall be deemed to be cured and not continuing, but no waiver
of a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
24. PARTICIPATIONS AND ASSIGNMENT.
(a) Borrower acknowledges that in the regular course of
commercial banking business Lender may at any time and from time to time sell
participating interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Loans held by it or other
Liabilities payable hereunder as fully as if such Transferee were the direct
holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to the
Lender which granted an interest in its Loans or other Liabilities payable
hereunder to such Transferee had Lender retained such interest in the Loans
hereunder or other Liabilities payable hereunder and in no event shall Borrower
be required to pay any such amount arising from the same circumstances and with
respect to the same Loans or other Liabilities payable hereunder to both Lender
and such Transferee. Borrower hereby grants to any Transferee a continuing
security interest in any deposits, moneys or other property actually or
constructively held by such Transferee as security for the Transferee's interest
in the Loans.
(b) Lender may (with Borrower's prior written consent, which
consent shall not be unreasonably withheld or delayed) sell, assign or transfer
all or any part of its rights under this Agreement and the Other Agreements to
one or more additional banks or financial institutions and one or more
additional banks or financial institutions may commit to make Loans hereunder
(each a "Purchasing Lender"), in minimum amounts of not less than $1,000,000,
pursuant to a Commitment Transfer Supplement in the form of EXHIBIT 24(b)
attached hereto, executed by the Purchasing Lender and the transferor Lender.
Upon such execution, delivery, acceptance and recording, from and after the
transfer effective date determined pursuant to such Commitment Transfer
Supplement, (i) a Purchasing Lender thereunder shall be a party hereto and, to
the extent provided in such Commitment Transfer Supplement, have the rights and
obligations of a Lender hereunder with a Commitment Percentage as set forth
therein, and (ii) the transferor Lender thereunder shall, to the extent provided
in such Commitment Transfer Supplement, be released from its obligations under
this Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Agreements. Borrower hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Agreements. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.
(c) Borrower authorizes Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in Lender's possession concerning Borrower which has
been delivered to Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with Lender's credit evaluation of Borrower; PROVIDED such
Transferee or Purchasing Lender agrees in writing to keep all such information
confidential in accordance with the terms of Paragraph 27(e) hereof.
25. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in
this Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
26. POWER OF ATTORNEY. Borrower acknowledges and agrees that
its appointment of Lender as its attorney-in-fact for the purposes specified in
this Agreement is an appointment coupled with an interest and shall be
irrevocable until all of the Liabilities are paid in full and this Agreement is
terminated.
27. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) LENDER AND BORROWER HEREBY WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT OF BORROWER OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG BORROWER AND
LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF
ANY KIND PRIOR TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE
COLLATERAL OF BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY
UPON SUCH COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and
notice of nonpayment, and further waives the benefit of all valuation, appraisal
and exemption laws.
(d) Lender's failure, at any time or times hereafter, to
require strict performance by Borrower of any provision of this Agreement or any
of the Other Agreements shall not waive, affect or diminish any right of Lender,
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by Lender, of an Event of Default under this Agreement or any default
under any of the Other Agreements shall not suspend, waive or affect any other
Event of Default under this Agreement or any other default under any of the
Other Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of Lender in
the exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing in compliance with Paragraph
23(b) hereof.
(e) Borrower has furnished and will furnish to Lender certain
information concerning Borrower which Borrower has advised is non-public,
proprietary or confidential in nature ("CONFIDENTIAL INFORMATION"). Lender
confirms to the Borrower that it is Lender's policy and practice to maintain in
confidence all Confidential Information which is provided to it under agreements
providing for the extension of credit and which is identified to it as such, and
that it will protect the confidentiality of Confidential Information submitted
to it with respect to Borrower under this Agreement, commensurate with its
efforts to maintain the confidentiality of its own Confidential Information,
PROVIDED, HOWEVER, that (i) nothing contained herein shall prevent Lender from
disclosing Confidential Information (A) to its Affiliates and their respective
directors, officers, and employees and to any legal counsel, auditors,
appraisers, consultants or other persons retained by it or its Affiliates as
professional advisors, on the condition that such information not be further
disclosed except in compliance with this paragraph 27(e); (B) under color of
legal authority, including, without limitation, to any regulatory authority
having jurisdiction over it or its operations or to, or under the authority of,
any court deemed by it to be of competent jurisdiction; (C) to any actual or
potential Transferee or Purchasing Lender in Lender's rights and obligations
under this Agreement to the extent such actual or potential Transferee or
Purchasing Lender has agreed to maintain such information in confidence on the
basis set forth in this paragraph 27(e); and (D) as necessary in connection with
the exercise of its remedies under this Agreement or any of the Other
Agreements; (ii) the terms of this paragraph 27(e) shall be inapplicable to any
information furnished to it which is in possession prior to the delivery to it
of such information by Borrower or any other authorized Person, or otherwise has
been obtained by it on a non-confidential basis, or which was or becomes
available to the public or otherwise part of the public domain (other than as a
result of Lender's failure or any prospective participant's or assignee's
failure to abide hereby), or which was not non-public, proprietary or
confidential when Borrower or any other authorized Person delivered it to
Lender; and (iii) the determination by Lender as to the application of any of
the circumstances described in the foregoing clauses (i) and (ii) will be
conclusive and binding if made in good faith.
(f) Notwithstanding subparagraph (e) above, Borrower consents
to Lender publishing a tombstone or similar advertising material relating to the
financing transaction contemplated by this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 13th day of June, 2001.
LASALLE BUSINESS CREDIT, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
PUMPKIN LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President