LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (FLORIDA)
as Lender
and
DRUGMAX, INC.
as Borrower, together with its subsidiaries VALLEY DRUG
COMPANY, VALLEY DRUG COMPANY SOUTH, and DISCOUNT
RX, INC.
Dated: April 15, 2003
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS..........................................................................1
SECTION 2. CREDIT FACILITIES...................................................................21
2.1 Revolving Loans.....................................................................21
2.2 Letter of Credit Accommodations.....................................................21
2.3 Term Loan...........................................................................25
SECTION 3. INTEREST AND FEES...................................................................25
3.1 Interest............................................................................25
3.2 Closing Fee.........................................................................27
3.3 Servicing Fee.......................................................................27
3.4 Unused Line Fee.....................................................................27
3.5 Changes in Laws and Increased Costs of Loans........................................27
SECTION 4. CONDITIONS PRECEDENT................................................................29
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations...........29
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations...............32
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST...........................................32
5.1 Grant of Security Interest..........................................................32
5.2 Perfection of Security Interests....................................................34
SECTION 6. COLLECTION AND ADMINISTRATION.......................................................39
6.1 Borrower's Loan Account.............................................................39
6.2 Statements..........................................................................39
6.3 Collection of Accounts..............................................................39
6.4 Payments............................................................................41
6.5 Authorization to Make Loans.........................................................42
6.6 Use of Proceeds.....................................................................42
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS.......................................44
7.1 Collateral Reporting................................................................44
7.2 Accounts Covenants..................................................................44
7.3 Inventory Covenants.................................................................45
7.4 Equipment and Real Property Covenants...............................................46
7.5 Power of Attorney...................................................................47
7.6 Right to Cure.......................................................................48
7.7 Access to Premises..................................................................48
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SECTION 8. REPRESENTATIONS AND WARRANTIES......................................................48
8.1 Corporate Existence; Power and Authority............................................49
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations...........49
8.3 Financial Statements; No Material Adverse Change....................................50
8.4 Priority of Liens; Title to Properties..............................................50
8.5 Tax Returns.........................................................................50
8.6 Litigation..........................................................................50
8.7 Compliance with Other Agreements and Applicable Laws................................51
8.8 Environmental Compliance............................................................51
8.9 Employee Benefits...................................................................52
8.10 Bank Accounts.......................................................................52
8.11 Intellectual Property...............................................................52
8.12 Subsidiaries; Affiliates; Capitalization; Solvency..................................53
8.13 Labor Disputes......................................................................54
8.14 Restrictions on Subsidiaries........................................................54
8.15 Material Contracts..................................................................54
8.16 Payable Practices...................................................................55
8.17 Accuracy and Completeness of Information............................................55
8.18 Survival of Warranties; Cumulative..................................................55
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..................................................55
9.1 Maintenance of Existence............................................................55
9.2 New Collateral Locations............................................................56
9.3 Compliance with Laws, Regulations, Etc..............................................56
9.4 Payment of Taxes and Claims.........................................................57
9.5 Insurance...........................................................................57
9.6 Financial Statements and Other Information..........................................58
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.............................60
9.8 Encumbrances........................................................................61
9.9 Indebtedness........................................................................61
9.10 Loans, Investments, Etc.............................................................62
9.11 Dividends and Redemptions...........................................................63
9.12 Transactions with Affiliates........................................................64
9.13 Compliance with ERISA...............................................................64
9.14 End of Fiscal Years; Fiscal Quarters................................................64
9.15 Change in Business..................................................................64
9.16 Limitation of Restrictions Affecting Subsidiaries...................................64
9.17 Tangible Net Worth..................................................................65
9.18 EBITDA..............................................................................65
9.19 License Agreements..................................................................66
9.20 After Acquired Real Property........................................................67
9.21 Costs and Expenses..................................................................68
9.22 Further Assurances..................................................................68
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES......................................................69
10.1 Events of Default...................................................................69
10.2 Remedies............................................................................72
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW........................75
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver...............75
11.2 Waiver of Notices...................................................................77
11.3 Amendments and Waivers..............................................................77
11.4 Waiver of Counterclaims.............................................................77
11.5 Indemnification.....................................................................78
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS....................................................78
12.1 Term................................................................................78
12.2 Interpretative Provisions...........................................................80
12.3 Notices.............................................................................82
12.4 Partial Invalidity..................................................................83
12.5 Successors..........................................................................83
12.6 Entire Agreement....................................................................83
12.7 Counterparts, Etc...................................................................84
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Compliance Certificate
Exhibit C Draft Letter of Intent re: Utopia, Inc.
Schedule 1.20 Accounts
Schedule 1.55 Permitted Holders
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated April __, 2003 is entered into by
and between Congress Financial Corporation (Florida), a Florida corporation
("Lender") and DrugMax, Inc., a Nevada corporation ("Borrower") (together with
its subsidiaries, Valley Drug Company, an Ohio corporation, Valley Drug Company
South, a Louisiana corporation, and Discount Rx, Inc., a Louisiana corporation,
also the "Borrower"). ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
have also executed this Agreement solely in connection with their
acknowledgement of and agreement to the provisions of Section 10.2(b) hereof.
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument, (a) for property that has been
or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be rendered, (c) for a secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.2 "Acquisition Line" shall have the meaning set forth in Section 6.6
hereof.
1.3 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve
Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.4 "Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five (5%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
(5%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.5 "Agreement" shall mean, this Loan and Security Agreement, as the same
now exists or may be amended, supplemented, restated, replaced, or otherwise
modified from time to time.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Borrowing Base" shall mean, at any time, the amount equal to: (a)
eighty-five (85%) percent of Eligible Accounts, plus (b) the lesser of: (i)
sixty-five (65%) percent of the Value of Eligible Inventory consisting of
finished goods or (ii) $16,000,000, subject to a $2,000,000 sublimit for
Controlled Substances, as such term is defined by the U.S. Food and Drug
Administration from time to time, less (c) any Reserves. For purposes only of
applying the sublimit on Revolving Loans based on Eligible Inventory set forth
clause (b) above, Lender may treat the then undrawn amounts of outstanding
Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory
as Revolving Loans to the extent Lender is in effect basing the issuance of the
Letter of Credit Accommodations on the Value of the Eligible Inventory being
purchased with such Letter of Credit Accommodations. In determining the actual
amounts of such Letter of Credit Accommodations to be so treated for purposes of
the sublimit, the outstanding Revolving Loans and Reserves shall be attributed
first to any components of the lending formulas set forth above
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that are not subject to such sublimit, before being attributed to the components
of the lending formulas subject to such sublimit.
1.8 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Florida, the State of New York or the State of North
Carolina, and a day on which the Reference Bank and Lender are open for the
transaction of business, except that if a determination of a Business Day shall
relate to any Eurodollar Rate Loans, the term Business Day shall also exclude
any day on which banks are closed for dealings in dollar deposits in the London
interbank market or other applicable Eurodollar Rate market.
1.9 "Capital Leases" shall mean, as applied to any Person, any lease of (or
any agreement conveying the right to use) any property (whether real, personal
or mixed) by such Person as lessee which in accordance with GAAP, is required to
be reflected as a liability on the balance sheet of such Person.
1.10 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.11 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and unimpaired surplus of not less than $1,000,000,000; (c)
commercial paper (including variable rate demand notes) with a maturity of
ninety (90) days or less issued by a corporation (except an Affiliate of
Borrower) organized under the laws of any State of the United States of America
or the District of Columbia and rated at least A-1 by Standard & Poor's Ratings
Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at least P-1 by
▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase obligations with a term of not
more than thirty (30) days for underlying securities of the types described in
clause (a) above entered into with any financial institution having combined
capital and unimpaired surplus of not less than $1,000,000,000; (e) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or issued by any governmental agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within ninety (90)
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days or less from the date of acquisition; provided, that, the terms of such
agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds that are registered under the
Investment Company Act of 1940 as amended which invest substantially all of
their assets in securities of the types described in clauses (a) through (e)
above.
1.12 "Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially all of the assets of Borrower
to any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act); (b) the liquidation or dissolution of Borrower or the adoption of a plan
by the stockholders of Borrower relating to the dissolution or liquidation of
Borrower; (c) the acquisition by any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders,
of beneficial ownership, directly or indirectly, of a majority of the voting
power of the total outstanding Voting Stock of Borrower or the Board of
Directors of Borrower; (d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Borrower (together with any new directors who have been appointed
by any Permitted Holder, or whose nomination for election by the stockholders of
Borrower, as the case may be, was approved by a vote of at least sixty-six and
two-thirds (66 2/3%) percent of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Borrower then still in office; or (e) the
failure of the Permitted Holders to own more than fifty-one (51%) percent of the
voting power of the total outstanding Voting Stock of Borrower.
1.13 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.14 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.15 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, by a lessor of premises to Borrower,
or any other person to whom any Collateral (including Inventory, Equipment,
bills of lading or other documents of title) is consigned or who has custody,
control or possession of any such Collateral or is otherwise the owner or
operator of any premises on which any of such Collateral is located, in favor of
Lender waiving or subordinating any rights of such lessor other person with
respect to the Collateral and granting Lender certain rights.
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1.16 "Consistent Basis" means in reference to the application of GAAP, that
the accounting principles observed in the current period are comparable in all
material respects to those applied in the preceding period.
1.17 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.18 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any bank at which any deposit account of Borrower is at any time
maintained which provides that such bank will comply with instructions
originated by Lender directing disposition of the funds in the deposit account
without further consent by Borrower and such other terms and conditions as
Lender may require.
1.19 "EBITDA" shall mean Borrower's net income for any accounting period
plus (i) the amount of the provision for federal, state and local income tax for
such period, plus (ii) the amount of interest expense during such period for
indebtedness for borrowed money, plus (iii) the amount of the provision for
depreciation and amortization for such period determined in accordance with GAAP
and, in the case of amounts described in clauses (i), (ii) and (iii), only to
the extent deducted in determining net income for such period.
1.20 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are (i) neither unpaid more than thirty (30) days
after the due date, nor more than sixty (60) days after the date of the original
invoice for them, provided however, that (ii) notwithstanding subsection (i)
hereof the Accounts listed on Schedule 1.20 hereof, each of which shall be
subject to net 30 day terms, shall be considered Eligible Accounts so long as
such Accounts are not unpaid more than sixty (60) days after the due date nor
more than ninety (90) days after the date of the original invoice for them and
otherwise meet the criteria for Eligible Accounts set forth in this Subsection
1.20;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
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(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, including Puerto Rico,
or Canada (provided, that, at any time promptly upon Lender's request, Borrower
shall execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Lender to perfect
the security interests of Lender in those Accounts of an account debtor with its
chief executive office or principal place of business in Canada in accordance
with the applicable laws of the Province of Canada in which such chief executive
office or principal place of business is located and take or cause to be taken
such other and further actions as Lender may request to enable Lender as secured
party with respect thereto to collect such Accounts under the applicable Federal
or Provincial laws of Canada) or, at Lender's option, if the chief executive
office and principal place of business of the account debtor with respect to
such Accounts is located other than in the United States of America, including
Puerto Rico, or Canada, then if either: (i) the account debtor has delivered to
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of America and in
U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and if required by Lender, the original of such letter of
credit has been delivered to Lender or Lender's agent and Borrower has complied
with the terms of Section 5.2(f) hereof with respect to the assignment of the
proceeds of such letter of credit to Lender or naming Lender as transferee
beneficiary thereunder, as Lender may specify, or (ii) such Account is subject
to credit insurance payable to Lender issued by an insurer and on terms and in
an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in
all respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon Borrower's satisfactory completion of any further performance under the
agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage invoices,
except as to ▇▇▇▇ and hold invoices, if Lender shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to
Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted
a counterclaim, defense or dispute and Borrower does not owe any amounts to the
account debtor with respect to such Accounts, and such account debtor does not
claim that Borrower owes any amounts to such account debtor, that
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may give rise to any right of setoff or recoupment against such Accounts (but
the portion of the Accounts of such account debtor in excess of the amount at
any time and from time to time owed by Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any security interests
or liens except those permitted in this Agreement that are subject to an
intercreditor agreement in form and substance satisfactory to Lender between the
holder of such security interest or lien and Lender;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than fifteen (15%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are (i) not owed by an account debtor who has
Accounts unpaid more than thirty (30) days after the due date, nor more than
sixty (60) days after the original invoice date for them, provided however, that
(ii) notwithstanding subsection (i) hereof the Accounts listed on Schedule 1.20
hereof, each of which shall be subject to net 30 day terms, shall be considered
Eligible Accounts so long as such Accounts are not unpaid more than sixty (60)
days after
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the due date nor more than ninety (90) days after the date of the original
invoice for them and otherwise meet the criteria for Eligible Accounts set forth
in this Subsection 1.20, and in either case such Accounts constitute more than
fifty percent (50%) of the total Accounts of such account debtor provided such
percentage shall decrease by five percent (5%) per month beginning the month
after the date of closing until the level of twenty-five percent (25%) of the
total Accounts of such account debtor is reached at which time no further
decreases shall occur;
(o) the account debtor is not located in a state requiring the filing
of a Notice of Business Activities Report or similar report in order to permit
Borrower to seek judicial enforcement in such State of payment of such Account,
unless Borrower has qualified to do business in such state or has filed a Notice
of Business Activities Report or equivalent report for the then current year or
such failure to file and inability to seek judicial enforcement is capable of
being remedied without any material delay or material cost;
(p) such Accounts are owed by account debtors whose total indebtedness
to Borrower does not exceed the credit limit with respect to such account
debtors as determined by Borrower from time to time in the ordinary course of
business consistent with its current practices as of the date hereof and as is
reasonably acceptable to Lender (but the portion of the Accounts not in excess
of such credit limit may be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender in good faith.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from Borrower prior to the date hereof, in either case under clause (i) or (ii)
which adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith determination of Lender. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.21 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for resale in the ordinary course of the business of Borrower which are
acceptable to Lender based on the criteria set forth below. In general, Eligible
Inventory shall not include (a) raw materials; (b) work-in-process; (c)
components which are not part of finished goods; (d) spare parts for equipment;
(e) packaging and shipping materials; (f) supplies used or consumed in
Borrower's business; (g) Inventory at premises other than those owned and
controlled by Borrower, except any Inventory which would otherwise be deemed
Eligible Inventory that is not located at premises owned and operated by
Borrower may nevertheless be
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considered Eligible Inventory: (i) as to locations which are leased by Borrower
if Lender shall have received a Collateral Access Agreement from the owner and
lessor of such location, duly authorized, executed and delivered by such owner
and lessor or if Lender shall not have received such Collateral Access Agreement
(or Lender shall determine to accept a Collateral Access Agreement that does not
include all required provisions or provisions in the form otherwise required by
Lender), Lender may, at its option, nevertheless consider Inventory at such
location to be Eligible Inventory to the extent Lender shall have established
such Reserves in respect of amounts at any time payable by Borrower to the owner
and lessor thereof as Lender shall determine, and (ii) as to locations owned and
operated by a third person, (A) if Lender shall have received a Collateral
Access Agreement from such owner and operator with respect to such location,
duly authorized, executed and delivered by such owner and operator or if Lender
shall not have received such Collateral Access Agreement (or Lender shall
determine to accept a Collateral Access Agreement that does not include all
required provisions or provisions in the form otherwise required by Lender),
Lender may, at its option, nevertheless consider Inventory at such location to
be Eligible Inventory to the extent Lender shall have established such Reserves
in respect of amounts at any time payable by Borrower to the owner and operator
thereof as Lender shall determine, and (B) in addition, as to locations owned
and operated by a third person, Lender shall have received, if required by
Lender: (1) UCC financing statements between the owner and operator, as
consignee or bailee and Borrower, as consignor or ▇▇▇▇▇▇, in form and substance
satisfactory to Lender, which are duly assigned to Lender and the written
authorization to file such financing statements in form satisfactory to Lender
and (2) a written notice to any lender to the owner and operator of the first
priority security interest in such Inventory of Lender; (h) Inventory subject to
a security interest or lien in favor of any person other than Lender except
those permitted in this Agreement (but without limiting the right of Lender to
establish any Reserves with respect to amounts secured by such security interest
or lien in favor of any Person even if permitted herein); (i) ▇▇▇▇ and hold
goods; (j) unserviceable, obsolete or slow moving Inventory; (k) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (l) returned, damaged and/or defective Inventory; (m) Inventory
purchased or sold on consignment and (n) Inventory located outside the United
States of America. The criteria for Eligible Inventory set forth above may only
be changed and any new criteria for Eligible Inventory may only be established
by Lender in good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition or other
circumstance existing on the date hereof to the extent Lender has no written
notice thereof from Borrower prior to the date hereof, in either case under
clause (i) or (ii) which adversely affects or could reasonably be expected to
adversely affect the Inventory in the good faith determination of Lender. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
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1.22 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.23 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment and computer hardware and software, whether owned or
licensed, and including embedded software, vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located.
1.24 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.25 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.26 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the
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existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the occurrence of a "prohibited transaction" with
respect to which Borrower or any of its Subsidiaries is a "disqualified person"
(within the meaning of Section 4975 of the Code) or with respect to which
Borrower or any of its Subsidiaries could otherwise be liable; (f) a complete or
partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer
Plan or a cessation of operations which is treated as such a withdrawal or
notification that a Multiemployer Plan is in reorganization; (g) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (i) the imposition of any liability under Title
IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due
but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
Affiliate in excess of $250,000; and (j) any other event or condition with
respect to a Plan including any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of Borrower in excess of $250,000.
1.27 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.28 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.29 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.30 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the Borrowing Base and
(ii) the Revolving Loan Limit (in each case under (i) and (ii) after giving
effect
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to any Reserves other than any Reserves in respect of Letter of Credit
Accommodations), minus (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations (but not including for this purpose the then outstanding
principal amount of the Term Loan), plus (ii) the amount of all Reserves then
established in respect of Letter of Credit Accommodations, plus (iii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations of Borrower which are more than thirty (30) days past due as of such
time, plus (iv) the amount of checks issued by Borrower to pay trade payables
and other obligations which are more than thirty (30) days past due as of such
time, but not yet sent (but without duplication of clause (b)(iii) and the book
overdraft of Borrower.
1.31 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.32 "Executive Officers" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
1.33 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements, and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by Borrower or any Obligor in connection with this Agreement.
1.34 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.18 and 9.19 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the most recent audited financial statements
delivered to Lender prior to the date hereof.
1.35 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.36 "Guarantor" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
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1.37 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.38 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time; (h)
all obligations, liabilities and indebtedness of such Person (marked to market)
arising under swap agreements, cap agreements and collar agreements and other
agreements or arrangements designed to protect such person
-13-
against fluctuations in interest rates or currency or commodity values and (i)
all obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments.
1.39 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.40 "Intellectual Property" shall mean Borrower's now owned and hereafter
arising or acquired: patents, patent rights, patent applications, copyrights,
works which are the subject matter of copyrights, copyright registrations,
copyright applications, trademarks, service marks, trade names, trade styles,
trademark and service ▇▇▇▇ applications, and licenses and rights to use any of
the foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to ▇▇▇ for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to software, in whatever
form created or maintained.
1.41 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.42 "Interest Rate" shall mean, as to Prime Rate Loans, a rate equal to
one-half of one percent (.5%) percent per annum in excess of the Prime Rate and,
as to Eurodollar Rate Loans, a rate of three percent (3%) per annum in excess of
the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrower as in effect three (3) Business Days after
the date of receipt by Lender of the request of Borrower for such Eurodollar
Rate Loans in accordance with the terms hereof, whether such rate is higher or
lower than any rate previously quoted to Borrower); provided, that,
notwithstanding anything to the contrary contained herein, the Interest Rate
shall mean the rate of two and three quarters percent (2.75%) per annum in
excess of the Prime Rate as to Prime Rate Loans and the rate of five and
one-quarter percent (5.25%) per annum in excess of the Adjusted Eurodollar Rate
as to Eurodollar Rate Loans, at Lender's option, without notice, (a) either (i)
for the period on and after the date of
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termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (ii)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined by
Lender and (b) on the Revolving Loans at any time outstanding in excess of the
amounts available to Borrower under Section 2 (whether or not such excess(es)
arise or are made with or without Lender's knowledge or consent and whether made
before or after an Event of Default).
1.43 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by Borrower
as lessor; (b) are held by Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by Borrower under a contract of service;
or (d) consist of raw materials, work in process, finished goods or materials
used or consumed in its business.
1.44 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of Borrower
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Lender, that it will comply with entitlement orders originated by Lender with
respect to such investment property, or other instructions of Lender, and
including such other terms and conditions as Lender may require.
1.45 "Lender Payment Account" shall mean account no. 500000003034 of Lender
at Wachovia Bank, National Association or such other account of Lender as Lender
may from time to time designate to Borrower as the Lender Payment Account for
purposes of this Agreement.
1.46 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by Borrower of its obligations to
such issuer: sometimes being referred to herein individually as a "Letter of
Credit Accommodation".
1.47 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.48 "Line of Business" shall mean wholesale distribution of
pharmaceuticals, over-the-counter products, health and beauty aids and
nutritional supplements primarily to the pharmaceutical industry.
-15-
1.49 "Loans" shall mean the Revolving Loans and the Term Loan.
1.50 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in an amount in excess of $250,000 in any
fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations or prospects of
Borrower or the validity or enforceability of this Agreement, any of the other
Financing Agreements, or any of the rights and remedies of Lender hereunder or
thereunder.
1.51 "Maximum Credit" shall mean the amount of $40,000,000.
1.52 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by Borrower or any
ERISA Affiliate.
1.53 "Obligations" shall mean any and all Revolving Loans, the Term Loan,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower to Lender
and/or its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.54 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.55 "Permitted Holders" shall mean the persons listed on Schedule 1.55
hereto and their respective successors and assigns.
1.56 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership,
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business trust, unincorporated association, joint stock corporation, trust,
joint venture or other entity or any government or any agency or instrumentality
or political subdivision thereof.
1.57 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multiemployer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
1.58 "Prime Rate" shall mean the rate from time to time publicly announced
by Wachovia Bank, National Association, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.59 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.60 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.61 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of Borrower: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of Borrower and other contract rights, chattel paper, instruments,
notes, and other forms of obligations owing to Borrower, whether from the sale
and lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services or
from loans or advances by Borrower or to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of Borrower) or
otherwise associated with any Accounts, Inventory or general intangibles of
Borrower (including, without limitation, choses in action, causes of action, tax
refunds, tax refund claims, any funds which may become payable to Borrower in
connection with the termination of any Plan or other employee benefit plan and
any other amounts payable to Borrower from any Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of
insurance covering the lives of employees on which Borrower is a beneficiary).
1.62 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
-17-
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.63 "Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Lender may from time to time designate.
1.64 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.65 "Reserves" shall mean as of any date of determination, such amounts as
Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security interests
and other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Lender determines in good faith constitutes a Default or an
Event of Default. Without limiting the generality of the foregoing, Reserves may
be established, at Lender's option, to reflect that (i) dilution with respect to
the Accounts (based on the ratio of the aggregate amount of non-cash reductions
in Accounts for any period to the aggregate dollar amount of the sales of
Borrower for such period) as calculated by Lender for any period is or is
reasonably anticipated to be greater than five percent (5%), (ii) the orderly
liquidation value of the Equipment or fair market value of any of the Real
Property as set forth in the most recent acceptable appraisals received by
Lender with respect thereto has declined so that the then outstanding principal
amount of the Term Loan is greater than such percentage with respect to such
appraised values as Lender used in establishing the original principal amount of
the Term Loan multiplied by such appraised values, (iii) returns, discounts,
claims, credits and allowances of any nature that are not paid pursuant to the
reduction of Accounts, (iv) the sales, excise or similar taxes included in the
amount of any Accounts reported to Lender, (v) a change in the turnover, age or
mix of the categories of Inventory that adversely affects the aggregate value of
all Inventory or (vi) the liquidation value of the Eligible Inventory, or any
category thereof, has decreased. To the extent Lender may revise the lending
formulas used to determine the Borrowing Base or establish new criteria or
revise existing criteria for Eligible Accounts or Eligible Inventory so
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as to address any circumstances, condition, event or contingency in a manner
satisfactory to Lender, Lender shall not establish a Reserve for the same
purpose. The amount of any Reserve established by Lender shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Lender in good faith.
1.66 "Revolving Loan Limit" shall mean $40,000,000 minus the
then-outstanding and unpaid principal amount of the Term Loan.
1.67 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.68 "Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.69 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.70 "Tangible Net Worth" shall mean an amount equal to the total assets of
Borrower minus the Total Intangible Assets of Borrower, minus the total
liabilities of Borrower, calculated in accordance with GAAP applied on a
Consistent Basis.
1.71 "Target" shall have the meaning set forth in Section 6.6 hereof.
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1.72 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.73 "Test Period" shall have the meaning set forth in Section 9.18 hereof.
1.74 "Total Intangible Assets" of Borrower shall be determined in
accordance with GAAP applied on a Consistent Basis, but in any event shall be
deemed to include the excess of costs over the assets of acquired businesses,
formulae, trademarks, patents, patent rights and deferred expenses (including,
but not limited to, organization expense, experimental and developmental
expenses, but excluding prepaid expenses and unamortized debt discount and
expense), and further including Affiliate or shareholder advancements or
investments, notes receivable and long-term deferred tax assets.
1.75 "UCC" shall mean the Uniform Commercial Code as in effect in the State
of Florida, and any successor statute, as in effect from time to time (except
that terms used herein which are defined in the Uniform Commercial Code as in
effect in the State of Florida on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as Lender may otherwise determine).
1.76 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP, or (b) market value provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Lender prior to the
date hereof, if any; or (c) eighty-five percent (85%) of an orderly liquidation
value appraisal (net of expenses) of Inventory conducted at Borrower's expense
by independent appraisers acceptable to Lender in its sole discretion.
1.77 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
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SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Revolving Loan Limit.
(b) Except in Lender's discretion, (i) the aggregate amount of the
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Limit and (ii) the aggregate amount of the Loans and the Letter of Credit
Accommodations outstanding at any time shall not exceed the Maximum Credit. In
the event that the outstanding amount of any component of the Loans, or the
aggregate amount of the outstanding Loans and Letter of Credit Accommodations,
exceed the amounts available pursuant to the Borrowing Base, the Revolving Loan
Limit, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(e) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at
the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to two and one-half percent
(2.5%) per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option, without notice, at
a rate equal to five percent (5%) percent per annum on such daily outstanding
balance for: (i) the period from and after the date of termination or
non-renewal hereof until Lender has received full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the
period from and after the date of the occurrence of an Event of Default for so
long as such Event of Default is
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continuing as determined by Lender. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) Borrower shall give Lender two (2) Business Days' prior written
notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. Borrower shall
attach to such notice the proposed terms of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit Accommodations shall be
available unless each of the following conditions precedent have been satisfied
in a manner satisfactory to Lender: (i) Borrower shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in such
manner as such proposed issuer may require, an application in form and substance
satisfactory to such proposed issuer and Lender for the issuance of the Letter
of Credit Accommodation and such other documents as may be required pursuant to
the terms thereof, and the form and terms of the proposed Letter of Credit
Accommodation shall be satisfactory to Lender and such proposed issuer, (ii) as
of the date of issuance, no order of any court, arbitrator or other Governmental
Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the
proposed Letter of Credit Accommodation, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
the proposed issuer of such Letter of Credit Accommodation refrain from, the
issuance of letters of credit generally or the issuance of such Letters of
Credit Accommodation; and (iii) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit Accommodations, on the
date of the proposed issuance of any Letter of Credit Accommodations, shall be
equal to or greater than: (A) if the proposed Letter of Credit Accommodation is
for the purpose of purchasing Eligible Inventory and the documents of title with
respect thereto are consigned to the issuer, the sum of (1) the percentage equal
to one hundred (100%) percent minus the then applicable percentage with respect
to Eligible Inventory set forth in the definition of the term
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Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$1,000,000.
(f) Borrower shall indemnify and hold Lender harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for the gross negligence
or wilful misconduct of Lender as determined pursuant to a final, non-appealable
order of a court of competent jurisdiction. The provisions of this Section
2.2(f) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrower shall, at Lender's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Lender
holds a security interest to deliver them to Lender and/or subject to Lender's
order, and if they shall come into Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form. Borrower shall also, at
Lender's request, designate Lender as
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the consignee on all bills of lading and other negotiable and non-negotiable
documents.
(h) Borrower hereby irrevocably authorizes and directs any issuer of a
Letter of Credit Accommodation to name Borrower as the account party therein and
to deliver to Lender all instruments, documents and other writings and property
received by issuer pursuant to the Letter of Credit Accommodations and to accept
and rely upon Lender's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower.
(i) So long as no Event of Default exists or has occurred and is
continuing, Borrower may, after notice to Lender, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
and (iv) with Lender's consent, grant any extensions of the maturity of, time of
payment for, or time of presentation of, any drafts, acceptances, or documents,
and agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances thereunder
or any letters of credit included in the Collateral.
(j) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have the right and authority to, and Borrower shall
not, without the prior written consent of Lender, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders,
(iv) grant any extensions of the maturity of, time of payments for, or time of
presentation of, any drafts, acceptances, or documents, and (v) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or
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acceptances thereunder or any letters of credit included in the Collateral.
Lender may take such actions either in its own name or in Borrower's name.
(k) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the original
principal amount of $400,000. The Term Loan is (a) evidenced by a Term
Promissory Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, the Term
Promissory Note, and the other Financing Agreements and (c) secured by all of
the Collateral. The principal amount of the Term Loan shall be repaid in
thirty-six (36) consecutive monthly installments (or earlier as provided herein)
payable on the first day of each month commencing May, 2003, of which the first
thirty-five (35) installments shall each be in the amount of $11,111.11 and the
last installment shall be in the amount of the entire unpaid balance of the Term
Loan.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding principal
amount of the Loans at the Interest Rate. All interest accruing hereunder on and
after the date of any Event of Default or termination or non-renewal hereof
shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate Loans or
may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that
any existing Eurodollar Rate Loans continue for an additional Interest Period.
Such request from Borrower shall specify the amount of the Eurodollar Rate Loans
or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans
or the amount of the Eurodollar Rate Loans to be continued (subject to the
limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from Borrower,
such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted
to Eurodollar Rate Loans or
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such Eurodollar Rate Loans shall continue, as the case may be, provided, that,
(i) no Default or Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrower shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrower from time to time for requests by Borrower for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower shall not exceed the amount equal to (A) the principal amount of the
Term Loan which it is anticipated will be outstanding as of the last day of the
applicable Interest Period plus (B) eighty (80%) percent of the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Loans), and (vii) Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Lender through the Reference Bank and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by Borrower. Any request by
Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar
Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrower shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in arrears
not later than the first day of each calendar month and shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. The
interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
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shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of the
month in which any such change occurs. In no event shall charges constituting
interest payable by Borrower to Lender exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
of $300,000, which shall be fully earned as of the date hereof. The Closing Fee
shall be payable over two equal installments of $150,000 each, at closing and on
the first anniversary of the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in
an amount equal to $2,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one quarter of one percent (.25%) percent per annum
calculated upon the amount by which the Revolving Loan Limit exceeds the average
daily principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be payable on the first day of each month in
arrears.
3.5 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of
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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 the Funding Bank's or Lender's policies
with respect to capital adequacy) by an amount deemed by Lender to be material,
and the result of any of the foregoing events described in clauses (i), (ii) or
(iii) is or results in an increase in the cost to Lender of funding or
maintaining the Loans or the Letter of Credit Accommodations, then Borrower
shall from time to time upon demand by Lender pay to Lender additional amounts
sufficient to indemnify Lender against such increased cost on an after-tax basis
(after taking into account applicable deductions and credits in respect of the
amount indemnified). A certificate as to the basis and amount of such increased
cost shall be submitted to Borrower by Lender and shall be conclusive, absent
manifest error.
(b) If prior to the first day of any Interest Period, (i) Lender shall
have determined in good faith (which determination shall be conclusive and
binding upon Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, (ii) Lender determines that the
Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to Lender of making or maintaining
Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in
the principal amounts of the Eurodollar Rate Loans to which such Interest Period
is to be applicable are not generally available in the London interbank market,
Lender shall give telecopy or telephonic notice thereof to Borrower as soon as
practicable thereafter, and will also give prompt written notice to Borrower
when such conditions no longer exist. If such notice is given (A) any Eurodollar
Rate Loans requested to be made on the first day of such Interest Period shall
be made as Prime Rate Loans, (B) any Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Rate Loans
shall be converted to or continued as Prime Rate Loans and (C) each outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Prime Rate Loans. Until such notice has been
withdrawn by Lender, no further Eurodollar Rate Loans shall be made or continued
as such, nor shall Borrower have the right to convert Prime Rate Loans to
Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Loan Agreement, (i) Lender shall promptly give written
notice of such circumstances to Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such
and convert Prime
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Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such
time as it shall no longer be unlawful for Lender to make or maintain Eurodollar
Rate Loans, Lender shall then have a commitment only to make a Prime Rate Loan
when a Eurodollar Rate Loan is requested and (iii) Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to Section
3.3(d) below.
(d) Borrower shall indemnify Lender and to hold Lender harmless from
any loss or expense which Lender may sustain or incur as a consequence of (i)
default by Borrower in making a borrowing of, conversion into or extension of
Eurodollar Rate Loans after Borrower has given a notice requesting the same in
accordance with the provisions of this Loan Agreement, (ii) default by Borrower
in making any prepayment of a Eurodollar Rate Loan after Borrower has given a
notice thereof in accordance with the provisions of this Agreement, and (iii)
the making of a prepayment of Eurodollar Rate Loans on a day which is not the
last day of an Interest Period with respect thereto. With respect to Eurodollar
Rate Loans, such indemnification may include an amount equal to the excess, if
any, of (A) the amount of interest which would have accrued on the amount so
prepaid, or not so borrowed, converted or extended, for the period from the date
of such prepayment or of such failure to borrow, convert or extend to the last
day of the applicable Interest Period (or, in the case of a failure to borrow,
convert or extend, the Interest Period that would have commenced on the date of
such failure) in each case at the applicable rate of interest for such
Eurodollar Rate Loans provided for herein over (B) the amount of interest (as
reasonably determined by such Lender) which would have accrued to Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. This covenant shall survive the
termination or non-renewal of this Loan Agreement and the payment of the
Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lenders to
Borrower of their respective financing arrangements with Borrower and the
termination and release by it or them, as the case may be, of any interest in
and to
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any assets and properties of Borrower and each Obligor, duly authorized,
executed and delivered by it or each of them, including, but not limited to, (i)
UCC termination statements for all UCC financing statements previously filed by
it or any of them or their predecessors, as secured party and Borrower or any
Obligor, as debtor and (ii) satisfactions and discharges of any mortgages, deeds
of trust or deeds to secure debt by Borrower or any Obligor in favor of such
existing lender or lenders, in form acceptable for recording with the
appropriate Governmental Authority;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or Governmental Authority (and including a copy
of the certificate of incorporation of Borrower certified by the Secretary of
State (or equivalent Governmental Authority) which shall set forth the same
complete corporate name of Borrower as is set forth herein and such document as
shall set forth the organizational identification number of Borrower, if one is
issued in its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower (including,
without limitation, current perpetual inventory records and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which in each case shall be satisfactory to Lender,
not more than three (3) Business Days prior to the date hereof;
(e) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements,
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including, without limitation, Collateral Access Agreements by owners and
lessors of leased premises of Borrower and by warehouses at which Collateral is
located;
(f) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $4,000,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(g) Lender shall have received, in form and substance satisfactory to
Lender, Deposit Account Control Agreements by and among Lender, Borrower and
each bank where Borrower has a deposit account, in each case, duly authorized,
executed and delivered by such bank and Borrower (or Lender shall be the bank's
customer with respect to such deposit account, as Lender may specify);
(h) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(i) Lender shall have received and reviewed lien and judgment search
results for the jurisdiction of incorporation or organization of Borrower, the
jurisdiction of the chief executive office of Borrower and all jurisdictions in
which assets of Borrower are located, which search results shall be in form and
substance satisfactory to Lender;
(j) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(k) Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request;
(l) Lender shall have received, in form and substance satisfactory to
Lender a guarantee of the Obligations from Guarantor in an initial amount up to
$2,000,000;
(m) Loans shall be subject to Reserves in the amount of $400,000;
(n) Lender shall have received in form and substance satisfactory to
Lender such assignments of existing notes receivable as Lender may request; and
(o) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
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4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct with the same effect as
though such representations and warranties had been made on and as of the date
of the making of each such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and accurate
on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letter of Credit
Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
could reasonably be expected to have a material adverse effect on the assets,
business or prospects of Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
or of Lender to enforce any Obligations or realize upon any of the Collateral;
(c) Loans shall be subject to Reserves in the amount of $400,000 minus
the aggregate amount of principal payments made by Borrower to Lender for
repayment of the Term Loan; and
(d) no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, including, without limitation, the Revolving Loans, the Term Loan,
and the Letter of Credit Accommodations, Borrower hereby grants to Lender a
continuing security interest in, a lien upon, and a right of set off against,
and hereby assigns to Lender as security, all personal and real property and
fixtures and interests in property and fixtures of Borrower, whether now owned
or hereafter acquired or existing, and wherever located (together with all other
collateral
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security for the Obligations at any time granted to or held or acquired by
Lender, collectively, the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and Equipment;
(d) all Real Property and fixtures;
(e) all chattel paper (including all tangible and electronic chattel
paper);
(f) all instruments (including all promissory notes);
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of Borrower now or hereafter held or received by or
in transit to Lender or its Affiliates or at any other depository or other
institution from or for the account of Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;
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(l) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
This Agreement shall also serve as a "Security Agreement" within the
meaning of that term as used in the Uniform Commercial Code as adopted and in
force from time to time in the State of Florida, and shall be operative and
effective as a Security Agreement in addition to, and not in substitution for,
any other Security Agreement executed by Borrower in connection with the
extension of credit or loan transaction secured hereby. Borrower agrees to and
shall, upon the request of Lender, execute and deliver to Lender, in form
satisfactory to Lender, such "Financing Statements," descriptions of property
and such further assurances as Lender, in its sole discretion, may from time to
time consider necessary to create, perfect, continue, and preserve the lien and
encumbrances hereof and the security interest granted herein upon and in such
Collateral. Lender, at the expenses of Borrower, may or shall cause such
statements, descriptions, and assurances to be recorded and re-recorded, filed
and refiled, at such times and in such places as may be required or permitted by
law to so create, perfect and preserve the lien and encumbrances hereof upon all
of said collateral. In addition to any other rights and remedies contained in
this Agreement or any other documents executed in connection with the
Obligations, Lender shall have all the rights and remedies of a secured party
under the Uniform Commercial Code as adopted and in force from time to time in
the State of Florida or other applicable law, all of which rights shall be
cumulative and nonexclusive, to the extent permitted by law.
5.2 Perfection of Security Interests.
(a) Borrower irrevocably and unconditionally authorizes Lender (or its
agent) to file at any time and from time to time such financing statements with
respect to the Collateral naming Lender or its designee as the secured party and
Borrower as debtor, as Lender may require, and including any other information
with respect to Borrower or otherwise required by part 5 of Article 9 of the
Uniform Commercial Code of such jurisdiction as Lender may determine, together
with any amendment and continuations with respect thereto, which authorization
shall apply to all financing statements filed on, prior to or after the date
hereof. Borrower hereby ratifies and approves all financing statements naming
Lender or its designee as secured party and Borrower as debtor with respect to
the Collateral
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(and any amendments with respect to such financing statements) filed by or on
behalf of Lender prior to the date hereof and ratifies and confirms the
authorization of Lender to file such financing statements (and amendments, if
any). Borrower hereby authorizes Lender to adopt on behalf of Borrower any
symbol required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement naming Lender or its
designee as the secured party and Borrower as debtor includes assets and
properties of Borrower that do not at any time constitute Collateral, whether
hereunder, under any of the other Financing Agreements or otherwise, the filing
of such financing statement shall nonetheless be deemed authorized by Borrower
to the extent of the Collateral included in such description and it shall not
render the financing statement ineffective as to any of the Collateral or
otherwise affect the financing statement as it applies to any of the Collateral.
In no event shall Borrower at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming Lender or
its designee as secured party and Borrower as debtor.
(b) Borrower does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, Borrower
shall promptly notify Lender thereof in writing. Promptly upon the receipt
thereof by or on behalf of Borrower (including by any agent or representative),
Borrower shall deliver, or cause to be delivered to Lender, all tangible chattel
paper and instruments that Borrower or may at any time acquire, accompanied by
such instruments of transfer or assignment duly executed in blank as Lender may
from time to time specify, in each case except as Lender may otherwise agree. At
Lender's option, Borrower shall, or Lender may at any time on behalf of
Borrower, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Lender with the
following legend referring to chattel paper or instruments as applicable: "This
[chattel paper][instrument] is subject to the security interest of Congress
Financial Corporation (Florida) and any sale, transfer, assignment or
encumbrance of this [chattel paper][instrument] violates the rights of such
secured party."
(c) In the event that Borrower shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record" (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), Borrower shall
promptly notify Lender thereof in writing. Promptly upon Lender's request,
Borrower shall take, or cause to be taken, such actions as Lender may reasonably
request to give Lender control of such electronic chattel paper under Section
9-105 of the UCC and control of such transferable record under Section 201 of
the Federal Electronic Signatures in
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Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) Borrower does not have any deposit accounts as of the date hereof,
except as set forth in the Information Certificate. Borrower shall not, directly
or indirectly, after the date hereof open, establish or maintain any new deposit
account unless each of the following conditions is satisfied: (i) Lender shall
have received not less than five (5) Business Days prior written notice of the
intention of Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Lender the name of
the account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom Borrower is dealing and the purpose of the account, (ii) the bank where
such account is opened or maintained shall be acceptable to Lender, and (iii) on
or before the opening of such deposit account, Borrower shall as Lender may
specify either (A) deliver to Lender a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by
Borrower and the bank at which such deposit account is opened and maintained or
(B) arrange for Lender to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Lender. The terms of this
subsection (d) shall not apply to deposit accounts specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of Borrower's salaried employees.
(e) Borrower does not own or hold, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that Borrower shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated
securities, Borrower shall promptly endorse, assign and deliver the
same to Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time
specify. If any securities, now or hereafter acquired by Borrower are
uncertificated and are issued to Borrower or its nominee directly by
the issuer thereof, Borrower shall immediately notify Lender thereof
and shall as Lender may specify, either (A) cause the issuer to agree
to comply with instructions from Lender as to such securities, without
further consent of Borrower or such nominee, or (B) arrange for Lender
to become the registered owner of the securities.
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(ii) Borrower shall not, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a
deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A)
Lender shall have received not less than five (5) Business Days prior
written notice of the intention of Borrower to open or establish such
account which notice shall specify in reasonable detail and
specificity acceptable to Lender the name of the account, the owner of
the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or
established, the individual at such intermediary with whom Borrower is
dealing and the purpose of the account, (B) the securities
intermediary or commodity intermediary (as the case may be) where such
account is opened or maintained shall be acceptable to Lender, and (C)
on or before the opening of such investment account, securities
account or other similar account with a securities intermediary or
commodity intermediary, Borrower shall as Lender may specify either
(1) execute and deliver, and cause to be executed and delivered to
Lender, an Investment Property Control Agreement with respect thereto
duly authorized, executed and delivered by Borrower and such
securities intermediary or commodity intermediary or (2) arrange for
Lender to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Lender.
(f) Borrower is not the beneficiary or otherwise entitled to any right
to payment under any letter of credit, banker's acceptance or similar instrument
as of the date hereof, except as set forth in the Information Certificate. In
the event that Borrower shall be entitled to or shall receive any right to
payment under any letter of credit, banker's acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
Borrower shall promptly notify Lender thereof in writing. Borrower shall
immediately, as Lender may specify, either (i) deliver, or cause to be delivered
to Lender, with respect to any such letter of credit, banker's acceptance or
similar instrument, the written agreement of the issuer and any other nominated
person obligated to make any payment in respect thereof (including any
confirming or negotiating bank), in form and substance satisfactory to Lender,
consenting to the assignment of the proceeds of the letter of credit to Lender
by Borrower and agreeing to make all payments thereon directly to Lender or as
Lender may otherwise direct or (ii) cause Lender to become, at Borrower's
expense, the transferee beneficiary of the letter of credit, banker's acceptance
or similar instrument (as the case may be).
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(g) Borrower has no commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
shall at any time after the date hereof have any commercial tort claims,
Borrower shall promptly notify Lender thereof in writing, which notice shall (i)
set forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by Borrower to Lender of a security
interest in such commercial tort claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by Borrower to Lender shall be deemed to constitute such grant to
Lender. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Lender provided in Section 5.2(a)
hereof or otherwise arising by the execution by Borrower of this Agreement or
any of the other Financing Agreements, Lender is hereby irrevocably authorized
from time to time and at any time to file such financing statements naming
Lender or its designee as secured party and Borrower as debtor, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, Borrower shall promptly upon Lender's request,
execute and deliver, or cause to be executed and delivered, to Lender such other
agreements, documents and instruments as Lender may require in connection with
such commercial tort claim.
(h) Borrower does not have any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for goods
located in the United States in transit to a location of Borrower permitted
herein in the ordinary course of business of Borrower in the possession of the
carrier transporting such goods. In the event that any goods, documents of title
or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Information
Certificate or such carriers, Borrower shall promptly notify Lender thereof in
writing. Promptly upon Lender's request, Borrower shall deliver to Lender a
Collateral Access Agreement duly authorized, executed and delivered by such
person and Borrower.
(i) Borrower shall take any other actions reasonably requested by
Lender from time to time to cause the attachment, perfection and first priority
of, and the ability of Lender to enforce, the security interest of Lender in any
and all of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC or other applicable law, to the extent, if any,
that Borrower's signature thereon is required therefor, (ii) causing Lender's
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Lender to enforce, the security interest of Lender in such
Collateral, (iii) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance
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with such provision is a condition to attachment, perfection or priority of, or
ability of Lender to enforce, the security interest of Lender in such
Collateral, (iv) obtaining the consents and approvals of any Governmental
Authority or third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking all actions
required by any earlier versions of the UCC or by other law, as applicable in
any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Receivables and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. Borrower shall
deliver, or cause to be delivered to Lender, a Depository Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and from
time to time Lender may become bank's customer with respect to the Blocked
Accounts and promptly upon Lender's request, Borrower shall execute and deliver
such agreements or documents as Lender may require in connection therewith.
Borrower shall cause all funds
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received or deposited into the Blocked Accounts to be transferred each Business
Day to the Lender Payment Account. Borrower agrees that all payments made to
such Blocked Accounts or other funds received and collected by Lender, whether
in respect of the Receivables, as proceeds of Inventory or other Collateral or
otherwise shall be treated as payments to Lender in respect of the Obligations
and therefore shall constitute the property of Lender to the extent of the then
outstanding Obligations. Borrower further agrees that within ninety (90) days of
the closing of this loan facility, Borrower will close an existing Blocked
Account with another Lender. Closing of such existing Blocked Account shall
constitute a condition subsequent, and failure to close such Blocked Account
within ninety(90) days of closing of this loan facility will constitute an Event
of Default.
(b) For purposes of calculating the amount of the Loans available to
Borrower, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Lender Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrower's
loan account on such day, and if not, then on the next Business Day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Lender Payment Account provided such payments
or other funds and notice thereof are received in accordance with Lender's usual
and customary practices as in effect from time to time and within sufficient
time to credit Borrower's loan account on such day, and if not, then on the next
Business Day. In the event that at any time or from time to time there are no
Revolving Loans outstanding, Lender shall be entitled to an administrative fee
in an amount equivalent to the Interest Rate for Prime Rate Loans (on a per
annum basis) multiplied by the amount of the funds received in the Blocked
Account for such day as calculated by Lender in accordance with its customary
practice.
(c) Borrower and its shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to pay, within a reasonable time, to Lender on demand for any
amounts owed or paid to any bank or other financial institution at which a
Blocked Account or investment account is established or any other bank,
financial institution or other person involved in the transfer of funds to or
from the Blocked Accounts or any investment account arising out of Lender's
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payments to or indemnification of such bank, financial institution or other
person. The obligation of Borrower to reimburse Lender for such amounts pursuant
to this Section 6.3 shall survive the termination or non-renewal of this
Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Lender Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender shall apply payments received or collected from Borrower or for the
account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Lender from Borrower; second, to pay
interest due in respect of any Loans; third, to pay principal due in respect of
the Loans; fourth, to pay or prepay any other Obligations whether or not then
due, in such order and manner as Lender determines. Notwithstanding anything to
the contrary contained in this Agreement, (i) unless so directed by Borrower, or
unless a Default or an Event of Default shall exist or have occurred and be
continuing, Lender shall not apply any payments which it receives to any
Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period
applicable to any such Eurodollar Rate Loans, or (B) in the event that there are
no outstanding Prime Rate Loans and (ii) to the extent Borrower uses any
proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or
the use of any Collateral or to repay any Indebtedness used to acquire rights in
or the use of any Collateral, payments in respect of the obligations shall be
deemed applied first to the Obligations arising from Loans and Letter of Credit
Accommodations that were not used for such purposes and second to the
Obligations arising from Loans and Letter of Credit Accommodations the proceeds
of which were used to acquire rights in or the use of any Collateral in the
chronological order in which Borrower acquired such rights or use.
(b) At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain
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effective notwithstanding any contrary action which may be taken by Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans and
provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be one of the Executive Officers
or, at the discretion of Lender, if such Loans are necessary to satisfy any
Obligations. All requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a Business Day) and the
amount of the requested Loan. Requests received after 12:00 noon, Eastern
Standard Time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day. All Loans and Letter of
Credit Accommodations under this Agreement shall be conclusively presumed to
have been made to, and at the request of and for the benefit of, Borrower when
deposited to the credit of Borrower or otherwise disbursed or established in
accordance with the instructions of Borrower or in accordance with the terms and
conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. Notwithstanding the foregoing, proceeds from Revolving Loans of up
to $5,000,000 in the aggregate outstanding within any fiscal year of Borrower
during the term of this Agreement (the "Acquisition Line") may be used by
Borrower for one or more strategic acquisitions of more than 50% of the voting
securities or substantially all of the assets of existing businesses from one or
more third parties, provided that all of the following conditions are met with
respect to each such acquisition at the time of any such acquisition: (i) Lender
has received and reviewed all due diligence materials requested in connection
with the acquisition and the results of such review shall be satisfactory to
Lender in its reasonable discretion; (ii) Excess Availability does not fall
below $3,000,000 after giving effect to such acquisition(s); (iii) Borrower has
maintained not less than $3,000,000 in average Excess Availability for thirty
(30) days preceding any such acquisition; (iv) the target of any such
acquisition is engaged in the same or a similar Line of Business, and (v) no
Event of Default has occurred or is existing at the time of such acquisition.
Without limiting the foregoing, Lender further acknowledges and agrees that in
addition to
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the Acquisition Line, Borrower may use proceeds from Revolving Loans to finance
its acquisition of Utopia, Inc., a Florida corporation ("Target") substantially
on the terms and conditions provided in the Letter of Intent attached to this
Agreement as Exhibit "C", provided that such use of proceeds shall be subject to
(i) completion of a field examination of Target by Lender and receipt and review
of any due diligence materials requested by Lender, the results of which shall
be satisfactory to Lender in its reasonable discretion, (ii) that the Excess
Availability does not fall below $4,000,000 after giving effect to such
acquisition, and (iii) further provided closing of such acquisition shall occur
on or before August 1, 2003, and (iv) no Event of Default has occurred or is
existing at the time of such acquisition. In the event acquisition of the Target
is not closed on or before August 1, 2003, any future acquisition of Target
shall be included in and shall be subject to the terms of the Acquisition Line.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents in a
form satisfactory to Lender:
(i) on a regular basis as required by Lender, a schedule of sales
made, credits issued and cash received;
(ii) as soon as possible after the end of each month (but in any
event within ten (10) days after the end thereof), on a monthly basis
or more frequently as Lender may request, (A) perpetual inventory
reports, (B) inventory reports by location and category (including
identifying Inventory at locations owned and operated by third parties
or on consignment), (C) agings of accounts payable (and including
information indicating the status of payments to owners and lessors of
the leased premises of Borrower) and (D) agings of accounts receivable
(together with a reconciliation to the previous month's aging and
general ledger);
(iii) upon Lender's request, (A) copies of customer statements,
purchase orders, sales invoices, credit memos, remittance advices and
reports, and copies of deposit slips and bank statements, (B) copies
of shipping and delivery documents, and (C) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired
by Borrower;
(iv) such other reports as to the Collateral as Lender shall
request from time to time; and
(b) If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or
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any disputes with account debtors, or any settlement, adjustment or compromise
thereof, (ii) all material adverse information relating to the financial
condition of any account debtor and (iii) any event or circumstance which, to
Borrower's knowledge would cause Lender to consider any then existing Accounts
as no longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor without Lender's consent, except in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed in
writing to Lender and except as set forth in the schedules delivered to Lender
pursuant to Section 7.1(a) above. So long as no Event of Default exists or has
occurred and is continuing, Borrower shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor. At any time that
an Event of Default exists or has occurred and is continuing, Lender shall, at
its option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors or grant any credits,
discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Lender pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Lender in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed to Lender, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Lender in accordance with
the terms of this Agreement, (v) none of the transactions giving rise thereto
will violate any applicable foreign, Federal, State or local laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(c) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory
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shall supply Lender with a report in the form and with such specificity as may
be reasonably satisfactory to Lender concerning such physical count; (c)
Borrower shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of Borrower's business and except to move
Inventory directly from one location set forth or permitted herein to another
such location and except for Inventory shipped from the manufacturer thereof to
Borrower which is in transit to the locations set forth or permitted herein; (d)
upon Lender's request, Borrower shall, at its expense, no more than two (2)
times in any twelve (12) month period, but at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written appraisals as to the Inventory in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender and upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof; (g) Borrower assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (h) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory other than in the ordinary
course of business; (i) Borrower shall keep the Inventory in good and marketable
condition; and (j) Borrower shall not, without prior written notice to Lender or
the specific identification of such Inventory other than in the ordinary course
of business with respect thereto provided by Borrower to Lender pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval.
7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) Borrower shall, at its expense, at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Equipment and/or the Real
Property in form, scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely; (b) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c) Borrower
shall use the Equipment and Real Property with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with all applicable laws; (d) the Equipment is and shall be used in Borrower's
business and not for personal, family, household or farming use; (e) Borrower
shall not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of the business of Borrower or to move Equipment directly
from one
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location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) Borrower assumes all responsibility
and liability arising from the use of the Equipment and Real Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default exists or has occurred and is continuing (i)
demand payment on Receivables or other Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Lender deems advisable, (v) settle, adjust, compromise, extend or renew
an Account, (vi) discharge and release any Receivable, (vii) prepare, file and
sign Borrower's name on any proof of claim in bankruptcy or other similar
document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Lender, and open and dispose of all mail addressed to Borrower and
handle and store all mail relating to the Collateral; and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment in respect of
Receivables or constituting Collateral or otherwise received in or for deposit
in the Blocked Accounts or otherwise received by Lender, (ii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse Borrower's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Lender and
deposit the same in Lender's account for application to the Obligations, (iv)
endorse Borrower's name upon any chattel paper, document, instrument, invoice,
or similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
(v) clear Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs or foreign export control authorities in
Borrower's name, Lender's name or the name of Lender's designee, and to sign and
deliver to customs officials powers of attorney in Borrower's name for such
purpose, and to complete in Borrower's or Lender's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, (vi) sign Borrower's name on any verification of
Receivables and notices thereof to account debtors or any
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secondary obligors or other obligors in respect thereof. Borrower hereby
releases Lender and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, except as a result of Lender's own
gross negligence or wilful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) upon notice to Borrower,
cure any default by Borrower under any material agreement with a third party
that affects the Collateral, its value or the ability of Lender to collect, sell
or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower to perform its obligations hereunder or under
the other Financing Agreements, (b) pay or bond on appeal any judgment entered
against Borrower, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add any
amounts so expended to the Obligations and charge Borrower's account therefor,
such amounts to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower. Any payment
made or other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
7.7 Access to Premises.From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
twenty-four (24) hour notice to Borrower, or at any time and without notice to
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower's books and records, including the Records, and (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) Lender or its designee may use during
normal business hours such of Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Receivables and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
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8.1 Corporate Existence; Power and Authority. Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a material adverse effect on Borrower's financial condition, results of
operation or business or the rights of Lender in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder (a) are
all within Borrower's corporate powers, (b) have been duly authorized, (c) are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound and (d) will not result in the creation or imposition of,
or require or give rise to any obligation to grant, any lien, security interest,
charge or other encumbrance upon any property of Borrower. This Agreement and
the other Financing Agreements constitute legal, valid and binding obligations
of Borrower enforceable in accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of Borrower is as set forth on the signature
page of this Agreement and in the Information Certificate. Borrower has not,
during the five years immediately prior to the date of this Agreement, except as
set forth in the Information Certificate, been known by or used any other
corporate or fictitious name or been a party to any merger or consolidation, or
acquired all or substantially all of the assets of any Person, or acquired any
of its property or assets out of the ordinary course of business, except as set
forth in the Information Certificate.
(b) Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
Borrower or accurately states that Borrower has none and accurately sets forth
the federal employer identification number of Borrower.
(c) The chief executive office and mailing address of Borrower and
Borrower's Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 to the Information Certificate and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in Schedule 8.2 to the Information Certificate, subject
to the right of Borrower to establish new locations in accordance with Section
9.2 below. The Information
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Certificate correctly identifies any of such locations which are not owned by
Borrower and sets forth the owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP (except as to any
interim financial statements, to the extent such statements are subject to
normal year-end adjustments and do not include any notes) and fairly present the
financial condition and the results of operation of Borrower as at the dates and
for the periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrower to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrower, since the date of the most
recent audited financial statements furnished by Borrower to Lender prior to the
date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable fee simple title to or valid leasehold
interests in all of its Real Property and good, valid and merchantable title to
all of its other properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted to
Lender and such others as are specifically listed on Schedule 8.4 to the
Information Certificate or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
8.6 Litigation. Except as set forth in Schedule 8.6 to the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrower's knowledge threatened, against or affecting
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrower's knowledge threatened,
against
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Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrower and any Subsidiary have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower and any Subsidiary complies in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of Borrower's knowledge threatened,
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by Borrower and any Subsidiary or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects Borrower or its business, operations or assets or any
properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
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(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance with the applicable provisions of
ERISA, the Code and other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service and to the best of Borrower's
knowledge, nothing has occurred which would cause the loss of such
qualification. Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrower and its ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth in Schedule 8.10 to the Information
Certificate, subject to the right of Borrower to establish new accounts in
accordance with Section 5.2 hereof.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has the
right to use all Intellectual Property necessary for the operation of its
business as
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presently conducted or proposed to be conducted. As of the date hereof, Borrower
does not have any Intellectual Property registered, or subject to pending
applications, in the United States Patent and Trademark Office or any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 to the Information Certificate hereto and has not granted any
licenses with respect thereto other than as set forth in Schedule 8.11 to the
Information Certificate. No event has occurred which permits or would permit
after notice or passage of time or both, the revocation, suspension or
termination of such rights. To the best of Borrower's knowledge, no slogan or
other advertising device, product, process, method, substance or other
Intellectual Property or goods bearing or using any Intellectual Property
presently contemplated to be sold by or employed by Borrower infringes any
patent, trademark, servicemark, tradename, copyright, license or other
Intellectual Property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting Borrower contesting its
right to sell or use any such Intellectual Property. Schedule 8.11 to the
Information Certificate sets forth all of the agreements or other arrangements
of Borrower pursuant to which Borrower has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property owned
by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of Borrower as in effect on
the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by Borrower after the date hereof,
collectively, the "License Agreements" and individually, a "License Agreement").
No trademark, servicemark or other Intellectual Property at any time used by
Borrower which is owned by another person, or owned by Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Lender, is affixed to any Eligible Inventory,
except to the extent permitted under the term of the License Agreements listed
on Schedule 8.11 to the Information Certificate.
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Borrower does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set
forth in Schedule 8.12 to the Information Certificate, subject to the right of
Borrower to form or acquire Subsidiaries in accordance with Section 9.10 hereof.
(b) Borrower is the record and beneficial owner of all of the issued
and outstanding shares of Capital Stock of each of the Subsidiaries listed on
Schedule 8.12 to the Information Certificate as being owned by Borrower and
there are no proxies, irrevocable or otherwise, with respect to such shares and
no equity securities of any of the Subsidiaries are or may become required to be
issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any
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kind or nature and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional
shares of it Capital Stock or securities convertible into or exchangeable for
such shares.
(c) A majority of the issued and outstanding shares of Capital Stock
of Borrower are directly and beneficially owned and held by the Permitted
Holders indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Lender prior to the date hereof.
(d) Borrower is Solvent and will continue to be Solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to Borrower and any union, labor organization
or other bargaining agent in respect of the employees of Borrower on the date
hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against Borrower or, to the best of Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against Borrower
or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which Borrower is a party or is bound as of the
date hereof. Borrower has delivered true, correct and complete copies of such
Material Contracts to Lender on or before the date hereof. Borrower is not in
breach of or in
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default under any Material Contract and has not received any notice of the
intention of any other party thereto to terminate any Material Contract.
8.16 Payable Practices. Borrower has not made any material change in the
historical accounts payable practices from those in effect immediately prior to
the date hereof.
8.17 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrower in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including all information on the Information Certificate is true and
correct in all material respects on the date as of which such information is
dated or certified and does not omit any material fact necessary in order to
make such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a material adverse affect
on the business, assets or prospects of Borrower, which has not been fully and
accurately disclosed to Lender in writing prior to the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Borrower shall at all times preserve, renew and keep in full force
and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted.
(b) Borrower shall not change its name unless each of the following
conditions is satisfied: (i) Lender shall have received not less than thirty
(30) days prior written notice from Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Lender shall have received a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of
Borrower as soon as it is available.
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(c) Borrower shall not change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Lender shall have received not less than
thirty (30) days' prior written notice from Borrower of such proposed change,
which notice shall set forth such information with respect thereto as Lender may
require and Lender shall have received such agreements as Lender may reasonably
require in connection therewith. Borrower shall not change its type of
organization, jurisdiction of organization or other legal structure.
9.2 New Collateral Locations. Borrower may only establish new locations of
its business or Collateral so long as such new location is within the United
States of America and Borrower (a) gives Lender thirty (30) days prior written
notice from Borrower of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem necessary or desirable
to protect its interests in the Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders applicable to it and duly observe all requirements
of any foreign, Federal, State or local Governmental Authority.
(b) Borrower shall give written notice to Lender immediately upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by Borrower or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material other than in the ordinary course of business and other than
as permitted under any applicable Environmental Law. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Lender. Borrower shall take prompt and appropriate action to respond
to any non-compliance with any of the Environmental Laws and shall regularly
report to Lender on such response.
(c) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of Borrower in order to avoid any material
non-compliance, with any Environmental Law, Borrower shall, at Lender's request
and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-
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compliance or alleged non-compliance with such Environmental Laws has occurred
as to such non-compliance and prepare and deliver to Lender a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(d) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrower and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary to, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements
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to Lender as Lender shall require as proof of such insurance, and, if Borrower
fails to do so, Lender is authorized, but not required, to obtain such insurance
at the expense of Borrower. All policies shall provide for at least thirty (30)
days prior written notice to Lender of any cancellation or reduction of coverage
and that Lender may act as attorney for Borrower in obtaining, and at any time
an Event of Default exists or has occurred and is continuing, adjusting,
settling, amending and canceling such insurance. Borrower shall cause Lender to
be named as a loss payee and an additional insured (but without any liability
for any premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its Affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly
furnish to Lender all such financial and other information as Lender shall
reasonably request relating to the Collateral and the assets, business and
operations of Borrower, and shall notify the auditors and accountants of
Borrower that Lender is authorized to obtain such information directly from
them. Without limiting the foregoing, Borrower shall furnish or cause to be
furnished to Lender, the following: (i) within twenty-five (25) days after the
end of each fiscal month, monthly unaudited consolidated financial statements
and unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower as of the end
of and through such fiscal month, certified to be correct by the chief financial
officer of Borrower, subject to normal year-end adjustments and accompanied by a
Compliance Certificate substantially in the form of Exhibit B hereto, along with
a schedule in form reasonably satisfactory to Lender of the calculations used in
determining, as of the end of such month, whether Borrower was in compliance
with the covenants set forth in Section 9.17 of this Agreement for such month,
(ii) within forty-five (45) days after the end of each fiscal quarter, quarterly
unaudited consolidated financial statements and unaudited consolidating
financial statements (including in each case balance sheets, statements of
income
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and loss, statements of cash flow, and statements of shareholders' equity), all
in reasonable detail, fairly presenting the financial position and the results
of the operations of Borrower as of the end of and through such fiscal quarter,
certified to be correct by the chief financial officer of Borrower, subject to
normal year-end adjustments and accompanied by a Compliance Certificate
substantially in the form of Exhibit B hereto, along with a schedule in form
reasonably satisfactory to Lender of the calculations used in determining, as of
the end of such quarter, whether Borrower was in compliance with the covenant
set forth in Sections 9.17 and 9.18 of this Agreement for such quarter and (iii)
within ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and unaudited consolidating financial statements of
Borrower (including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower as of the end
of and for such fiscal year, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an
independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim relating
to the Collateral or any other property which is security for the Obligations or
which would result in any material adverse change in Borrower's business,
properties, assets, goodwill or condition, financial or otherwise, (ii) any
Material Contract of Borrower being terminated or amended or any new Material
Contract entered into (in which event Borrower shall provide Lender with a copy
of such Material Contract), (iii) any order, judgment or decree in excess of
$100,000 shall have been entered against Borrower or any of its properties or
assets, (iv) any notification of violation of laws or regulations received by
Borrower, (v) any ERISA Event, and (vi) the occurrence of any Default or Event
of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any
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other information relating to Borrower to any court or other Governmental
Authority, to any Affiliate of Lender or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Lender, at Borrower's expense,
copies of the financial statements of Borrower and any reports or management
letters prepared by such accountants or auditors on behalf of Borrower and to
disclose to Lender such information as they may have regarding the business of
Borrower. Any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender one (1) year after the same
are delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall
not, and shall not permit any Subsidiary to (and Lender does not authorize
Borrower to), directly or indirectly,
(a) merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it; or
(b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for (i) sales of Inventory in the
ordinary course of business, (ii) the disposition of worn-out or obsolete
Equipment so long as (A) any proceeds are paid to Lender and (B) such sales do
not involve Equipment having an aggregate fair market value in excess of
$250,000 for all such Equipment disposed of in any fiscal year of Borrower and
(iii) the issuance and sale by Borrower of Capital Stock of Borrower after the
date hereof; provided, that, (A) Lender shall have received not less than ten
(10) Business Days prior written notice of such issuance and sale by Borrower,
which notice shall specify the parties to whom such shares are to be sold, the
terms of such sale, the total amount which it is anticipated will be realized
from the issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by Borrower from such sale, (B) Borrower shall not
be required to pay any cash dividends or repurchase or redeem such Capital Stock
or make any other payments in respect thereof, (C) the terms of such Capital
Stock, and the terms and conditions of the purchase and sale thereof, shall not
include any terms that include any limitation on the right of Borrower to
request or receive Loans or Letter of Credit Accommodations or the right of
Borrower to amend or modify any of the terms and conditions of this Agreement or
any of the other Financing Agreements or otherwise in any way relate to or
affect the arrangements of Borrower with Lender or are more restrictive or
burdensome to Borrower than the terms of any Capital Stock in effect on the date
hereof, (D) except as Lender may otherwise agree in writing, all of the proceeds
from such sale and issuance shall be paid to Lender for application to the
Obligations in such order and manner as Lender may determine, and (E) as of the
date of such issuance and sale
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and after giving effect thereto, no Default or Event of Default shall exist or
have occurred;
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall not permit any Subsidiary
to, create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any security interest or lien with respect to any such assets
or properties, except: (a) the security interests and liens of Lender; (b) liens
securing the payment of taxes, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower or such Subsidiary, as the case may be and with
respect to which adequate reserves have been set aside on its books; (c)
non-consensual statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of Borrower's or such Subsidiary's business to
the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such
liens secure Indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower or such Subsidiary, in each case
prior to the commencement of foreclosure or other similar proceedings and with
respect to which adequate reserves have been set aside on its books; (d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of Real Property which do not interfere in any material respect with the
use of such Real Property or ordinary conduct of the business of Borrower or
such Subsidiary as presently conducted thereon or materially impair the value of
the Real Property which may be subject thereto; (e) purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof;
and (f) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate.
9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
to, incur, create, assume, become or be liable in any manner with respect to,
suffer or permit to exist, any Indebtedness or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the performance,
dividends or other obligations of any Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in
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Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $300,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of
Borrower or any Subsidiary other than the Equipment or Real Property so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Subsidiaries of Borrower of the Obligations in
favor of Lender;
(d) Indebtedness of Borrower under interest swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate exchange
agreements and similar contractual agreements entered into for the purpose of
protecting a Person against fluctuations in interest rates; provided, that, such
arrangements are with banks or other financial institutions that have combined
capital and unimpaired surplus of not less than $1,000,000,000 and are not for
speculative purposes and such Indebtedness shall be unsecured;
(e) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof except, that, Borrower may, after prior written notice to Lender,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrower shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, make, or suffer or permit to exist, any
loans or advance money or property to any person, or any investment in (by
capital contribution, dividend or otherwise) or purchase or repurchase the
Capital Stock or Indebtedness or all or a substantial part of the assets or
property of any person, or form or acquire any Subsidiaries, or agree to do any
of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
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(b) investments in cash or Cash Equivalents, provided, that, (i) no
Revolving Loans are then outstanding and (ii) the terms and conditions of
Section 5.2 hereof shall have been satisfied with respect to the deposit account
or investment account in which such cash or Cash Equivalents are held;
(c) the existing equity investments of Borrower as of the date hereof
in its Subsidiaries, provided, that, Borrower shall have no obligation to make
any other investment in, or loans to, or other payments in respect of, any such
Subsidiaries;
(d) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrower
as Lender may request;
(e) obligations of account debtors to Borrower arising from Accounts
which are past due evidenced by a promissory note made by such account debtor
payable to Borrower; provided, that, promptly upon the receipt of the original
of any such promissory note by Borrower, such promissory note shall be endorsed
to the order of Lender by Borrower and promptly delivered to Lender as so
endorsed;
(f) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i)
Borrower shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such loans and advances either received by Borrower or on its
behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of class of Capital Stock
of Borrower or such Subsidiary now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, except (a) in any case in the form of shares of Capital
Stock consisting of common stock and (b) any Subsidiary of Borrower may pay any
dividends to Borrower.
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9.12 Transactions with Affiliates. Except for the three (3) transactions
disclosed on Schedule 9.12 of the Information Certificate, Borrower shall not,
directly or indirectly, (a) purchase, acquire or lease any property from, or
sell, transfer or lease any property to, any officer, director, agent or other
person affiliated with Borrower, except in the ordinary course of and pursuant
to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person or (b) make
any payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower except reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business.
9.13 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan (other than a Multiemployer Plan) in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (f) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (g) not allow or suffer
to exist any occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Borrower shall, for financial
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end on March 31 of each year and (b) fiscal quarters to end on March 31, June
30, September 30 and December 31 of each year.
9.15 Change in Business. Borrower shall not engage in any business other
than the business of Borrower on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which Borrower is engaged
on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall not,
directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to
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(a) pay dividends or make other distributions or pay any Indebtedness owed to
Borrower or any Subsidiary of Borrower; (b) make loans or advances to Borrower
or any Subsidiary of Borrower, (c) transfer any of its properties or assets to
Borrower or any Subsidiary of Borrower; or (d) create, incur, assume or suffer
to exist any lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired, other than encumbrances and restrictions arising
under (i) applicable law, (ii) this Agreement, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of Borrower or any of its Subsidiaries, (iv) customary restrictions on
dispositions of real property interests found in reciprocal easement agreements
of Borrower or its Subsidiary, (v) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of Borrower prior to the date on which
such Subsidiary was acquired by Borrower and outstanding on such acquisition
date, and (vi) the extension or continuation of contractual obligations in
existence on the date hereof; provided, that, any such encumbrances or
restrictions contained in such extension or continuation are no less favorable
to Lender than those encumbrances and restrictions under or pursuant to the
contractual obligations so extended or continued. Borrower further agrees that
within One Hundred Twenty (120) days of the Closing of this loan facility,
Borrower will dissolve the following subsidiaries: Desktop Media Group, Inc., a
Florida corporation, VetMall, Inc., a Florida corporation, and ▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc., a Massachusetts corporation. Dissolution of these three subsidiaries
within One Hundred Twenty (120) days shall constitute a condition subsequent,
unless Borrower provides a business reason for continuing the existence of one
or more of the Subsidiaries, and Lender approves in writing such continued
existence, which approval will not be unreasonably withheld, and provided
further that in no event will any of these Subsidiaries be used to operate any
portion or aspect of the Borrower's business.
9.17 Tangible Net Worth. Borrower shall maintain Tangible Net Worth of no
less than: (i) $3,400,000 at all times from closing through ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇)
$3,600,000 at all times from April 1, 2004 through March 31, 2005, and (iii)
$3,800,000 from April 1, 2005 through March 31, 2006.
9.18 EBITDA.
Borrower shall not, for any period set forth below (each, a "Test Period"),
permit its cumulative EBITDA to be less than the amount set forth below opposite
such Test Period:
TEST PERIOD EBITDA
---------------- --------
4/1/03 - 6/30/03 $338,000
4/1/03 - 9/30/03 $744,000
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TEST PERIOD EBITDA
----------------- ----------
4/1/03 - 12/31/03 $1,087,000
4/1/03 - 3/31/04 $1,495,000
7/1/03 - 6/30/04 $1,578,000
10/1/03 - 9/30/04 $1,578,000
1/1/04 - 12/31/04 $1,578,000
4/1/03 - 3/31/05 $1,578,000
7/1/04 - 6/30/05 $1,661,000
10/1/04 - 9/30/05 $1,661,000
1/1/05 - 12/31/05 $1,661,000
4/1/04 - 3/31/06 $1,661,000
9.19 License Agreements.
(a) Borrower shall (i) promptly and faithfully observe and perform all
of the material terms, covenants, conditions and provisions of the material
License Agreements to be observed and performed by it, at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything
could reasonably be expected to result in a default under or breach of any of
the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing; except,
that, subject to Section 9.19(b) below, Borrower may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
Borrower; provided, that, Borrower shall give Lender not less than thirty (30)
days prior written notice of its intention to so cancel, surrender and release
any such material License Agreement, (iv) give Lender prompt written notice of
any material License Agreement entered into by Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Lender may request, (v) give Lender prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Lender (promptly upon
the receipt thereof by Borrower in the case of a notice to Borrower, and
concurrently with the sending thereof in the case of a notice from Borrower) a
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copy of each notice of default and every other notice and other communication
received or delivered by Borrower in connection with any material License
Agreement which relates to the right of Borrower to continue to use the property
subject to such License Agreement, and (vi) furnish to Lender, promptly upon the
request of Lender, such information and evidence as Lender may require from time
to time concerning the observance, performance and compliance by Borrower or the
other party or parties thereto with the terms, covenants or provisions of any
material License Agreement.
(b) Borrower will either exercise any option to renew or extend the
term of each material License Agreement in such manner as will cause the term of
such material License Agreement to be effectively renewed or extended for the
period provided by such option and give prompt written notice thereof to Lender
or give Lender prior written notice that Borrower does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, not less than sixty (60) days prior to the date of
any such non-renewal or expiration. In the event of the failure of any Borrower
to extend or renew any material License Agreement, Lender shall have, and is
hereby granted, the irrevocable right and authority, at its option, to renew or
extend the term of such material License Agreement, whether in its own name and
behalf, or in the name and behalf of a designee or nominee of Lender or in the
name and behalf of Borrower, as Lender shall determine at any time that an Event
of Default shall exist or have occurred and be continuing. Lender may, but shall
not be required to, perform any or all of such obligations of any Borrower under
any of the License Agreements, including, but not limited to, the payment of any
or all sums due from Borrower thereunder. Any sums so paid by Lender shall
constitute part of the Obligations.
9.20 After Acquired Real Property. If Borrower hereafter acquires any Real
Property or fixtures and such Real Property, fixtures or other property at any
one location has a fair market value in an amount equal to or greater than
$250,000 (or if a Default or Event of Default exists, then regardless of the
fair market value of such assets), without limiting any other rights of Lender,
or duties or obligations of Borrower, upon Lender's request, Borrower shall
execute and deliver to Lender a mortgage, deed of trust or deed to secure debt,
as Lender may determine, in form and substance satisfactory to Lender and in
form appropriate for recording in the real estate records of the jurisdiction in
which such Real Property or other property is located granting to Lender a first
and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as Borrower would otherwise be permitted to
incur hereunder or as otherwise consented to in writing by Lender) and such
other agreements, documents and instruments as Lender may require in connection
therewith.
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9.21 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees, costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the then standard rate of Lender per
person per day for Lender's examiners in the field and office (which rate is
currently $750) provided, however, that Lender agrees that per diem charges
pursuant to this Subsection (f), excluding per diem charges for the initial
survey examination by Lender, shall be limited to no more than $15,000 plus
out-of-pocket expenses per fiscal year during the term of this Agreement
provided that no Event of Default has occurred or is continuing; and (g) the
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.22 Further Assurances. At the request of Lender at any time and from time
to time, Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit
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Accommodations contained herein are satisfied. In the event of such request by
Lender, Lender may, at its option, cease to make any further Loans or provide
any further Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower (i) fails to pay when due any of the Obligations, or (ii)
fails to perform any of the other terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by Borrower
or any Obligor to Lender in this Agreement, the other Financing Agreements or
any other agreement, schedule, confirmatory assignment or otherwise shall when
made or deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of, any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against Borrower
or any Obligor in excess of $100,000 in any one case or in excess of $150,000 in
the aggregate and shall remain undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
their assets;
(e) any Obligor (being a natural person) dies, unless within ninety
(90) days after the date of death, the Borrower submits a plan of management
succession to Lender, and Lender approves such plan of management succession in
Lender's sole discretion; or Borrower or any Obligor, which is a partnership,
limited liability company, limited liability partnership or a corporation,
dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
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reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default in respect of any Indebtedness of Borrower or any
Obligor (other than Indebtedness owing to Lender), in any case in an amount in
excess of $100,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower or any Obligor
under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Lender) in accordance with
its terms, or any such party shall challenge the enforceability hereof or
thereof, or shall assert in writing, or take any action or fail to take any
action based on the assertion that any provision hereof or of any of the other
Financing Agreements has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms, or any security interest provided for
herein or in any of the other Financing Agreements shall cease to be a valid and
perfected first priority security interest in any of the Collateral purported to
be subject thereto (except as otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could reasonably be
expected to result in liability of Borrower in an aggregate amount in excess of
$250,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower, any Obligor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or
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civil proceedings against Borrower pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral having a value in excess of $100,000 or (ii) any other property of
Borrower which is necessary or material to the conduct of its business;
(n) there shall be a material adverse change in the business, assets
or prospects of Borrower or any Obligor after the date hereof; or
(o) there shall be an event of default under any of the other
Financing Agreements.
Notwithstanding the foregoing, an Event of Default under Subsections
10.1(a)(ii), 10.1(b) or 10.1(c) above shall not be deemed to have occurred if
the matter described therein is cured within ten (10) days after the date of
written notice from Lender to Borrower.
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10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
Borrower or any Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements, the
UCC or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to any Obligor or any of the
Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and,
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. Upon any action by
Lender to collect, foreclose, receive, appropriate, set off or realize upon any
Collateral pursuant to this Section 10.2 each of the Executive Officers hereby
agrees that he will cooperate with Lender
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as necessary for Lender to realize upon the Collateral and shall act at the
direction of Lender in connection with any such realization of the Collateral,
provided that any action requested by the Lender is lawful. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower will either, as
Lender shall specify, furnish cash collateral to the issuer to be used to secure
and fund Lender's reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations. Such cash collateral shall be in the amount
equal to one hundred ten (110%) percent of the amount of the Letter of Credit
Accommodations plus the amount of any fees and expenses payable in connection
therewith through the end of the expiration of such Letter of Credit
Accommodations.
(c) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, enforce Borrower's rights against any account
debtor, secondary obligor or other obligor in respect of any of the Accounts or
other Receivables. Without limiting the generality of the foregoing, Lender may
at such time or times (i) notify any or all account debtors, secondary obligors
or other obligors in respect thereof that the Receivables have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors, secondary obligors and other obligors to make payment of
Receivables directly to Lender, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing
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the sale and delivery of goods or the performance of services giving rise to any
Accounts as Lender may require. In the event any account debtor returns
Inventory when an Event of Default exists or has occurred and is continuing,
Borrower shall, upon Lender's request, hold the returned Inventory in trust for
Lender, segregate all returned Inventory from all of its other property, dispose
of the returned Inventory solely according to Lender's instructions, and not
issue any credits, discounts or allowances with respect thereto without Lender's
prior written consent.
(d) To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrower acknowledges and agrees that it is not
commercially unreasonable for Lender (i) to fail to incur expenses reasonably
deemed significant by Lender to prepare Collateral for disposition or otherwise
to complete raw material or work in process into finished goods or other
finished products for disposition, (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required by
other law, to fail to obtain consents of any Governmental Authority or other
third party for the collection or disposition of Collateral to be collected or
disposed of, (iii) to fail to exercise collection remedies against account
debtors, secondary obligors or other persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (iv)
to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether or
not in the same business as Borrower for expressions of interest in acquiring
all or any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Borrower
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Lender would not be commercially
unreasonable in Lender's exercise of remedies against the Collateral and that
other actions or omissions by Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without
limitation of the foregoing, nothing contained in
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this Section shall be construed to grant any rights to Borrower or to impose any
duties on Lender that would not have been granted or imposed by this Agreement
or by applicable law in the absence of this Section.
(e) For the purpose of enabling Lender to exercise the rights and
remedies hereunder, Borrower hereby grants to Lender, to the extent assignable,
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Borrower) to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by Borrower, wherever
the same maybe located, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.
(f) Lender may apply the cash proceeds of Collateral actually received
by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(g) Without limiting the foregoing, upon the occurrence of a Default
or Event of Default, Lender may, at its option, without notice, (i) cease making
Loans or arranging for Letter of Credit Accommodations or reduce the lending
formulas or amounts of Revolving Loans and Letter of Credit Accommodations
available to Borrower (ii) terminate any provision of this Agreement providing
for any future Loans or Letter of Credit Accommodations to be made by Lender to
Borrower and/or (iii) establish such Reserves as Lender determines without
limitation or restriction, notwithstanding anything to the contrary contained
herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Florida but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
Florida.
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(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Eleventh Judicial Circuit and the United
States District Court for the Middle District of Florida, whichever Lender may
elect, and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth herein and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
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contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct of Lender.
In any such litigation, Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement. Except as
prohibited by law, Borrower waives any right which it may have to claim or
recover in any litigation with Lender any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages. Borrower: (i) certifies that neither Lender nor any representative,
agent or attorney acting for or on behalf of Lender has represented, expressly
or otherwise, that Lender would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Lender is relying upon, among other things, the
waivers and certifications set forth in this Section 11.1 and elsewhere herein
and therein.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
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11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, Borrower shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. To the extent permitted by applicable law, Borrower shall not
assert, and Borrower hereby waives, any claim against Lender, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"). Lender and Borrower may, at their mutual
options extend the Renewal Date to the date four (4) years from the date hereof
by each party giving the other written notice of such intent at least sixty (60)
days prior to the Renewal Date, after which this Agreement and the other
Financing Agreements shall automatically continue in full force and effect from
year to year thereafter, unless sooner terminated pursuant to the terms hereof.
Lender or Borrower may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other party at least sixty (60) days prior
written notice; provided, that, this Agreement and all other Financing
Agreements must be terminated simultaneously. In addition, Borrower may
terminate this Agreement at any time upon ten (10) days prior written notice to
Lender (which notice shall be irrevocable) and Lender may terminate this
Agreement at any time on or after an Event of Default. Upon the effective date
of termination or non-renewal of this Agreement, Borrower shall pay to Lender,
in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender (or at Lender's option, a letter of credit
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issued for the account of Borrower and at Borrower's expense, in form and
substance satisfactory to Lender, by an issuer acceptable to Lender and payable
to Lender as beneficiary) in such amounts as Lender determines are reasonably
necessary to secure (or reimburse) Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment and any
continuing obligations of Lender to any bank or other financial institution
under or pursuant to any Deposit Account Control Agreement. Such payments in
respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in its
discretion, designate in writing to Borrower for such purpose. Interest shall be
due until and including the next business day, if the amounts so paid by
Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, Eastern Standard time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid. Accordingly, Borrower waives any rights which it may have
under the UCC to demand the filing of termination statements with respect to the
Collateral, and Lender shall not be required to send such termination statements
to Borrower, or to file them with any filing office, unless and until this
Agreement is terminated in accordance with its terms and all of the Obligations
are paid and satisfied in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
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Amount Period
------ ------
(i) two (2%) percent of the From the date hereof to and
Maximum Credit including April 14, 2004
(ii) one (1%) percent of the From April 15, 2004 to and
Maximum Credit including ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇▇) one-half of one percent From April 15, 2005 to and
(0.5%) of the Maximum including April 14, 2006
Credit
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
Notwithstanding the foregoing, Lender hereby agrees to waive any early
termination fee otherwise payable pursuant to this Section 12.1(b) in the event
LaSalle Business Credit, as lender, replaces the credit facility evidenced by
this Agreement.
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1 or Article 9
of the UCC shall have the meanings given therein unless otherwise defined in
this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to Borrower and Lender pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement
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as a whole and not any particular provision of this Agreement and as this
Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower shall have the burden of proving any lack of good faith on
the part of Lender alleged by Borrower at any time.
(g) An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Lender prior to the date hereof. Notwithstanding anything to the
contrary contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term "unqualified
opinion" as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is not only unqualified but also does not
include any explanatory note or language, including any explanation,
supplemental comment or other comment concerning the ability of the applicable
person to continue as a going concern.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references herein
to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory
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and regulatory provisions consolidating, amending, replacing, recodifying,
supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to Borrower: DrugMax, Inc.
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇, Loop & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.:(▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.:(▇▇▇) ▇▇▇-▇▇▇▇
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If to Lender: Congress Financial Corporation (Florida)
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Holland & Knight LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Louis ▇.▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person on terms and conditions acceptable to Lender.
12.6 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
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12.7 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
IN WITNESS WHEREOF, (i) Lender and Borrower have caused these presents to
be duly executed and (ii) Executive Officers have caused these presents to be
duly executed to affirm their individual agreement to the provisions of Section
10.2(b) hereof, as of the day and year first above written.
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LENDER BORROWER
CONGRESS FINANCIAL DRUGMAX, INC.
CORPORATION (FLORIDA)
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------- --------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President Title: CEO & Chairman
Address: Chief Executive Office:
-------- -----------------------
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Suite 137
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXECUTIVE OFFICERS
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------- VALLEY DRUG COMPANY
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Title: CFO
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
VALLEY DRUG COMPANY SOUTH
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: CEO
DISCOUNT Rx, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: CFO
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