EXHIBIT 10.19
FINANCING AGREEMENT
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THE CIT GROUP/BUSINESS CREDIT, INC.
AS AGENT AND LENDER
THE CIT GROUP/EQUIPMENT FINANCING, INC.
AS LENDER
AND
4MC-BURBANK, INC.
DIGITAL MAGIC COMPANY
(AS BORROWERS)
DATED: October 17, 1996
TABLE OF CONTENTS
SECTION 1. Definitions........................................
SECTION 2. Conditions Precedent...............................
SECTION 3. Revolving Loans....................................
SECTION 4. Term Loan..........................................
SECTION 5. Letters of Credit..................................
SECTION 6. Collateral.........................................
SECTION 7. Representations, Warranties and Covenants..........
SECTION 8. Interest, Fees and Expenses........................
SECTION 9. Powers.............................................
SECTION 10. Events of Default and Remedies.....................
SECTION 11. Termination........................................
SECTION 12. Miscellaneous......................................
SECTION 13. Agreement between Lenders..........................
SECTION 14. Agency.............................................
EXHIBIT
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Exhibit A - Form of Revolving Loan Promissory Note
Exhibit B - Form of Term Loan Promissory Note A
Exhibit C - Form of Term Loan Promissory Note B
Exhibit D - Form of Capex Term Loan Promissory Note
Exhibit E - Form of Assignment and Transfer Agreement
SCHEDULES
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Schedule 1 - Existing Liens
Schedule 2 - Collateral Locations and Chief Executive Office
Schedule 3 - Permitted Indebtedness
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and The CIT Group/Equipment Financing, Inc., a New York
corporation (hereinafter "CITEF") with offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (CITBC, CITEF and any other party hereafter
becoming a Lender hereunder pursuant to Section 13, Paragraph 9 hereof each
individually sometimes referred to as a "Lender" and collectively the "Lenders")
and CITBC as Agent for the Lenders (hereinafter the "Agent") are pleased to
confirm the terms and conditions under which the Lenders acting through the
Agent shall make revolving loans, term loans and other financial accommodations
to 4MC-Burbank, Inc. (herein the "4MC"), a Delaware corporation with a principal
place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ and
Digital Magic Company (herein "DMC"), a Delaware corporation with a principal
place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (4MC and
DMC may be referred to herein individually as a "Company" and collectively as
the "Companies").
SECTION 1. DEFINITIONS
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ACCOUNTS shall mean all of the Companies' now existing and future: (a) accounts
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(as defined in the U.C.C.) and any and all other receivables (whether or not
specifically listed on schedules furnished to the Agent), including, without
limitation, all accounts created by or arising from all of their sales of goods
or rendition of services to their customers, and all accounts arising from sales
or rendition of services made under any of their trade names or styles, or
through any of their divisions; (b) any and all instruments (as defined in the
U.C.C.), documents (as defined in the U.C.C.), contract rights (as defined in
the U.C.C.) and chattel paper (as defined in the U.C.C.); (c) unpaid seller's
rights (including rescission, replevin, reclamation and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned or repossessed
goods; (e) reserves and credit balances arising hereunder; (f) guarantees or
collateral for any of the foregoing; (G) insurance policies or rights relating
to any of the foregoing; and (H) cash and non-cash proceeds of any and all the
foregoing.
ACCOUNTS RECEIVABLE ADVANCE PERCENTAGE shall mean eighty-five percent (85%).
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ANNIVERSARY DATE shall mean the date, occurring forty-two (42) months after the
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date of this Financing Agreement (the "Initial Anniversary Date") and the same
date in each year thereafter. Notwithstanding the foregoing, at the Companies'
option subject to the conditions hereof, the Initial Anniversary Date shall be
subject to an extension for an additional period of two (2) years, to be
executed by the Companies giving the Agent and the Lenders sixty (60) day's
notice prior to the Initial Anniversary Date, provided that: (i) no Default
and/or Event of Default has
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occurred (other than a Default or Event of Default that has been waived in
writing by, or cured to the satisfaction of, the Agent and the Required
Lenders), and (ii) the then outstanding aggregate balance of the (x) Term Loan
and (y) CAPEX Term Loans is less than eighty percent (80%) of the then currently
appraised orderly liquidation value of the Companies' Equipment (which is
subject to a first and exclusive lien in favor of the Agent for the benefit of
the Lenders). Such appraisal shall be obtained no early than one hundred and
fifty (150) days prior to the Initial Anniversary Date and shall be performed by
an appraiser retained by the Agent (but mutually agreed upon between the Agent
and the Companies) and paid for by the Companies.
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
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Agreement in the form of Exhibit E hereto.
AVAILABILITY shall mean, as to any Company, at any time the excess of the sum of
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a) Eligible Accounts Receivable of such Company multiplied by the Accounts
Receivable Advance Percentage and b) Eligible Inventory of such Company
multiplied by the Inventory Advance Percentage over the sum of x) the
outstanding aggregate amount of all Obligations of such Company, including,
without limitation, all Obligations with respect to Revolving Loans and Letters
of Credit but excluding the Term Loans and CAPEX Term Loans and y) the
Availability Reserve of such Company.
AVAILABILITY RESERVE shall mean, as to any Company, the sum of three (3) months
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rental payments on all of its leased premises (other than the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ locations)
for which it has not delivered to the Agent a landlord's waiver (in form and
substance satisfactory to the Agent in the exercise of its reasonable business
judgment), provided that such amount shall be adjusted from time to time
hereafter upon (i) delivery to the Agent of any such acceptable waiver, (ii) the
opening or closing of a Collateral location and/or (iii) any change in rental
payment, and further provided that no such reserve shall be established with
respect to the location at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ until
the expiration of 90 days after the date hereof.
BUSINESS DAY shall mean any day that the Agent is open for business in New York,
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New York, which is not (i) a Saturday, Sunday or legal holiday in the state of
New York or (ii) a day on which banking institution chartered by the state of
New York or the United States are legally required to close.
CAPEX TERM LOAN PROMISSORY NOTE shall mean the promissory note in the form of
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Exhibit D hereto executed by the Companies to evidence a CAPEX Term Loan made by
the Agent in behalf of the Lenders pursuant to Section 4 hereof.
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CAPEX TERM LOANS shall mean the term loans made and to be made to the Companies
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by the Agent on behalf of the Lenders in the aggregate principal amount of up to
$7,000,000 as more fully described in Section 4 of this Financing Agreement.
CAPEX TERM LOAN LINE OF CREDIT shall mean the commitment of the Lenders to make
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CAPEX Term Loans to the Companies pursuant to Section 4 of this Financing
Agreement in the aggregate amount of $7,000,000 for the Companies.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
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of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies, provided,
however, that, if purchased during the fiscal year ending July 31, 1997, the
purchase of the real property and the building located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ for a purchase price not to exceed $11,500,000 will
not be considered a Capital Expenditure hereunder.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
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land) acquired or installed for use in the Companies' business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
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which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Companies.
CHASE MANHATTAN BANK RATE shall mean the rate of interest per annum announced by
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Chase Manhattan Bank from time to time as its prime rate in effect at its
principal office in the City of New York. (The prime rate is not intended to be
the lowest rate of interest charged by Chase Manhattan Bank to its borrowers).
CLOSING DATE shall mean the date on or after the date hereof upon which the
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Agent in behalf of the Lenders makes the initial extension of credit hereunder
whether in the form of Revolving Loans, Letters of Credit, Term Loans or CAPEX
Term Loans.
COLLATERAL shall mean all present and future Accounts, Equipment, Inventory,
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Documents of Title, General Intangibles, Real Estate and Other Collateral of the
Companies.
COLLATERAL MANAGEMENT FEE shall mean the sum of $25,000 which shall be paid to
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the Agent for its own account in accordance with Section 8, Paragraph 12 hereof
to offset the expenses and costs of the Agent in connection with record keeping,
periodic examinations, analyzing and evaluating the Collateral.
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COMMITMENT LETTER shall mean the commitment letter dated August 12, 1996, issued
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by CITBC and CITEF to, and accepted by, the Companies.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for Parent,
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the Companies and the consolidated subsidiaries of each eliminating all inter-
company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
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individual balance sheets for Parent, the Companies, and the subsidiaries of
each showing all eliminations of inter-company transactions and prepared in
accordance with GAAP and including a balance sheet for each Company exclusively.
CURRENT ASSETS shall mean those assets which in accordance with GAAP are
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classified as current.
CURRENT LIABILITIES shall mean, wherever used through out this Financing
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Agreement, those liabilities which in accordance with GAAP, are classified as
"current", provided, however, that notwithstanding GAAP the (i) Revolving Loans
and (ii) the current portion of long term Permitted Indebtedness shall not be
considered Current Liabilities hereunder.
CUSTOMARILY PERMITTED LIENS shall mean
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(a) liens of local or state authorities for franchise or other like
taxes provided the aggregate amounts of such liens shall not exceed $100,000.00
in the aggregate for the Companies at any one time;
(b) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts not yet due (or which are being
contested in good faith by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with
respect to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), statutory
obligations and other similar obligations arising as a result of progress
payments under government contracts; and
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(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which (i)
are listed in Schedule B of the title insurance policy delivered to the Agent
herewith or (ii) in the aggregate (x) do no materially interfere with the
occupation, use or enjoyment by the Companies in their business of the property
so encumbered and (y) in the reasonable business judgment of the Agent do not
materially and adversely affect the value of such Real Estate.
DEFAULT shall mean any event specified in Section 10 hereof, whether or not any
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requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
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sum of: a) two percent (2%) plus b) the applicable contract rate of interest
based upon the applicable increment over the Chase Manhattan Bank Rate as
determined under Section 8 hereof, which the Agent in behalf of the Lenders
shall be entitled to charge the Companies on all Obligations due the Agent in
behalf of the Lenders by the Companies to the extent provided in Section 10,
Paragraph 2 of this Financing Agreement.
DEPOSITORY ACCOUNTS shall have the meaning specified in Section 3, Paragraph 4
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hereof.
DOCUMENTATION FEE shall mean i) the sum which is included in the Loan Facility
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Fee and is intended to compensate the Agent for the use of the Agent's in-house
Legal Department and facilities in documenting, in whole or in part, the initial
transaction solely on behalf of the Agent, exclusive of Out-of-Pocket Expenses,
and ii) the Agent's standard fees relating to any and all future modifications,
waivers, releases, amendments or additional collateral with respect to this
Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
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the U.C.C.) including, without limitation all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
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Financing Agreement or the Line of Credit which date is prior to an Anniversary
Date.
EARLY TERMINATION FEE shall: i) mean the fee the Agent in behalf of the Lenders
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is entitled to charge the Companies in the event they terminate the Line of
Credit or
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this Financing Agreement on a date prior to an Anniversary Date; and ii) be
determined by calculating the sum of (x) the average daily loan balance of the
Revolving Loans of the Companies plus (y) the average daily balance of
outstanding Letters of Credit of the Companies and (z) the average daily balance
of the Term Loans and CAPEX Term Loans of the Companies for the period from the
date of this Financing Agreement to the Early Termination Date and multiplying
that number by the applicable percentage set forth below per annum for the
number of days from the Early Termination Date to the next succeeding
Anniversary Date:
(a) 3/4 of 1% if the Early Termination Date occurs prior to one (1) year
after the Closing Date;
(b) 1/2 of 1% if the Early Termination Date occurs after one (1) year
from the Closing Date but prior to two (2) years from Closing Date;
(c) 1/4 of 1% if the Early Termination Date occurs after two (2) years
from the Closing Date but prior to three (3) years from the Closing
Date; and
(d) 0% if the Early Termination Date occurs after three (3) years from
the Closing Date.
EBIT shall mean, in any period, all earnings before all interest and tax
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obligations for said period, determined in accordance with GAAP but excluding
the effect of extraordinary and/or non-recurring gains or losses for such
period.
EBITDA shall mean, in any period, all earnings before all (i) interest and tax
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obligations, (ii) depreciation, and (iii) amortization for said period, all
determined in accordance with GAAP on a basis consistent with the latest audited
financial statements of the Companies but excluding the effect of other non-cash
charges or income and extraordinary and/or non-recurring gains or losses for
such period.
ELIGIBLE ACCOUNTS RECEIVABLE shall mean, as to any Company, the gross amount of
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such Company's Trade Accounts Receivable that are subject to a valid, first
priority and fully perfected security interest in favor of the Agent in behalf
of the Lenders and which conform to the warranties contained herein and at all
times continue to be acceptable to the Agent in the exercise of its reasonable
business judgment, less, without duplication, the sum of a) any returns,
discounts, claims, credits and allowances of any nature (whether issued, owing,
granted or outstanding) and b) reserves for: i) sales to the United States of
America, any state or local governmental entity, or to any agency, department or
division thereof; ii) foreign sales other than sales x) secured by stand-by
letters of credit (in form and substance satisfactory to the Agent) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency, or y) to customers
residing in Canada provided such sales otherwise comply with all of the other
criteria for eligibility hereunder, are payable
8
in United States currency and such sales do not exceed $100,000 in the aggregate
at any one time; iii) Accounts that remain unpaid more than one hundred and
twenty (120) days from invoice date; iv) contras; v) sales to Parent, any
subsidiary, or to any company affiliated with the Companies or Parent in any
way; vi) ▇▇▇▇ and hold (deferred shipment) or consignment sales; vii) sales to
any customer which is a) insolvent, b) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, c) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts or d) financially
unacceptable to the Agent or has a credit rating unacceptable to the Agent;
viii) all sales to any customer if fifty percent (50%) or more of either x) all
outstanding invoices or y) the aggregate dollar amount of all outstanding
invoices, are unpaid more than one hundred and twenty (120) days from invoice
date; ix) any other reasons deemed necessary by the Agent in its reasonable
business judgment and which are customary either in the commercial finance
industry or in the lending practices of the Agent and/or the Lenders; and x) an
amount representing, historically, returns, discounts, claims, credits and
allowances.
ELIGIBLE INVENTORY shall mean, as to any Company, the gross amount of such
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Company's Inventory that is subject to a valid, first priority and fully
perfected security interest in favor of the Agent in behalf of the Lenders and
which conform to the warranties contained herein and which at all times continue
to be acceptable to the Agent in the exercise of its reasonable business
judgment less any work-in-process, supplies (other than raw material), goods not
present in the United States of America, goods returned or rejected by its
customers other than goods that are undamaged and resaleable in the normal
course of business, goods to be returned to its suppliers, goods in transit to
third parties (other than its agents or warehouses), Inventory in possession of
a warehouseman, bailee or other third party unless such warehouseman, bailee or
third party has executed a notice of security interest agreement (in form and
substance satisfactory to the Agent) and the Agent has taken all other action
required to perfect its security interest in such Inventory, and less any
reserves required by the Agent in its reasonable discretion for special order
goods, market value declines and ▇▇▇▇ and hold (deferred shipment) or
consignment sales.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
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the U.C.C.) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
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from time to time and the rules and regulations promulgated thereunder from time
to time.
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EVENT(S) OF DEFAULT shall have the meaning provided for in Section 10 of this
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Financing Agreement.
FIXED CHARGE COVERAGE RATIO shall mean, for the relevant period, the ratio
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determined by dividing EBITDA by the sum of (i) all interest obligations
scheduled to be paid, (ii) the amount of principal repaid or scheduled to be
repaid on the Term Loans, Capex Term Loans, Permitted Indebtedness, and
Subordinated Debt, (iii) Net Capital Expenditures and (iv) all federal, state
and local income tax expenses due and payable.
4MC ASIA shall mean Four Media Company Asia Pte. Ltd.
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GAAP shall mean generally accepted accounting principles in the United States of
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America as in effect from time to time and for the period as to which such
accounting principles are to apply.
GENERAL INTANGIBLES shall have the meaning set forth in the U.C.C. and shall
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include, without limitation, all present and future right, title and interest in
and to all tradenames, Trademarks (together with the goodwill associated
therewith), Patents, licenses, customer lists, distribution agreements, supply
agreements and tax refunds, together with all monies and claims for monies now
or hereafter due and payable in connection with any of the foregoing or
otherwise, and all cash and non-cash proceeds thereof.
GUARANTORS shall mean i) Parent, and ii) the Companies.
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INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
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otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise) or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized.
INVENTORY shall mean all of the Companies' present and hereafter acquired
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inventory (as defined in the U.C.C.) including, without limitation all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY ADVANCE PERCENTAGE shall mean fifty percent (50%).
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ISSUING BANK shall mean the bank issuing Letters of Credit for the Companies.
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LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
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the Agent on behalf of the Lenders by the Issuing Bank for or on behalf of the
Companies.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by the Agent in
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behalf of the Lenders to the Issuing Bank of the Companies' reimbursement
obligation under the Issuing Bank's Reimbursement Agreement, Application for
Letter of Credit or other like document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent in behalf of the
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Lenders may charge the Companies under Section 8, Paragraph 7 of this Financing
Agreement for: i) issuing the Letter of Credit Guaranty or ii) otherwise aiding
the Companies in obtaining Letters of Credit.
LETTER OF CREDIT SUB-LINE shall mean $1,000,000 in the aggregate for the
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Companies.
LEVERAGE RATIO shall mean the ratio determined by dividing Total Liabilities by
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Net Worth.
LIBOR shall mean at any time of determination, and subject to availability, for
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each interest period the higher of the applicable London Interbank Offered rate
paid in London on dollar deposits from other banks as (x) quoted by Chase
Manhattan Bank, (y) published under "Money Rates" in the new York City edition
of the Wall Street Journal or if there is no such publication or statement
therein as to Libor then in any publication used in the New York City financial
community or (z) determined by the Agent based upon information presented on
Telerate Systems at Page 3750 as of 11:00 a.m. (London Time).
LIBOR LOAN shall mean those Revolving Loans, Term Loans and/or CAPEX Term Loans
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for which the Companies have elected to use Libor for interest rate
computations.
LIBOR PERIOD shall mean the Libor for one month, two month or three month U.S.
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dollar deposits, as selected by the Companies.
LINE OF CREDIT shall mean the commitment of the Lenders to make Revolving Loans
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pursuant to Section 3 of this Financing Agreement, to make Term Loans and CAPEX
Term Loans pursuant to Section 4 of this Financing Agreement and to assist the
Companies in opening Letters of Credit pursuant to Section 5 of this Financing
Agreement, in the aggregate amount equal to $34,000,000 for the Companies,
provided that the commitment hereunder of (i) CITBC shall not exceed $17,000,000
and (ii) CITEF shall not exceed $17,000,000.
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LINE OF CREDIT FEE shall: i) mean the fee due the Agent for the benefit of the
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Lenders at the end of each month for the Revolving Line of Credit, and ii) be
determined by multiplying the difference between the Revolving Line of Credit
and the sum of (x) the average daily balance of Revolving Loans of the Companies
plus (y) the average daily balance of Letters of Credit of the Companies for
said month by one half of one percent (1/2 of 1%) per annum for the number of
days in said month.
LOAN FACILITY FEE shall mean the fee payable to the Agent for the benefit of the
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Lenders in accordance with, and pursuant to, the provisions of Section 8,
Paragraph 11 of this Financing Agreement.
NET CAPITAL EXPENDITURES shall mean Capital Expenditures which are not financed
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by any third party or by the Lenders under the CAPEX Term Loan Line of Credit
and which are not subject to a lien (other than the liens granted to the Lenders
herein), provided that for purposes of calculation of Net Capital Expenditures,
such financing shall be included in the fiscal year in which it is obtained
whether or not the Capital Expenditures to which it relates were incurred in
such year or the prior year.
NET WORTH shall mean assets in excess of liabilities, and shall be determined in
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accordance with GAAP, on a consistent basis with the latest audited statements.
OBLIGATIONS shall mean all loans and advances made or to be made by the Agent
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and/or the Lenders to the Companies or to others for the Companies' account
(including, without limitation, all Revolving Loans, Letters of Credit, Term
Loans and CAPEX Term Loans); any and all indebtedness and obligations which may
at any time be owing by the Companies to the Agent and/or the Lenders howsoever
arising, whether now in existence or incurred by the Companies from time to time
hereafter; whether secured by pledge, lien upon or security interest in any of
the Companies' assets or property or the assets or property of any other person,
firm, entity or corporation; whether such indebtedness is absolute or
contingent, joint or several, matured or unmatured, direct or indirect and
whether the Companies are liable to the Agent and/or the Lenders for such
indebtedness as principal, surety, endorser, guarantor or otherwise.
Obligations shall also include indebtedness owing to the Agent and/or the
Lenders by the Companies under this Financing Agreement or under any other
agreement or arrangement now or hereafter entered into between the Companies and
the Agent and/or the Lenders; indebtedness or obligations incurred by, or
imposed on, the Agent and/or the Lenders as a result of environmental claims
(other than as a result of actions of the Agent and/or the Lenders) arising out
of the Companies' operation, premises or waste disposal practices or sites; the
Companies' liability to the Agent and/or the Lenders as maker or endorser on any
promissory note or other instrument for the payment of money; the Companies'
liability to the Agent and/or the Lenders under any
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instrument of guaranty or indemnity, or arising under any guaranty, endorsement
or undertaking which the Agent and/or the Lenders may make or issue to others
for the Companies' account, including any accommodation extended with respect to
applications for Letters of Credit, the Agent's (in behalf of the Lenders)
acceptance of drafts or the Agent's (in behalf of the Lenders) endorsement of
notes or other instruments for the Companies' account and benefit, provided that
Obligations shall exclude any Equipment leases or financing done by any Lender
under separate agreement with the Companies and not as part of the financing
under this Financing Agreement.
OPERATING LEASES shall mean all leases of property (whether real, personal or
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mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired deposit
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accounts maintained with any bank or financial institutions; all cash and other
monies and property in the possession or control of the Agent and/or the
Lenders; all books, records, ledger cards, disks and related data processing
software at any time evidencing or containing information relating to any of the
Collateral described herein or otherwise necessary or helpful in the collection
thereof or realization thereon, and all cash and non-cash proceeds of the
foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's and/or the Lenders' actual
----------------------
present and future expenses incurred relative to this Financing Agreement,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to, the cost of record searches, all costs and expenses incurred
by the Agent and/or the Lenders in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges imposed on the Agent and/or
the Lenders due to "insufficient funds" of deposited checks and the Agent's
and/or the Lenders' standard fee relating thereto, any amounts paid by the Agent
and/or the Lenders, incurred by or charged to the Agent and/or Lenders by the
Issuing Bank under the Letter of Credit Guaranty or the Companies' Reimbursement
Agreement, Application for Letter of Credit or other like document which pertain
either directly or indirectly to such Letters of Credit, and the Agent's and/or
the Lenders' standard fees relating to the Letters of Credit and any drafts
thereunder, reasonable local counsel fees, title insurance premiums, real estate
survey costs, fees and taxes relative to the filing of financing statements,
costs of preparing and recording mortgages/deeds of trust against the Real
Estate and all expenses, costs and fees set forth in Section 10, Paragraph 3 of
this Financing Agreement.
PARENT shall mean Four Media Company, a Delaware corporation.
------
PATENTS shall mean all present and hereafter acquired patents and/or patent
-------
rights of the Companies and all cash and non-cash proceeds thereof.
13
PERMITTED ENCUMBRANCES shall mean: i) liens existing on the date hereof on
----------------------
specific items of Equipment and listed on Schedule 1 hereto and other liens
expressly permitted, or consented to, by the Agent; ii) Purchase Money Liens;
iii) Customarily Permitted Liens; iv) liens on the real property and building
granted in connection with the Permitted Real Estate Purchase Financing; v)
liens granted the Agent by the Companies; vi) liens of judgment creditors
provided such liens do not exceed, in the aggregate for the Companies, at any
time, $100,000 (other than liens bonded or insured to the reasonable
satisfaction of the Agent); and vii) liens for taxes not yet due and payable or
which are being diligently contested in good faith by the Companies by
appropriate proceedings and which liens are not x) other than with respect to
Real Estate, senior to the liens of the Agent or y) for taxes due the United
States of America.
PERMITTED INDEBTEDNESS shall mean: i) current indebtedness maturing in less
----------------------
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, taxes or labor; ii) the indebtedness secured by
the Purchase Money Liens; iii) Subordinated Debt; iv) indebtedness arising under
the Letters of Credit and this Financing Agreement; v) deferred taxes and other
expenses incurred in the ordinary course of business; vi) other indebtedness
existing on the date of execution of this Financing Agreement and listed on
Schedule 3 attached hereto and vii) Permitted Real Estate Purchase Financing.
PERMITTED REAL ESTATE PURCHASE FINANCING shall mean the financing obtained by
----------------------------------------
the Companies in connection with the purchase by the Companies of certain real
property and building located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ for an
amount not to exceed $11,500,000 prior to July 31, 1997, provided that (a) such
financing shall (i) be for at least 70% of the purchase price thereof, (ii) be
secured solely by a first mortgage on such real property and building, (iii) be
repayable in accordance with a minimum of a 15 year straight-line amortization
schedule with a balloon payment due no earlier than 5 years after closing
thereof, and (iv) incur interest at a rate of prime plus 1.5% per annum or less
and (b) either (A) the Companies have entered into a written agreement with
Technical Services Partners, L.P. (in form and substance reasonably satisfactory
to the Agent) pursuant to which Technical Services Partners L.P. agrees that, in
the event that the Parent has not completed an initial public offering of its
stock and received at least $25,000,000 (herein the "IPO") on or prior to July
31, 1997, it shall loan to the Companies, on an unsecured basis, an amount equal
to the amount of the purchase price which was not financed pursuant to condition
(i) above, to be repayable in accordance with a minimum of a 5 year straight
line amortization schedule and incur interest at a rate of no more than 12% per
annum, or (B) the IPO has occurred.
PROMISSORY NOTES shall mean the notes, in the form of Exhibits A, B, C and D
----------------
attached hereto, delivered by the Companies to the Agent to evidence the
14
Revolving Loans, Term Loans and CAPEX Term Loans pursuant to, and repayable in
accordance with, the provisions of Sections 3 and 4 of this Financing Agreement.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
--------------------
the date of this Financing Agreement provided that i) each such lien shall
attach only to the property to be acquired, ii) a description of the property so
acquired is furnished to the Agent, and iii) the debt incurred in connection
with such acquisitions shall not exceed in the aggregate in any fiscal year the
difference between (x) the maximum amount of Capital Expenditures permitted
under Section 7, Paragraph 11(b) of this Financing Agreement and (y) the maximum
amount of Net Capital Expenditures permitted under Section 7, Paragraph 11(c) of
this Financing Agreement.
REAL ESTATE shall mean the Companies' fee and/or leasehold interests in real
-----------
property.
REQUIRED LENDERS shall mean Lenders holding more than fifty percent (50%) of the
----------------
outstanding loans, advances, extensions of credit and commitments to the
Companies hereunder.
RESTRUCTURING shall mean (i) the formation of Four Media Company, a Delaware
-------------
corporation as a wholly owned subsidiary of Technical Services Partners, L.P.
(herein the "New Holding Company"), (ii) the dividend of the stock owned by 4MC
in DMC and 4MC Asia to such New Holding Company and (iii) the changing of 4MC's
name to 4MC-Burbank, Inc.
REVOLVING LINE OF CREDIT shall mean the commitment of the Lenders to make
------------------------
Revolving Loans pursuant to Section 3 of this Financing Agreement and to assist
the Companies in opening Letters of Credit pursuant to Section 5 of this
Financing Agreement in the aggregate amount for the Companies equal to
$11,000,000, provided, that the commitment hereunder of (i) CITBC shall not
exceed $5,500,000 and (ii) CITEF shall not exceed $5,500,000 in the aggregate.
REVOLVING LOAN PROMISSORY NOTE shall mean the promissory note in the form of
------------------------------
Exhibit A hereto executed by the Companies to evidence Revolving Loans made by
the Agent in behalf of the Lenders to the Companies pursuant to Section 3
hereof.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
---------------
for the account of the Companies by the Agent in behalf of the Lenders pursuant
to Section 3 of this Financing Agreement.
REVOLVING LOAN ACCOUNT(S) shall have the meaning specified in Section 3,
-------------------------
Paragraph 6 hereof.
15
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
---------------
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that x) the Agent shall not have, as
the Agent, any money at risk and y) on such Settlement Date the Lenders shall
have a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on which
such Lender and its bank are open for business.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the note
-----------------
evidencing such) which has been subordinated, by a Subordination Agreement, to
the prior payment and satisfaction of the Obligations of the Companies to the
Agent and/or the Lenders (in form and substance satisfactory to the Agent).
SUBORDINATING CREDITOR shall mean Technical Services Partners, L.P. and any
----------------------
other party hereafter executing a Subordination Agreement.
SUBORDINATION AGREEMENT shall mean the agreement among the Companies, a
-----------------------
Subordinating Creditor and the Agent pursuant to which Subordinated Debt is
subordinated to the prior payment and satisfaction of the Companies' Obligations
to the Agent and/or the Lenders (in form and substance satisfactory to the
Agent).
TERM LOAN PROMISSORY NOTE A shall mean the promissory note in the form of
---------------------------
Exhibit B hereto executed by 4MC to evidence Term Loan A made by the Agent in
behalf of the Lenders under Section 4 hereof.
TERM LOAN PROMISSORY NOTE B shall mean the promissory note in the form of
---------------------------
Exhibit C hereto executed by DMC to evidence Term Loan B made by the Agent in
behalf of the Lenders under Section 4 hereof.
TERM LOANS shall mean the term loans to 4MC and DMC in the respective principal
----------
amounts of $13,000,000 and $3,000,000 made by the Agent in behalf of the Lenders
pursuant to, and repayable in accordance with, the provisions of Section 4 of
this Financing Agreement.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
-----------------
GAAP, on a basis consistent with the latest audited statements of the Companies.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of Accounts which arises from
-------------------------
the sale of Inventory or the rendition of services in the ordinary course of the
Companies' business.
16
TRADEMARKS shall mean all present and hereafter acquired trademarks and/or
----------
trademark rights (together with the goodwill associated therewith) and all cash
and non-cash proceeds thereof.
TREASURY RATE shall be the average life U.S. Treasury Securities rate per annum
-------------
equal to the yield to maturity for U.S. Treasury Securities having a remaining
term to maturity closest to the average maturity of the Term Loans (based on the
loan term at the time of request for conversion) as reported on page 5 ("U.S.
Treasury and Money Markets") of the information ordinarily provided by Telerate
Systems Incorporated as of the close of business on the third day prior to the
applicable request for conversion. If more than one (1) such government bond
or note has a maturity date in the same month and term of years from the date
the Treasury Rate is selected (as determined by the Agent), the Agent shall
select the interest rate to be used for purposes of this definition.
TREASURY RATE LOANS shall mean all or any portion of the Term Loan for which the
--------------------
Company has elected to use the Treasury Rate for interest calculations.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to time in
------
the state of California.
WORKING CAPITAL shall mean Current Assets in excess of Current Liabilities.
---------------
SECTION 2. CONDITIONS PRECEDENT
--------------------
The obligation of the Agent and the Lenders to make loans hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such loans, the following conditions precedent:
a) LIEN SEARCHES - The Agent shall have received tax, judgment and
-------------
Uniform Commercial Code searches satisfactory to the Agent for all locations
presently occupied or used by the Companies.
b) CASUALTY INSURANCE - The Companies shall have delivered to the
------------------
Agent evidence satisfactory to the Agent that casualty insurance policies
listing the Agent as loss payee or mortgagee, as the case may be, are in full
force and effect, all as set forth in Section 7, Paragraph 5 of this Financing
Agreement.
c) MORTGAGES/DEEDS OF TRUST - The Companies shall have executed and
------------------------
delivered to either the Agent or an agent of the Agent or of a title insurance
Company acceptable to the Agent such mortgages and deeds of trust as the Agent
may reasonably require to obtain first liens on the Real Estate.
d) UCC FILINGS - Any documents (including without limitation,
-----------
financing statements) required to be filed in order to create, in favor of the
Agent for the benefit of the Lenders, a first and exclusive perfected security
interest in the Collateral with respect to which a security interest may be
perfected by a filing
17
under the U.C.C. shall have been properly filed in each office in each
jurisdiction required in order to create in favor of the Agent a perfected lien
on the Collateral. The Agent shall have received acknowledgement copies of all
such filings (or, in lieu thereof, the Agent shall have received other evidence
satisfactory to the Agent that all such filings have been made); and the Agent
shall have received evidence that all necessary filing fees and all taxes or
other expenses related to such filings have been paid in full.
e) TITLE INSURANCE POLICIES - The Agent shall have received, in
------------------------
respect of each mortgage or deed of trust, a mortgagee's title policy or marked-
up unconditional binder for such insurance. Each such policy shall (i) be in an
amount satisfactory to the Agent; (ii) insure that the mortgage or deed of trust
insured thereby creates a valid first lien on the property covered by such
mortgage or deed of trust, free and clear of all defects and encumbrances except
those acceptable to the Agent; (iii) name the Agent as the insured thereunder;
and (iv) contain such endorsements and effective coverage as the Agent may
reasonably request, including without limitation the revolving line of credit
endorsement. the Agent shall also have received evidence that all premiums in
respect of such policies have been paid and that all charges for mortgage
recording taxes, if any, shall have been paid.
f) SURVEYS - The Agent and the title insurance company issuing each
-------
policy referred to in the immediately preceding paragraph (each, a "Title
-----
Insurance Company") shall have received maps or plats of a perimeter or boundary
----------
of the site of each of the properties covered by the mortgages or deeds of
trust, dated a date satisfactory to the Agent and the relevant Title Insurance
Company prepared by an independent professional licensed land surveyor
satisfactory to the Agent and the relevant Title Insurance Company, which maps
or plats and the surveys on which they are based shall be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the American
Congress on Surveying and Mapping; and, without limiting the generality of the
foregoing, there shall be surveyed and shown on the maps or plats or surveys the
following: (i) the locations on such sites of all the buildings, structures and
other improvements and the established building setback lines insofar as the
foregoing affect the perimeter or boundary of such property; (ii) the lines of
streets abutting the sites and width thereof; (iii) all access and other
easements appurtenant to the sites or necessary or desirable to use the sites;
(iv) all roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the sites, whether recorded,
apparent from a physical inspection of the sites or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is designated as
being on a filed map, a legend relating the survey to said map. Further, the
survey shall x) be certified to the Agent and the Title Insurance Company and y)
contain a legend reciting as to whether or not the site is located in a flood
zone.
18
g) GUARANTIES - The Guarantors shall have executed and delivered to
----------
the Agent guaranties, in form acceptable to the Agent, guaranteeing all present
and future Obligations of the Companies to the Agent and/or the Lenders.
h) OPINIONS - Counsel for the Companies and the Guarantors shall have
--------
delivered to the Agent opinions satisfactory to the Agent opining, inter alia,
that, subject to the i) filing, priority and remedies provisions of the Uniform
Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, iii) the equity powers of a court of law and iv) such other
matters as may be agreed upon with the Agent: (A)(a) this Financing Agreement,
(b) the Guaranty of the Guarantors, and (c) all other loan documents of the
Companies and the Guarantors are x) valid, binding and enforceable according to
their terms, y) are duly authorized and z) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Companies or the
Guarantors or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement or indenture to
which the Companies or the Guarantors is a signatory or by which the Companies
or the Guarantors or their assets are bound; and (B) the Restructuring has been
effected. In addition, counsel for the Subordinating Creditor(s) shall have
delivered an opinion satisfactory to the Agent that the Subordination
Agreement(s) have been duly authorized, executed and delivered and constitute
valid and binding agreements of the Subordinating Creditor(s) enforceable
against such Subordinating Creditor(s) in accordance with the terms thereof.
i) PLEDGE AGREEMENT - Parent shall a) execute and deliver to the
-------------------
Agent for the benefit of the Lenders a pledge and security agreement and stock
powers pledging to the Agent for the benefit of the Lenders as additional
collateral for the Obligations of the Companies all of the issued and
outstanding stock of the Companies and, b) deliver to the Agent for the benefit
of the Lenders the stock certificates evidencing such stock together with duly
executed stock powers with respect thereto.
j) ADDITIONAL DOCUMENTS - The Companies shall have executed and
----------------------
delivered to the Agent all loan documents necessary to consummate the lending
arrangement contemplated between the Companies and the Agent.
k) CAPITAL STRUCTURE - The Agent and the Lenders shall have reviewed
-----------------
and be satisfied with (i) the capital structure (consisting of a cash investment
of equity and Subordinated Debt) of the Companies and (ii) all of the terms,
provisions and conditions thereof.
l) SUBORDINATION AGREEMENT - The Subordinating Creditor shall have
-----------------------
executed and delivered to the Agent a Subordination Agreement, in form and
substance satisfactory to the Agent, subordinating the debt due such
Subordinating Creditor by the Companies to the prior payment and satisfaction of
the Obligations of the Companies to the Agent and/or the Lenders.
m) ENVIRONMENTAL REPORT - The Agent shall have received,
--------------------
environmental audit reports on i) all of the Companies' leasehold and fee
interests, and ii) the Companies' waste disposal practices. The reports must x)
be satisfactory to the
19
Agent and y) not disclose or indicate any liability (real or potential) stemming
from the Companies' premises, operations, waste disposal practices or waste
disposal sites used by Companies'.
n) BOARD RESOLUTION - The Agent shall have received a copy of the
----------------
resolutions of the Board of Directors of the Companies and the Guarantors (as
the case may be) authorizing the execution, delivery and performance of (i) this
Financing Agreement, (ii) the Guaranties and (iii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Companies and
the Guarantors (as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as to the incumbency and signature of the
officers of the Companies and/or the Guarantors executing such agreements and
any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
o) CORPORATE ORGANIZATION - The Agent shall have received (i) a copy
----------------------
of the Certificate of Incorporation of the Companies and the Guarantors
certified by the Secretary of State of its incorporation, and (ii) a copy of the
By-Laws (as amended through the date hereof) of the Companies and the Guarantors
certified by the Secretary or Assistant Secretary thereof.
p) OFFICER'S CERTIFICATE - The Agent shall have received an executed
---------------------
Officer's Certificate of the Companies, satisfactory in form and substance to
the Agent, certifying that (i) the representations and warranties contained
herein are true and correct in all material respects on and as of the date
hereof; (ii) the Companies are in compliance with all of the terms and
provisions set forth herein; and (iii) no Default or Event of Default has
occurred.
q) ABSENCE OF DEFAULT - No Default, Event of Default or material
------------------
adverse change in the financial condition, business, prospects, profits,
operations or assets of the Companies shall have occurred.
r) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this
---------------------------
Financing Agreement, there shall be no x) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against the
Companies or the Guarantors or their assets, by any agency, division or
department of any county, city, state or federal government arising out of the
Restructuring or this Financing Agreement, y) injunction, writ or restraining
order restraining or prohibiting the Restructuring or the consummation of the
financing arrangements contemplated under this Financing Agreement or z) to the
best knowledge of the Companies (except as disclosed to the Agent in writing
prior to the date hereof), suit, action, investigation or proceeding (judicial
or administrative) pending or threatened against the Companies or the Guarantors
or their assets, which, in the opinion of the Agent, if adversely determined
could have a material adverse effect on the business, operation, assets,
financial condition or Collateral of the Companies and/or the Guarantors.
s) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered to
--------------------------
the Agent all information necessary for the Agent to issue wire transfer
instructions on
20
behalf of the Companies for the initial and subsequent loans and/or advances to
be made under this Agreement including, but not limited to, disbursement
authorizations in form acceptable to the Agent.
t) EXAMINATION & VERIFICATION - The Agent shall have completed to
--------------------------
the satisfaction of the Agent an examination and verification of the Accounts,
Inventory, books and records of the Companies and the Guarantors which
examination shall indicate that, after giving effect to all loans, advances and
extensions of credit to be made at closing, the Companies shall have an opening
additional aggregate Availability of $5,000,000 all as more fully required by
the Commitment Letter. It is understood that such requirement contemplates that
all debts, obligations and payables are current.
u) CASH BUDGET PROJECTIONS - The Agent shall have received, reviewed
-----------------------
and be satisfied with a 12 month cash budget projection prepared by the
Companies in the form provided by the Agent.
v) COLLECTION ACCOUNTS - Within 30 days after the date hereof, the
-------------------
Companies shall have established a system of bank accounts with respect to the
collection of Accounts and the deposit of proceeds of Inventory as shall be
acceptable to the Agent in all respects.
w) EXISTING CREDIT AGREEMENTS - The Companies' existing credit
--------------------------
and/or loan agreements with BankAmerica Business Credit, Inc. and The CIT
Group/Equipment Financing, Inc. (other than that certain CITEF loan dated August
1994 in the original principal amount of $619,002.35) shall be (x) terminated,
(y) all loans and obligations of the Companies and/or the Guarantors thereunder
shall be paid or satisfied in full utilizing the proceeds of the initial
Revolving Loans and Term Loans to be made under this Financing Agreement and (z)
all liens upon or security interests in favor of such existing lender in
connection therewith shall be terminated and/or released upon such payment.
x) REPATRIATION - The Agent's receipt of and satisfaction with
------------
verification that funds can be repatriated from 4MC Asia to the Companies in the
United States.
y) COMMITMENT LETTER - The Companies shall have fully complied, to
-----------------
the satisfaction of the Agent, with all of the terms and conditions of the
Commitment Letter.
Upon the execution of this Financing Agreement and the initial disbursement of
loans hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Company and the Agent shall otherwise agree herein or in
a separate writing.
SECTION 3. REVOLVING LOANS
---------------
1. Upon the Agent's receipt of an executed Revolving Loan Promissory
Note from each of the Companies in the form of Exhibit A hereto the Lenders
agree,
21
subject to the terms and conditions of this Financing Agreement from time to
time, and within x) the Availability and y) the Revolving Line of Credit, but
subject to Lenders' right to make "overadvances", to make loans and advances to
each of the Companies on a revolving basis (i.e. subject to the limitations set
forth herein, the Companies may borrow, repay and re-borrow Revolving Loans).
Such loans and advances to each Company shall be in amounts up to the sum of:
a) outstanding Eligible Accounts Receivable of such Company multiplied by the
Accounts Receivable Advance Percentage, plus b) the aggregate value of Eligible
Inventory of such Company as determined at the lower of cost or market
multiplied by the Inventory Advance Percentage. Each request shall constitute,
unless otherwise disclosed in writing to the Agent and the Lenders, a
representation and warranty by the Companies that (i) after giving effect to the
requested advance, no Default or Event of Default has occurred and (ii) such
requested Revolving Loan is within the Line of Credit and Availability. All
requests for loans and advances must be received by an officer of the Agent no
later than 1:00 p.m., New York time, of the day on which such loans and advances
are required. Should the Agent for any reason honor requests for advances in
excess of the limitations set forth herein, such advances shall be considered
"overadvances" and shall be made in the Agent's sole discretion, subject to any
additional terms the Agent deems necessary.
2. In furtherance of the continuing assignment and security interest
in the Companies' Accounts, the Companies will, upon the creation of Accounts,
execute and deliver to the Agent in such form and manner as the Agent may
reasonably require, solely for the Agent's convenience in maintaining records of
collateral, such confirmatory schedules of Accounts as the Agent may reasonably
request, and such other appropriate reports designating, identifying and
describing the Accounts as the Agent may reasonably require. In addition, upon
the Agent's request the Companies shall provide the Agent with copies of
agreements with, or purchase orders from, the Companies' customers, and copies
of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to said Accounts and other collateral as
the Agent may reasonably require. Failure to provide the Agent with any of the
foregoing shall in no way affect, diminish, modify or otherwise limit the
security interests granted herein. The Companies hereby authorize the Agent to
regard the Companies' printed name or rubber stamp signature on assignment
schedules or invoices as the equivalent of a manual signature by one of the
Companies' authorized officers or agents.
3. Each of the Companies hereby represents and warrants that: each
of its Trade Accounts Receivable is based on an actual and bona fide sale and
delivery of goods or rendition of services to customers, made by them in the
ordinary course of their business; the goods and Inventory being sold and the
Trade Accounts Receivable created are their exclusive property and are not and
shall not be subject
22
to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in their name; and their
customers have accepted the goods or services, owe and are obligated to pay the
full amounts stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes and other matters
arising in the ordinary course of business with respect to which they have
complied with the notification requirements of Paragraph 5 of this Section 3.
Each of the Companies confirms to the Agent that any and all taxes or fees
relating to its business, its sales, the Accounts or goods relating thereto, are
its sole responsibility and that same will be paid by them when due and that
none of said taxes or fees represent a lien on or claim against the Accounts.
Each of the Companies also warrants and represents that it is a duly and validly
existing corporation and is qualified in all states where the failure to so
qualify would have an adverse effect on their business or their ability to
enforce collection of Accounts due from customers residing in that state. Each
of the Companies agrees to maintain such books and records regarding Accounts as
the Agent may reasonably require and agrees that such books and records will
reflect the Agent's interest in the Accounts. All of the books and records of
the Companies will be available to the Agent at normal business hours, including
any records handled or maintained for the Companies by any other company or
entity.
4. Until the Agent has advised the Companies to the contrary after
the occurrence of an Event of Default, the Companies may and will enforce,
collect and receive all amounts owing on the Accounts for the Agent's and
Lenders' benefit and on their behalf, but at the Companies' expense; such
privilege shall terminate automatically upon the institution by or against the
Companies of any proceeding under any bankruptcy or insolvency law or, at the
election of the Agent, upon the occurrence of any other Event of Default and
until such Event of Default is waived in writing by the Agent or cured to the
Agent's satisfaction. Any checks, cash, notes or other instruments or property
received by the Companies with respect to any Accounts shall be held by them in
trust for the Agent for the benefit of the Lenders, separate from their own
property and funds, and immediately turned over to the Agent with proper
assignments or endorsements by deposit to the special depository accounts in the
Companies name designated by the Agent for such purposes, which accounts shall
be subject to blocked account agreements (in form and substance satisfactory to
the Agent) with the institutions maintaining such accounts (the "Depository
Accounts"). Each of the institutions holding Depository Accounts will be
instructed to remit such funds on deposit therein to the Companies' operating
accounts, which shall be accounts (other than payroll accounts) with a financial
institution in the United States. Notwithstanding the foregoing or anything to
the contrary contained herein or in any agreement with any institution holding a
Depository Account, immediately upon the occurrence of any of the following
events: (x) the occurrence of a Default and/or Event of Default
23
hereunder, or (y) 4MC has an Availability (computed on the basis of all of its
debts, obligations and payables being current in accordance with its usual
business practices) hereunder of less than $250,000 for three (3) consecutive
Business Days, or (z) DMC has an Availability (computed on the basis of all of
its debts, obligations and payables being current in accordance with its usual
business practices) hereunder of less than $100,000 for three (3) consecutive
Business Days, then the Agent acting on behalf of the Lenders may notify the
institutions holding Depository Accounts to remit all amounts then or thereafter
on deposit in such Depository Accounts to the Agent to be applied by the Agent
to the reduction of the Obligations, all as more fully set forth in Paragraph 6
of this Section 3. The Agent will immediately rescind such instructions (a)
upon the written waiver by the Lenders of any such Default or Event of Default
and (b) when (i) 4MC has an Availability hereunder of $250,000 or more for three
(3) consecutive Business Days and (ii) DMC has an Availability hereunder of
$100,000 or more for three (3) consecutive Business Days. All such amounts
received by the Agent in payment of Accounts will be credited to the Companies'
appropriate Revolving Loan Account upon the Agent's receipt of "collected funds"
at the Agent's bank account in New York, New York on the Business Day of receipt
if received no later than 1:00 pm or on the next succeeding Business Day if
received after 1:00 pm. No checks, drafts or other instrument received by the
Agent shall constitute final payment to the Agent unless and until such
instruments have actually been collected.
5. Each of the Companies agrees to notify the Agent promptly of any
matters materially affecting the value, enforceability or collectibility of any
Account and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. Each
of the Companies agrees to issue credit memoranda promptly (with duplicates to
the Agent upon request after the occurrence of an Event of Default) upon
accepting returns or granting allowances, and may continue to do so until the
Agent has notified the Companies that an Event of Default has occurred and that
all future credits or allowances are to be made only after the Agent's prior
written approval. Upon the occurrence of an Event of Default and until such time
as such Event of Default is waived in writing by the Agent or cured to the
Agent's satisfaction and on notice from the Agent, the Companies agree that all
returned, reclaimed or repossessed merchandise or goods shall be set aside by
the Companies, marked with the Agent's name and held by the Companies for the
Agent's account as owner and assignee.
6. The Agent shall maintain a separate account on its books in each
of the Companies' names (herein each a "Revolving Loan Account" and collectively
the "Revolving Loan Accounts") in which the Companies will be charged with loans
and advances made by the Agent to them or for their account, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which the Agent may incur in connection with the exercise by or for the
Agent of
24
any of the rights or powers herein conferred upon the Agent, or in the
prosecution or defense of any action or proceeding to enforce or protect any
rights of the Agent in connection with this Financing Agreement or the
Collateral assigned hereunder, or any Obligations owing to the Agent and the
Lenders by the Companies. Subject to the provisions of Paragraph 4 of this
Section 3, each of the Companies will be credited with all amounts received by
the Agent and/or the Lenders from them or from others for their account,
including, as above set forth, all amounts received by the Agent in payment of
assigned Accounts and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Companies be a prerequisite to the Agent's right to demand
payment of any Obligation. Further, it is understood that the Agent and/or the
Lenders shall have no obligation whatsoever to perform in any respect any of the
Companies' contracts or obligations relating to the Accounts.
7. After the end of each month, the Agent shall promptly send the
Companies a statement showing the accounting for the charges, loans, advances
and other transactions occurring between the Agent and the Companies during that
month. The monthly statements shall be deemed correct and binding upon the
Companies and shall constitute an account stated between the Companies and the
Agent unless the Agent receives a written statement of the exceptions within
thirty (30) days of the date of the monthly statement.
8. In the event that the sum of (i) the outstanding balance of
Revolving Loans and (ii) outstanding balance of Letters of Credit exceeds (x) as
to any Company the maximum amount thereof available to such Company under
Sections 3 and 5 hereof or (y) for all of the Companies the Line of Credit
(herein the amount of any such excess shall be referred to as the "Excess") such
Excess shall be due and payable to the Agent for the benefit of the Lenders
immediately upon the Agent's demand therefor.
SECTION 4. TERM LOANS AND CAPEX TERM LOANS
-------------------------------
TERM LOAN A
-----------
1. 4MC hereby agrees to execute and deliver to the Agent Term Loan
Promissory Note A, in the form of Exhibit B attached hereto, to evidence Term
Loan A to be extended by the Lenders.
2. Upon receipt of such Term Loan Promissory Note A, the Lenders
hereby agree to extend to 4MC Term Loan A in the principal amount of
$13,000,000.
3. The principal amount of Term Loan A shall be repaid to the Agent
for the benefit of the Lenders by 4MC by: (i) eighty-three (83) equal monthly
principal
25
installments of $155,000 each, followed by ii) one (1) installment of $135,000
whereof the first installment shall be due and payable on November 20, 1997 and
the subsequent installments shall be due and payable on the 20th day of each
month thereafter until paid in full.
26
TERM LOAN B
-----------
4. DMC hereby agrees to execute and deliver to the Agent Term Loan
Promissory Note B, in the form of Exhibit C attached hereto, to evidence Term
Loan B to be extended by the Lenders.
5. Upon receipt of such Term Loan Promissory Note B, the Lenders
hereby agree to extend to DMC Term Loan B in the principal amount of $3,000,000.
6. The principal amount of Term Loan B shall be repaid to the Agent
for the benefit of the Lenders by DMC by: i) eighty-three (83) equal monthly
principal installments of $35,000 each, followed by ii) one (1) installment of
$95,000 whereof the first installment shall be due and payable on November 20,
1997 and the subsequent installments shall be due and payable on the 20th day of
each month thereafter until paid in full.
CAPEX TERM LOANS
----------------
7. Within the available and unused CAPEX Term Loan Line of Credit and
upon receipt of a Promissory Note in the form of Exhibit D attached hereto, from
any of the Companies in the amount of the CAPEX Term Loan, the Lenders will
extend to them a CAPEX Term Loan, provided: a) no Default or Event of Default
has occurred or would occur after giving effect to such CAPEX Term Loan, b) all
of the conditions listed below are fulfilled to the sole but reasonable
satisfaction of the Agent.
8. CAPEX Term Loan proceeds: x) are to be used exclusively to pay
for, or reimburse the Companies for, the acquisition by the Companies of newly
acquired Capital Improvements (other than Real Estate) which are not subject to
Purchase Money Liens; and (y) will be disbursed upon completion of the delivery,
assembly and installation of the capital improvement.
9. The Companies must give the Agent ten (10) Business Days prior
written notice of its intention to enter into a CAPEX Term Loan and draw down
the CAPEX Term Loans no later than the close of business on the date occurring
two (2) years from the date hereof.
10. No CAPEX Term Loan may exceed one hundred percent (100%) of the
total invoiced acquisition costs of the Capital Improvements (other than land)
exclusive of assembly costs, installation expenses, maintenance, shipping costs,
taxes and import or custom charges for which the CAPEX Term Loan is sought.
11. The CAPEX Term Loans must be in initial increments of at least
$500,000.00 and multiples of $100,000.00 thereafter.
27
12. Each CAPEX Term Loan will be repaid to the Agent for the benefit
of the Lenders by the Companies in sixty (60) equal monthly installments of
principal commencing on the first Business Day of the month following the
disbursement of such CAPEX Term Loan and each equal to the amount derived by
dividing such CAPEX Term Loan amount by sixty (60). To the extent repaid, CAPEX
Term Loans may not be reborrowed under this Section 4 of this Financing
Agreement and the CAPEX Term Loan Line of Credit shall be permanently reduced by
the amount of any such repayment(s).
ADDITIONAL PROVISIONS FOR TERM LOANS AND CAPEX TERM LOANS
---------------------------------------------------------
14. In the event this Financing Agreement or the Line of Credit is
terminated by either the Lenders acting through the Agent or the Companies for
any reason whatsoever, the Term Loans and CAPEX Term Loans shall become due and
payable on the effective date of such termination notwithstanding any provision
to the contrary in the Promissory Notes or this Financing Agreement.
15. The Companies may prepay at any time, at its option, in whole or
in part, the Term Loans and/or the CAPEX Term Loans, provided that on each such
prepayment, the Companies shall pay: i) accrued interest on the principal so
prepaid to the date of such prepayment and ii) any amount due under Section 8 as
a result of the prepayment of any Treasury Rate Loan or Libor Loan.
16. Each prepayment shall be applied at Agent's discretion, to the
then last maturing installments of principal of either of the Term Loans and/or
the CAPEX Term Loans.
17. Each of the Companies hereby authorizes the Agent to charge its
Revolving Loan Account with the amount of all amounts due under this Section 4
as such amounts become due. Each of the Companies confirms that any charges
which the Agent may so make to its account as herein provided will be made as an
accommodation to the Companies and solely at the Agent's discretion.
SECTION 5. LETTERS OF CREDIT
-----------------
In order to assist the Companies in establishing or opening Letters of
Credit with an Issuing Bank to cover the purchase of inventory, equipment or
otherwise, the Companies have requested the Agent in behalf of the Lenders to
join in the applications for such Letters of Credit, and/or guarantee payment or
performance of such Letters of Credit and any drafts or acceptances thereunder
through the issuance of the Letters of Credit Guaranty, thereby lending the
Agent's and the Lenders' credit to the Companies and the Agent and the Lenders
have agreed to do
28
so. These arrangements shall be handled by the Agent subject to the terms and
conditions set forth below.
1. Within the Line of Credit and Availability, the Agent and the
Lenders shall assist the Companies in obtaining Letter(s) of Credit in an amount
not to exceed the Letter of Credit Sub-Line in the aggregate outstanding at any
one time. The Agent's and Lenders' assistance for amounts in excess of the
limitation set forth herein shall at all times and in all respects be in the
Agent's sole discretion. It is understood that the form and purpose of each
Letter of Credit must be acceptable to the Agent in its reasonable business
judgment. Any and all outstanding Letters of Credit shall be treated as a
Revolving Loan for Availability purpose. Notwithstanding anything herein to the
contrary, upon the occurrence of a Default and/or Event of Default, the Agent's
assistance in connection with the Letter of Credit Guaranty shall be in the
Agent's sole discretion unless such Default and/or Event of Default is cured to
the Agent's satisfaction or waived by the Agent in writing.
2. The Agent shall have the right, without notice to the Companies,
to charge the Companies' Revolving Loan Accounts on the Agent's books with the
amount of any and all indebtedness, liability or obligation of any kind incurred
by the Agent under the Letters of Credit Guaranty at the earlier of a) payment
by the Agent under the Letters of Credit Guaranty, or b) the occurrence of an
Event of Default. Any amount charged to Companies' Revolving Loan Accounts
shall be deemed a Revolving Loan hereunder and shall incur interest at the rate
provided in Section 8, Paragraph 1 of this Financing Agreement.
3. Each of the Companies jointly and severally unconditionally
indemnifies the Agent and the Lenders and holds the Agent and the Lenders
harmless from any and all loss, claim or liability incurred by the Agent and/or
the Lenders arising from any transactions or occurrences relating to Letters of
Credit established or opened for the Companies' account, the collateral relating
thereto and any drafts or acceptances thereunder, and all Obligations
thereunder, including any such loss or claim due to any action taken by any
Issuing Bank, other than for any such loss, claim or liability arising out of
the gross negligence or willful misconduct by the Agent and/or the Lenders under
the Letters of Credit Guaranty. Each of the Companies further agrees to jointly
and severally hold the Agent and the Lenders harmless from any errors or
omission, negligence or misconduct by the Issuing Bank. The Companies'
unconditional obligation to the Agent and the Lenders hereunder shall not be
modified or diminished for any reason or in any manner whatsoever, other than as
a result of the Agent's gross negligence or willful misconduct. Each of the
Companies agrees that any charges incurred by the Agent and/or the Lenders for
their account by the Issuing Bank shall be conclusive on the Agent and the
Lenders and may be charged to their Revolving Loan Accounts.
29
4. The Agent and/or the Lenders shall not be responsible for: the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipment, or failure or omission to ship
any or all of the goods referred to in the Letters of Credit or documents; any
deviation from instructions; delay, default, or fraud by the shipper and/or
anyone else in connection with the Collateral or the shipping thereof; or any
breach of contract between the shipper or vendors and the Companies.
Furthermore, without being limited by the foregoing, the Agent and/or the
Lenders shall not be responsible for any act or omission with respect to or in
connection with any Collateral.
5. Each of the Companies agrees that any action taken by the Agent
and/or the Lenders, if taken in good faith, or any action taken by any Issuing
Bank, under or in connection with the Letters of Credit, the guarantees, the
drafts or acceptances, or the Collateral, shall be binding on the them and shall
not put the Agent and/or the Lenders in any resulting liability to the
Companies. In furtherance thereof, the Agent shall have the full right and
authority to clear and resolve any questions of non-compliance of documents; to
give any instructions as to acceptance or rejection of any documents or goods;
to execute any and all steamship or airways guaranties (and applications
therefore), indemnities or delivery orders; to grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents; and to agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; all in the
Agent's sole name, and the Issuing Bank shall be entitled to comply with and
honor any and all such documents or instruments executed by or received solely
from the Agent, all without any notice to or any consent from the Companies.
6. Without the Agent's express consent and endorsement in writing,
each of the Companies agrees: a) not to execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
and b) after the occurrence of an Event of Default which is not cured within any
applicable grace period, if any, or waived by the Agent, not to i) clear and
resolve any questions of
30
non-compliance of documents, or ii) give any instructions as to acceptances or
rejection of any documents or goods.
7. Each of the Companies agrees that any necessary import, export or
other licenses or certificates for the import or handling of the Collateral will
have been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and full complied with; and any
certificates in that regard that the Agent may at any time request will be
promptly furnished. In this connection, each of the Companies warrants and
represents that all shipments made under any such Letters of Credit are in
accordance with the laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such laws and
regulations. The Companies assume all risk, liability and responsibility for,
and agrees to pay and discharge, all present and future local, state, federal or
foreign taxes, duties, or levies. Any embargo, restriction, laws, customs or
regulations of any country, state, city, or other political subdivision, where
the Collateral is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely the
Companies' risk, liability and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, the Agent for the benefit of the Lenders shall acquire by
subrogation, any rights, remedies, duties or obligations granted or undertaken
by the Companies to the Issuing Bank in any application for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent and apply in all respects to
the Agent for the benefit of the Lenders and shall be in addition to any rights,
remedies, duties or obligations contained herein.
SECTION 6. COLLATERAL
----------
1. As security for the prompt payment in full of all loans and
advances made and to be made to the Companies from time to time by the Agent
and/or the Lenders pursuant hereto, as well as to secure the payment in full of
the other Obligations, each of the Companies hereby pledges and grants to the
Agent for the benefit of the Lenders a continuing general lien upon and security
interest in all of its:
(a) present and hereafter acquired Inventory;
(b) present and hereafter acquired Equipment;
(c) present and future Accounts;
31
(d) present and future Documents of Title;
(e) present and future General Intangibles;
(f) Real Estate; and
(g) present and future Other Collateral; provided that the specific
items of Equipment which are subject to filed financing statements
constituting Permitted Encumbrances hereunder shall be excluded from
Collateral hereunder (the "Excluded Collateral") so long as the
granting of a junior lien thereon would constitute a breach of or
default under the Companies' agreement(s) with the secured party/lessor
named in any such financing statement but only until the earlier of (x)
payment of all of the Companies' obligations to such secured
party/lessor or (y) termination and/or release of such financing
statement. Upon the occurrence of either of such events said Excluded
Collateral shall automatically and without any further act or agreement
of the Companies or the Agent (A) become part of the Collateral, (B) be
subject to the security interest granted in favor of the Agent for the
benefit of the Lenders hereunder and (C) constitute Collateral
hereunder for all purposes of this Financing Agreement.
2. The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is presently in existence and which is owned
by the Companies or in which the Companies have any interest, whether held by
them or others for their account, and, if any Collateral is Equipment, whether
the Companies' interest in such Equipment is as owner or lessee or conditional
vendee;
(b) All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Companies from the
Companies' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Companies, or to the sale, promotion
or shipment thereof.
3. The Companies agree to safeguard, protect and hold all Inventory
for the Agent's account and make no disposition thereof except in the regular
course of the business of the Companies as herein provided. Until the Agent has
given the
32
Companies notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Companies to their customers in the ordinary course of
their business, on open account and on terms currently being extended by them to
their customers, provided that all proceeds of all sales (including cash,
accounts receivable, checks, notes, instruments for the payment of money and
similar proceeds) are forthwith transferred, endorsed, and turned over and
delivered to the Agent for the benefit of the Lenders in accordance with Section
3, Paragraph 4 of this Financing Agreement. The Agent shall have the right to
withdraw this permission at any time upon the occurrence of an Event of Default
and until such time as such Event of Default is waived in writing by the Agent
or cured to the Agent's satisfaction, in which event no further disposition
shall be made of the Inventory by the Companies without the Agent's prior
written approval. Cash sales or sales of inventory in which a lien upon, or
security interest in, Inventory is retained by the Companies shall be made by
the Companies only with the approval of the Agent, and the proceeds of such
sales or sales of Inventory for cash shall not be commingled with the Companies'
other property, but shall be segregated, held by the Companies in trust for the
Agent for the benefit of the Lenders as the Agent's exclusive property, and
shall be delivered immediately by the Companies to the Agent in the identical
form received by the Companies by deposit to the Depository Accounts. Upon the
sale, exchange, or other disposition of Inventory, as herein provided, the
security interest in the Companies' Inventory provided for herein shall, without
break in continuity and without further formality or act, continue in, and
attach to, all proceeds, including any instruments for the payment of money,
accounts receivable, contract rights, documents of title, shipping documents,
chattel paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, the Agent
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding the foregoing the
Companies may make cash sales of Inventory, provided that (i) the aggregate
amount thereof for the Companies during any fiscal year does not exceed
$100,000.00 for such fiscal year and (ii) the proceeds of such sales are turned
over to the Agent by deposit in the Depository Accounts.
4. Each of the Companies agrees at its own cost and expense to keep
the Equipment in as good and substantial repair and condition as the same is now
or at the time the lien and security interest granted herein shall attach
thereto, reasonable wear and tear excepted, making any and all repairs and
replacements when and where necessary. Each of the Companies also agrees to
safeguard, protect and hold all Equipment for the Agent's account and make no
disposition thereof unless they first obtain the prior written approval of the
Agent. Any sale, exchange or other disposition of any Equipment shall only be
made by the Companies with the prior written approval of the Agent, and the
proceeds of any such sales shall not be commingled with the Companies' other
property, but shall be segregated, held by the Companies in trust for the Agent
for the benefit of the
33
Lenders as the Agent's exclusive property, and shall be delivered immediately by
the Companies to the Agent in the identical form received by the Companies by
deposit to the Depository Accounts. Upon the sale, exchange, or other
disposition of the Equipment, as herein provided, the security interest provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sales, exchange or disposition. As to any such sale, exchange or other
disposition, the Agent shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation.
Notwithstanding anything hereinabove contained to the contrary, the Companies
may sell, exchange or otherwise dispose of obsolete Equipment or Equipment no
longer needed in the Companies' operations, provided, however, that (a) the then
book value of the Equipment so disposed of does not exceed $100,000.00 in the
aggregate for the Companies in any fiscal year and (b) the proceeds of such
sales or dispositions in excess of $50,000 are delivered to the Agent in
accordance with the foregoing provisions of this paragraph, except that the
Companies may retain and use such proceeds to purchase forthwith replacement
Equipment which the Companies determine in their reasonable business judgment to
have a collateral value at least equal to the Equipment so disposed of or sold,
provided, however, that the aforesaid right shall automatically cease upon the
occurrence of an Event of Default which is not cured within any applicable grace
period or waived.
5. The rights and security interests granted to the Agent for the
benefit of the Lenders hereunder are to continue in full force and effect,
notwithstanding the termination of this Financing Agreement or the fact that any
account maintained in the Companies' name on the books of the Agent may from
time to time be temporarily in a credit position, until the final payment in
full to the Agent and the Lenders of all Obligations and the termination of this
Financing Agreement. Any delay, or omission by the Agent and/or the Lenders to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by the
Agent. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion.
6. To the extent that the Obligations are now or hereafter secured by
any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, then the Agent shall have
the right in its sole discretion to determine which rights, security, liens,
security interests or remedies the Agent shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
Lenders' rights hereunder.
34
7. Any reserves or balances to the credit of the Companies and any
other property or assets of the Companies in the possession of the Agent and/or
the Lenders may be held by the Agent as security for any Obligations and applied
in whole or partial satisfaction of such Obligations when due. The liens and
security interests granted herein and any other lien or security interest the
Agent may have in any other assets of the Companies, shall secure payment and
performance of all now existing and future Obligations. The Agent may in its
discretion charge any or all of the Obligations to the Revolving Loan Accounts
of the Companies when due.
8. This Financing Agreement and the obligation of the Companies to
perform all of its covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate.
9. The Companies shall give to the Agent for the benefit of the
Lenders from time to time such mortgage(s), deed(s) of trust or assignment(s) on
the Real Estate or real estate acquired after the date hereof as the Agent shall
require to obtain a valid first lien thereon subject only to those exceptions of
title as set forth in future title insurance policies that are satisfactory to
the Agent.
10. The Companies shall give to the Agent for the benefit of the
Lenders, and/or shall cause the appropriate party to give to the Agent for the
benefit of the Lenders, from time to time such pledge or security agreements
with respect to General Intangibles and capital stock of the Companies and any
and all of their subsidiaries as the Agent shall require to obtain valid first
liens thereon.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
1. Each of the Companies hereby warrants and represents and/or
covenants that: i) the book value of its assets exceeds the book value of its
liabilities; ii) it is generally able to pay its debts as they become due and
payable; and iii) it does not have unreasonably small capital to carry on its
business as it is currently conducted absent extraordinary and unforeseen
circumstances. Each of the Companies further warrants and represents that
Schedule 2 hereto correctly and completely sets forth its chief executive office
and all of its Collateral locations; and except for the Permitted Encumbrances,
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral; that, except for the
Permitted Encumbrances, the Companies are or will be at the time additional
Collateral is acquired by them, the absolute owner of the Collateral with full
right to pledge, sell, consign, transfer and create a security interest therein,
free and clear of any and all claims or liens in favor of others; that the
Companies will at their expense forever warrant and, at the Agent's request,
defend the same from any and all claims and demands of any other person other
than the Permitted Encumbrances; that the Companies will not grant, create or
permit to exist, any lien upon or security interest in the Collateral, or any
proceeds thereof, in favor of
35
any other person other than the holders of the Permitted Encumbrances; and that
the Equipment does not comprise a part of its Inventory and that the Equipment
is and will only be used by the Companies in their business and will not be held
for sale or lease, or removed from its premises, or otherwise disposed of by the
Companies without the prior written approval of the Agent except as otherwise
permitted in Section 6, Paragraph 4 of this Financing Agreement.
2. The Companies agree to maintain books and records pertaining to
the Collateral in such detail, form and scope as the Agent shall reasonably
require. The Companies agree that the Agent or its agents may enter upon the
Companies' premises at any time during normal business hours, and from time to
time, for the purpose of inspecting the Collateral, and any and all records
pertaining thereto. The Companies agree to afford the Agent prior written notice
of any change in the location of any Collateral, other than to locations, that
as of the date hereof, are known to the Agent and at which the Agent has filed
financing statements and otherwise fully perfected its liens thereon. Each of
the Companies is also to advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or on the security interests granted to the Agent therein.
3. Each of the Companies agrees to: execute and deliver to the
Agent, from time to time, solely for the Agent's convenience in maintaining a
record of the Collateral, such written statements, and schedules as the Agent
may reasonably require, designating, identifying or describing the Collateral
pledged to the Agent hereunder. The Companies' failure, however, to promptly
give the Agent such statements, or schedules shall not affect, diminish, modify
or otherwise limit the Agent's security interests in the Collateral.
4. The Companies agree to comply with the requirements of all state
and federal laws in order to grant to the Agent valid and perfected first
security interests in the Collateral, subject only to the Permitted
Encumbrances. The Agent is hereby authorized by the Companies to file any
financing statements covering the Collateral whether or not the Companies'
signature appears thereon. The Companies agree to do whatever the Agent may
reasonably request, from time to time, by way of: filing notices of liens,
financing statements, amendments, renewals and continuations thereof;
cooperating with the Agent's custodians; keeping stock records; transferring
proceeds of Collateral to the Agent's possession; and performing such further
acts as the Agent may reasonably require in order to effect the purposes of this
Financing Agreement.
5.(a) The Companies agree to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to the Agent. All policies covering the
Real Estate,
36
Equipment and Inventory are, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to the Agent, to be made payable to the Agent
for the benefit of the Lenders, in case of loss, under a standard non-
contributory "mortgagee", "lender" or "secured party" clause and are to contain
such other provisions as the Agent may require to fully protect the Agent's
interest in the Real Estate, Inventory and Equipment and to any payments to be
made under such policies. All original policies or true copies thereof are to
be delivered to the Agent, premium prepaid, with the loss payable endorsement in
the Agent's favor, and shall provide for not less than thirty (30) days prior
written notice to the Agent of the exercise of any right of cancellation. At
the Companies' request, or if the Companies fail to maintain such insurance, the
Agent may arrange for such insurance, but at the Companies' expense and without
any responsibility on the Agent's part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence of an Event of Default which is not
waived or cured to the Agent's satisfaction, the Agent shall, subject to the
rights of any holders of Permitted Encumbrances holding claims senior to the
Agent, have the sole right, in the name of the Agent or the Companies, to file
claims under any insurance policies, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
(b)(i) In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory of any Company shall reduce such
Company's Revolving Loans.
ii) In the event any part of a Company's Real Estate or Equipment is
damaged by fire or other casualty and the insurance proceeds for such damage or
other casualty (the "Proceeds") is less than or equal to $100,000.00, the Agent
shall promptly apply such Proceeds to reduce such Company's outstanding balance
in its Revolving Loan Account.
iii) As long as an Event of Default has not occurred (which is not
cured to the Agent's satisfaction), the Companies' have sufficient business
interruption insurance to replace the lost profits of any of the Companies'
facilities, and the Proceeds are in excess of $100,000.00, such Company may
elect (by delivering written notice to the Agent) to replace, repair or restore
such Real Estate or Equipment to substantially the equivalent condition prior to
such fire or other casualty as set forth herein. If the Companies do not, or
cannot, elect to use the Proceeds as set forth above, the Agent may, subject to
the rights of any holders of Permitted Encumbrances holding claims senior to the
Agent, apply the Proceeds to
37
the payment of the Obligations in such manner and in such order as the Agent may
reasonably elect.
iv) If a Company elects to use the Proceeds for the repair,
replacement or restoration of any Real Estate and/or Equipment, and there is
then no Event of Default, i) proceeds of insurance on Real Estate and/or
Equipment in excess of $100,000.00 will be applied to the reduction of the
Revolving Loans of such Company and ii) the Agent may set up a reserve against
Availability for an amount equal to the proceeds referred to in clause i)
hereof. The reserve will be reduced dollar-for-dollar upon receipt of non-
cancelable executed purchase orders, delivery receipts or contracts for the
replacement, repair or restoration of Real Estate and/or Equipment and
disbursements in connection therewith. Prior to the commencement of any
restoration, repair or replacement of Real Estate, the Companies shall provide
the Agent with a restoration plan and a total budget certified by an independent
third party experienced in construction costing. If there are insufficient
Proceeds to cover the cost of restoration as so determined, the Companies shall
be responsible for the amount of any such insufficiency, prior to the
commencement of restoration and shall demonstrate evidence of such before the
reserve will be reduced. Completion of restoration shall be evidenced by a
final, unqualified certification of the design architect employed, if any; an
unconditional Certificate of Occupancy, if applicable; such other certification
as may be required by law; or if none of the above is applicable, a written good
faith determination of completion by the Companies (herein collectively the
"Completion"). Upon Completion, any remaining reserve as established hereunder
will be automatically released.
(v) The Companies agree to pay any reasonable costs, fees or expenses
which the Agent may reasonably incur in connection herewith.
6. Each of the Companies agrees to pay, when due, all taxes,
assessments, claims and other charges (herein "taxes") lawfully levied or
assessed upon the Companies or the Collateral and if such taxes remain unpaid
after the date fixed for the payment thereof unless such taxes are being
diligently contested in good faith by the Companies by appropriate proceedings
or if any lien shall be claimed thereunder x) for taxes due the United States of
America or y) which in the Agent's opinion might create a valid obligation
having priority over the rights granted to the Agent herein, the Agent may, on
the Companies' behalf, pay such taxes, and the amount thereof shall be an
Obligation secured hereby and due to the Agent on demand.
7. Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
the Companies'
38
business; provided that the Companies may contest any acts, rules, regulations,
orders and directions of such bodies or officials in any reasonable manner which
will not, in the Agent's reasonable opinion, materially and adversely effect the
Agent's rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the ownership and/or use
of its real property and operation of its business, which the failure to comply
with would have a material and adverse impact on the Collateral, or any material
part thereof, or on the operation of the business of the Companies. Each of the
Companies hereby jointly and severally indemnifies the Agent and the Lenders and
agrees to defend and hold the Agent and the Lenders harmless from and against
any and all loss, damage, claim, liability, injury or expense which the Agent
and/or the Lenders may sustain or incur (other than as a result of actions of
the Agent and/or the Lenders) in connection with: any claim or expense asserted
against the Agent and/or the Lenders as a result of any environmental
pollution, hazardous material or environmental clean-up of the Companies' real
property; or any claim or expense which results from the Companies' operations
(including, but not limited to, the Companies' off-site disposal practices) and
the Companies further agree that this indemnification shall survive termination
of this Financing Agreement as well as the payment of all Obligations or amounts
payable hereunder; and (c) shall not be deemed to have breached any provision of
this Paragraph 7 if (i) the failure to comply with the requirements of this
Paragraph 7 resulted from good faith error or innocent omission, (ii) the
Companies promptly commence and diligently pursues a cure of such breach and
(iii) such failure is cured within fifteen (15) business days following the
Companies' receipt of notice of such failure.
8. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
the Agent shall have otherwise consented in writing, the Companies will furnish
to the Agent and each Lender, within ninety (90) days after the end of each
fiscal year of the Companies, an audited Consolidated Balance Sheet and an
audited Consolidating Balance Sheet as at the close of such year, and statements
of profit and loss, cash flow and reconciliation of surplus of Parent, the
Companies and all subsidiaries of each for such year, audited by independent
public accountants selected by the Companies and satisfactory to the Agent;
within sixty (60) days after the end of each fiscal quarter a Consolidated
Balance Sheet and Consolidating Balance Sheet as at the end of such period and
statements of profit and loss, cash flow and surplus of Parent, the Companies
and all subsidiaries of each, certified by an authorized financial or accounting
officer of the Companies; and within thirty (30) days after the end of each
month a Consolidated Balance Sheet as at the end of such period and statements
of profit and loss, cash flow and surplus of the Companies and all subsidiaries
for such period, certified by an authorized financial or accounting officer of
the Companies; and from time to time, such further information regarding the
business affairs and financial condition of the Parent, the
39
Companies and any subsidiaries thereof as the Agent may reasonably request,
including without limitation (a) the accountant's management practice letter and
(b) annual cash flow projections in form satisfactory to the Agent. Each
financial statement which the Companies are required to submit hereunder must be
accompanied by an officer's certificate, signed by the President, Vice
President, Controller, or Treasurer, pursuant to which any one such officer must
certify that: (i) the financial statement(s) fairly and accurately represent(s)
the Companies' financial condition at the end of the particular accounting
period, as well as the Companies' operating results during such accounting
period, subject to year-end audit adjustments; (ii) during the particular
accounting period: (x) there has been no Default or Event of Default under this
Financing Agreement, provided, however, that if any such officer has knowledge
------------------
that any such Default or Event of Default, has occurred during such period, the
existence of and a detailed description of same shall be set forth in such
officer's certificate; and (y) the Companies have not received any notice of
cancellation with respect to its property insurance policies; and (iii) the
exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
9. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, without
the prior written consent of the Agent, except as otherwise herein provided, the
Companies will not:
A. Mortgage, assign, pledge, transfer or otherwise permit any lien,
charge, security interest, encumbrance or judgment, (whether as a
result of a purchase money or title retention transaction, or
other security interest, or otherwise) to exist on any of its
assets or goods, whether real, personal or mixed, whether now
owned or hereafter acquired, except for the Permitted
Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Borrow any money on the security of the Collateral from sources
other than the Agent and the Lenders;
D. Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or ii) either all or substantially all of
their assets, which do not constitute Collateral;
E. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or
existence, or enter into or engage in any operation or activity
materially different from that presently being conducted by the
Companies, except that the Companies may (i) merge with each
other and/or (ii) change their corporate name or address;
provided that in any instance under
40
clauses (i) and (ii) (x) the Companies shall give the Agent
thirty (30) days prior written notice thereof and (y) the
Companies shall execute and deliver prior to or simultaneously
with any such action any and all documents and agreements
requested by the Agent (including, without limitation, any and
all U.C.C. financing statements) to confirm (A) the assumption by
the surviving corporation of all Obligations to the Agent and the
Lenders of the other Company so merged, (B) the continuation and
preservation of all security interests and liens granted to the
Agent hereunder and (C) that such surviving corporation adopts,
ratifies and confirms its agreement to be bound by and comply
with this Financing Agreement;
F. Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any person, firm, entity or corporation, except by
the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business;
G. Declare or pay any dividend of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or equity interest, of
any class whatsoever, whether now or hereafter outstanding,
except that the Companies may declare and pay dividends on their
capital stock in an amount sufficient to enable the Parent to a)
redeem the capital stock owned by its retired, deceased or
terminated officers or shareholders which the Parent is
contractually obligated to redeem, provided that in no event
shall the aggregate amount of such dividend under this clause (a)
exceed $100,000.00 in the aggregate in any fiscal year; and b)
pay income or franchise taxes of the Companies due as a result of
the filing of a consolidated, combined or unitary tax return in
which the operations of the Companies are included, provided
that, in any instance under this paragraph G, after giving effect
to such payment, no Default or Event of Default has occurred
hereunder;
H. Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, except loans and advances (i) by
and among the Companies not to exceed $1,000,000.00 in the
aggregate above the outstanding amount of intercompany loans and
advances as shown on the Companies' financial statements as of
August 4, 1996, at any time outstanding and (ii) by the Companies
to 4MC Asia not to exceed $250,000 in the aggregate any time
outstanding above the outstanding amount of loans and advances
made to 4MC Asia by 4MC as of August 4, 1996; or
I. Pay management, consulting or other similar fees to Steinhardt
Group, the Parent or any person, corporation or other entity
affiliated with the Companies.
41
10. Until termination of this Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Companies shall:
(a) (i) maintain at all times, tested at the end of each fiscal
quarter, a consolidated Net Worth of the Companies and 4MC Asia of not
less than $19,000,000, (ii) with respect to 4MC, maintain at all times,
tested at the end of each fiscal quarter, a Net Worth of 4MC of not
less than $16,500,000, and (iii) with respect to DMC, maintain at all
times, tested at the end of each fiscal quarter, a Net Worth of DMC of
not less than $2,500,000; and
(b) maintain at all times, tested at the end of each fiscal quarter, a
consolidated Working Capital of the Companies and 4MC Asia of not less
than $5,000,000; and
(c) maintain at the end of each of the periods set forth below
(calculated for such period) a consolidated Fixed Charge Coverage Ratio
of the Companies and 4MC Asia of not less than the ratio set forth below
for the applicable period:
PERIOD RATIO
------ -----
For the fiscal quarter ended
October 31, 1996, 0.5 to 1.0
For the two consecutive fiscal quarters
ended January 31, 1997 0.5 to 1.0
For the three consecutive fiscal quarters
ended April 30, 1997 0.9 to 1.0
For the four consecutive fiscal quarters
ended July 31, 1997 0.9 to 1.0
For all four consecutive fiscal quarters
thereafter 0.9 to 1.0; and
(d) maintain at the end of each fiscal quarter a consolidated Leverage
Ratio of the Companies and 4MC Asia of no more than 3.75 to 1.
11. Without the prior written consent of the Agent, the Companies will not:
42
a) enter into any Operating Lease if after giving effect thereto the
aggregate obligations with respect to Operating Leases of the Companies
during any fiscal year would exceed $6,000,000; or
b) contract for, purchase, make expenditures for, lease pursuant to a
Capital Lease or otherwise incur obligations with respect to Capital
Expenditures (whether subject to a security interest or otherwise) during
any period below in the aggregate amount for the Companies in excess of the
amount set forth for said period:
i) $13,000,000 for the fiscal quarter ending October 31, 1996;
ii) $17,000,000 for the two consecutive quarters ending January 31, 1997;
iii) $20,000,000 for the three consecutive fiscal quarters ending April 30,
1997;
iv) $20,000,000 for the four consecutive fiscal quarters ending July 31,
1997, and for each consecutive four quarter period thereafter; or
c) contract for, purchase, make expenditures for, lease pursuant to a
Capital Lease or otherwise incur obligations with respect to Net Capital
Expenditures (whether subject to a security interest or otherwise) during
any period below in the aggregate amount for the Companies in excess of the
amount set forth for said period:
i) $4,500,000 for the fiscal quarter ending October 31, 1996;
ii) $8,250,000 for the two consecutive quarters ending January 31, 1997;
iii) $8,250,000 for the three consecutive fiscal quarters ending April 30,
1997;
iv) $8,250,000 for the four consecutive fiscal quarters ending July 31,
1997, and for each consecutive four quarter period thereafter; or
d) contract for, purchase, make expenditures for, lease pursuant to a
Capital Lease or otherwise incur obligations with respect to Net Capital
Expenditures for each year this Financing Agreement continues in effect in
the aggregate amount for the Companies less than the difference between (i)
$4,000,000 and (ii) the aggregate principal
43
amount the Companies have repaid on the Term Loans during such year.
12. The Companies agree to advise the Agent in writing of: a) all
expenditures (actual or anticipated) in excess of $150,000.00 for x)
environmental clean-up, y) environmental compliance or z) environmental testing
and the impact of said expenses on the Companies' Working Capital; and b) any
notices the Companies receive from any local, state or federal authority
advising the Companies of any environmental liability (real or potential)
stemming from the Companies' operations, premises, waste disposal practices, or
waste disposal sites used by the Companies and to provide the Agent with copies
of all such notices if so required.
13. Without the prior written consent of the Agent, the Companies agree
that they will not enter into any transaction, including, without limitation,
any purchase, sale, lease, loan or exchange of property with the Parent, any of
the Companies or any subsidiary or affiliate of either the Companies or Parent,
except (i) as otherwise permitted in this Financing Agreement, and (ii) that the
Companies may purchase certain goods for 4MC Asia not to exceed $50,000 during
any month, provided that (x) the outstanding unpaid balance thereof together
with all other amounts owing to the Companies from 4MC Asia does not exceed the
maximum amount of permitted intercompany advances by the Companies to 4MC Asia
pursuant to Paragraph 9(H) of this Section 7 and (y) all such transactions under
this clause (ii) shall be on terms no less favorable to the Companies than would
be obtained in an arms length transaction with an unrelated third party.
SECTION 8. INTEREST, FEES AND EXPENSES
---------------------------
1. Interest on the Revolving Loan(s) shall be payable monthly as of the
end of each month and shall be an amount equal to (a) one half of one percent
(1/2 of 1%) plus the Chase Manhattan Bank Rate per annum on the average of the
net balances owing by the Companies to the Agent in the Companies' Revolving
Loan Account(s) at the close of each day during such month on balances other
than Libor Loans and (b) two and one-half percent (2 1/2%) plus the applicable
Libor on any Libor Loan, on a per annum basis, on the average of the net
balances owing by the Companies to the Agent and/or the Lenders in the
Companies' Revolving Loan Account(s) at the close of each day during such month.
In the event of any change in said Chase Manhattan Bank Rate, the rate under
clause (a) above shall change, as of the first of the month following any
change, so as to remain one half of one percent (1/2 of 1%) above the Chase
Manhattan Bank Rate. The rate hereunder shall be calculated based on a 360-day
year. The Agent and the Lenders shall be entitled to charge the Companies'
Revolving Loan Account(s) at the rate provided for herein when due until all
Obligations have been paid in full.
44
2. Interest on the Term Loan A shall be payable monthly as of the end of
each month on the unpaid balance or on payment in full prior to maturity in an
amount equal to (a) three quarters of one percent (3/4 of 1%) plus the Chase
Manhattan Bank Rate per annum on balances other than Libor Loans and (b) two and
three quarters percent (2 3/4%) plus the applicable Libor on any Libor Loan, on
a per annum basis, on the average of the net balance of Term Loan A owing by 4MC
to the Agent and/or the Lenders at the close of each day during such month. In
the event of any change in said Chase Manhattan Bank Rate, the rate under clause
(a) above shall change, as of the first of the month following any change, so as
to remain three quarters of one percent (3/4 of 1%) above the Chase Manhattan
Bank Rate. The rate hereunder shall be calculated based on a 360 day year. The
Agent and the Lenders shall be entitled to charge the Companies' Revolving Loan
Account(s) at the rate provided for herein when due until all Obligations have
been paid in full.
3. Interest on the Term Loan B shall be payable monthly as of the end of
each month on the unpaid balance or on payment in full prior to maturity in an
amount equal to (a) three quarters of one percent (3/4 of 1%) plus the Chase
Manhattan Bank Rate per annum on balances other than Libor Loans and (b) two and
three quarters percent (2 3/4%) plus the applicable Libor on any Libor Loan, on
a per annum basis, on the average of the net balance of Term Loan B owing by DMC
to the Agent and/or the Lenders at the close of each day during such month. In
the event of any change in said Chase Manhattan Bank Rate, the rate under clause
(a) above shall change, as of the first of the month following any change, so
as to remain three quarters of one percent (3/4 of 1%) above the Chase Manhattan
Bank Rate. The rate hereunder shall be calculated based on a 360 day year. The
Agent and the Lenders shall be entitled to charge the Companies' Revolving Loan
Account(s) at the rate provided for herein when due until all Obligations have
been paid in full.
4. At the Companies option, to be exercised at any time prior to the
expiration of one (1) year from the Closing Date, so long as no Default and/or
Event of Default has occurred hereunder, upon three (3) Business Days prior to
written notice to the Agent interest on the Term Loan shall be payable monthly
as of the end of each month on the unpaid balance or on payment in full prior to
maturity at a fixed rate of interest in an amount equal to 3.35% plus the
Treasury Rate on a per annum basis, on the average of the net balance of the
Term Loan owing by the Company to the Agent and/or the Lenders at the close of
each day during such month. The rate hereunder shall be calculated based on a
360 day year. The Agent and the Lenders shall be entitled to charge the
Company's Revolving Loan Account at the rate provided for herein when due until
all Obligations have been paid in full. In addition, the Companies hereby
jointly and severally indemnify and shall pay to the Agent for the benefit of
the Lenders, upon the request of the Agent such amount or amounts as shall
compensate the Agent
45
and/or the Lenders for any actual loss, costs or expenses incurred by the Agent
and/or the Lenders (as reasonably determined by the Agent and the Lenders) as a
result of: (i) any payment or prepayment on a date other than a scheduled
payment date for any such Treasury Rate Loan, or (ii) any failure of the
Companies to borrow a Treasury Rate Loan on the date for such borrowing
specified in the relevant notice; such compensation to include, without
limitation, an amount equal to any loss or expenses suffered by the Agent and/or
the Lenders during the period from the date of receipt of such payment or
prepayment or the date of such failure to borrow to the scheduled payment
date(s) of such Treasury Rate Loans if the rate of interest obtained by the
Agent and/or the Lenders upon the reemployment of an amount of funds equal to
the amount of such payment, prepayment or failure to borrow is less than the
rate of interest applicable to such Treasury Rate. The determination by the
Agent and/or the Lenders of the amount of any such loss or expense, when set
forth in a written notice to the Companies, containing the Agent's and/or the
Lenders' calculations thereof in reasonable detail, such be conclusive on the
Companies, in the absence of manifest error. Calculation of all amounts payable
to the Agent and/or the Lenders under this paragraph with regard to Treasury
Rate Loans shall be made as though the Agent and/or the Lenders had actually
funded the Treasury Rate Loans through the purchase of deposits in the relevant
market and currency, as the case may be, bearing interest at the rate applicable
to such Treasury Rate Loans in an amount equal to the amount of the Treasury
Rate Loans and having a maturity comparable to the relevant Treasury Rate Loans
provided, however, that the Agent and the Lenders may fund each of the Treasury
-------- -------
Rate Loans in any manner the Agent and the Lenders see fit and the foregoing
assumption shall be used only for calculation of amounts payable under this
paragraph.
5. Interest on the CAPEX Term Loans shall be payable monthly as of the end
of each month on the unpaid balance or on payment in full prior to maturity in
an amount equal to (a) three quarters of one percent (3/4 of 1%) plus the Chase
Manhattan Bank Rate per annum on balances other than Libor Loans and (b) two and
three quarters percent (2 3/4%) plus the applicable Libor on any Libor Loan, on
a per annum basis, on the average of the net balance of CAPEX Term Loans owing
by the Companies to the Agent and/or the Lenders at the close of each day during
such month. In the event of any change in said Chase Manhattan Bank Rate, the
rate under clause (a) above shall change, as of the first of the month following
any change, so as to remain three quarters of one percent (3/4 of 1%) above the
Chase Manhattan Bank Rate. The rate hereunder shall be calculated based on a
360 day year. The Agent and the Lenders shall be entitled to charge the
Companies' Revolving Loan Account at the rate provided for herein when due until
all Obligations have been paid in full.
46
6. The Companies may elect to use Libor as to any outstanding Revolving
Loans, Term Loans and/or CAPEX Term Loans provided A) there is then no Default
or Event of Default, B) the Companies have so advised the Agent of their
election to use Libor and the Libor Period selected no later than three (3)
Business Days preceding the first day of a Libor Period and C) the election of
Libor and the Libor rate shall be effective, provided, there is then no Default
or Event of Default, on the fourth Business Day following said notice. The
Libor elections must be for $1,000,000 or whole multiples thereof. If no such
election is timely made or can be made, or if the Libor rate can not be
determined, then the Agent shall use the Chase Manhattan Bank Rate to compute
interest. In the event the Companies request any Libor election the Companies
shall pay to the Agent a $500 processing fee ("Libor Processing Fee") upon the
effective date of each such Libor election hereunder. In addition, the
Companies shall pay to the Agent for the benefit of the Lenders, upon the
request of the Agent such amount or amounts as shall compensate the Agent and/or
the Lenders for any actual loss, costs or expenses incurred by the Agent and/or
the Lenders (as reasonably determined by the Agent and the Lenders) as a result
of: (i) any payment or prepayment on a date other than the last day of a Libor
Period for such Libor Loan, or (ii) any failure of the Companies to borrow a
Libor Loan on the date for such borrowing specified in the relevant notice; such
compensation to include, without limitation, an amount equal to any loss or
expense suffered by the Agent and/or the Lenders during the period from the date
of receipt of such payment or prepayment or the date of such failure to borrow
to the last day of such Libor Period if the rate of interest obtained by the
Agent and/or the Lenders upon the reemployment of an amount of funds equal to
the amount of such payment, prepayment or failure to borrow is less than the
rate of interest applicable to such Libor Loan for such Libor Period. The
determination by the Agent and/or the Lenders of the amount of any such loss or
expense, when set forth in a written notice to the Companies, containing the
Agent's and/or the Lenders' calculations thereof in reasonable detail, shall be
conclusive on the Company, in the absence of manifest error. Calculation of all
amounts payable to the Agent and/or the Lenders under this paragraph with regard
to Libor Loans shall be made as though the Agent and/or the Lenders had actually
funded the Libor Loans through the purchase of deposits in the relevant market
and currency, as the case may be, bearing interest at the rate applicable to
such Libor Loans in an amount equal to the amount of the Libor Loans and having
a maturity comparable to the relevant interest period provided, however, that
-------- -------
the Agent and the Lenders may fund each of the Libor Loans in any manner the
Agent and the Lenders see fit and the foregoing assumption shall be used only
for calculation of amounts payable under this paragraph. In addition,
notwithstanding anything to the contrary contained herein, the Agent and the
Lenders shall apply all proceeds of Collateral, including the Accounts, and all
other amounts received by it from or on behalf of the Companies (i) initially to
the Chase Manhattan Bank Rate loans and (ii) subsequently to Libor Loans;
provided, however, x) upon the occurrence of an Event of Default or y) in the
-------- -------
event the aggregate amount of outstanding Libor Rate
47
Loans exceeds Availability or the applicable maximum levels set forth therefor,
the Agent and the Lenders may apply all such amounts received by it to the
payment of Obligations in such manner and in such order as the Agent may elect
in its reasonable business judgment. In the event that any such amounts are
applied to Revolving Loans which are Libor Loans, such application shall be
treated as a prepayment of such loans and the Agent and the Lenders shall be
entitled to indemnification hereunder.
7. In consideration of the Letter of Credit Guaranty of the Agent, the
Companies shall jointly and severally pay the Agent for the benefit of the
Lenders the Letter of Credit Guaranty Fee which shall be an amount equal to one
and one half percent (1 and 1/2%) per annum, payable monthly, on the face amount
of each Letter of Credit less the amount of any and all amounts previously drawn
under the Letter of Credit.
8. Any charges, fees, commissions, costs and expenses actually charged to
the Agent and/or the Lenders for the Companies' account by any Issuing Bank in
connection with or arising out of Letters of Credit issued pursuant to this
Financing Agreement or out of transactions relating thereto will be charged to
the Companies' account in full when charged to or paid by the Agent and when
made by any such Issuing Bank shall be conclusive on the Agent.
9. The Companies shall jointly and severally reimburse or pay the Agent,
as the case may be, for: i) all Out-of-Pocket Expenses and ii) any applicable
Documentation Fee.
10. Upon the last Business Day of each month, commencing with the last day
of the month in which this Financing Agreement is executed the Companies shall
jointly and severally pay the Agent for the benefit of the Lenders the Line of
Credit Fee.
11. To induce the Agent and the Lenders to enter into this Financing
Agreement and to extend to the Companies the Revolving Loan, Letters of Credit,
Term Loans and the CAPEX Term Loan, the Companies shall jointly and severally
pay to the Agent for the benefit of the Lenders a Loan Facility Fee in the
amount of $170,000.00 payable upon execution of this Financing Agreement,
provided that the Commitment Fee in the aggregate amount of $150,000.00 paid to
the Agent under the Commitment Letter will be credit against such Loan Facility
Fee.
12. Upon the date hereof and on such annual anniversary hereof the
Companies shall jointly and severally pay to the Agent the Collateral Management
Fee, which shall be fully earned and not refundable or rebateable when due.
48
13. The Companies shall jointly and severally pay the Agent's standard
charges for, and the fees and expenses of, the Agent personnel used by the Agent
for reviewing the books and records of the Companies and for verifying, testing
protecting, safeguarding, preserving or disposing of all or any part of the
Collateral provided, however, that the foregoing shall not be payable until the
occurrence of an Event of Default if the Companies are paying a Collateral
Management Fee.
14. Each of the Companies hereby authorizes the Agent to charge its
Revolving Loan Account with the Agent with the amount of all payments due
hereunder as such payments become due. Each of the Companies confirms that any
charges which the Agent may so make to the Companies' account as herein provided
will be made as an accommodation to the Companies and solely at the Agent's
discretion. The Agent may in its sole and absolute discretion allocate any of
the above fees and/or any other payments due under this Financing Agreement to
the Companies' respective Revolving Loan Accounts in any proportion that the
Agent may decide.
SECTION 9. POWERS
------
Each of the Companies hereby constitutes the Agent in behalf of the Lenders
or any person or agent the Agent may designate as its attorney-in-fact, at the
Companies' cost and expense, to exercise all of the following powers, which
being coupled with an interest, shall be irrevocable until all of the Companies'
Obligations to the Agent and the Lenders have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the name
of the Agent or the Companies, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Companies
and to notify postal authorities to change the address for delivery thereof to
such address as the Agent may designate;
(c) To request from customers indebted on Accounts at any time, in the
name of the Agent or the Companies or that of the Agent's designee, information
concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of the Agent's
interest therein and to notify customers indebted on Accounts to make payment
directly to the Agent for the Companies' account; and
49
(e) To take or bring, in the name of the Agent or the Companies, all
steps, actions, suits or proceedings deemed by the Agent necessary or desirable
to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the powers
set forth in (a), (b), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent or cured to the Agent's satisfaction. In
addition, the powers set forth in (c) above will only be exercised in the name
of the Companies or a certified public accountant designated by the Agent prior
to the occurrence of such Event of Default.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
1. Notwithstanding anything hereinabove to the contrary, the Lenders
acting through the Agent may terminate this Financing Agreement immediately upon
the occurrence of any of the following (herein "Events of Default"):
a) cessation of the business of the Companies, or any one of them, or the
calling of a meeting of the creditors of the Companies, or any one of
them, for purposes of compromising their debts and obligations;
b) the failure of the Companies, or any one of them, to generally meet
debts as they mature;
c) the commencement by or against the Companies, or any one of them, of
any bankruptcy, insolvency, arrangement, reorganization, receivership
or similar proceedings under any federal or state law, provided that
in the event of any involuntary proceeding commenced against the
Companies such proceeding is not dismissed or discharged within thirty
(30) days after commencement thereof;
d) breach by the Companies, or any one of them, of any warranty,
representation or covenant contained herein (other than those referred
to in sub-paragraph e below) or in any other written agreement between
the Companies and the Agent and/or the Lenders executed in connection
with this Financing Agreement, provided that such breach by the
Companies of any of the warranties, representations or covenants
referred in this clause d shall not be deemed to be an Event of
Default unless and until such breach shall remain unremedied to the
Agent's satisfaction for a period of thirty (30) days from the date of
such breach;
50
e) breach by the Companies, or any one of them, of any warranty,
representation or covenant of Section 3, Paragraphs 3 (other than
the thirds entence of paragraph 3) and 4; Section 6, Paragraphs 3
and 4 (other than the first sentence of paragraph 4); Section 7,
Paragraphs 1,5,6, and 9 through 11;
f) failure of either of the Companies to pay any of the Obligations
within five (5) Business Days of the due date thereof, provided
that nothing contained herein shall prohibit the Agent from
charging such amounts to the Companies' Revolving Loan Accounts on
the due date thereof;
g) the Companies, or any one of them, shall i) engage in any
"prohibited transaction" as defined in ERISA, ii) have any
"accumulated funding deficiency" as defined in ERISA, iii) have
any Reportable Event as defined in ERISA, iv) terminate any Plan,
as defined in ERISA or v) be engaged in any proceeding in which
the Pension Benefit Guaranty Corporation shall seek appointment,
or is appointed, as trustee or administrator of any Plan, as
defined in ERISA, and with respect to this sub-paragraph h such
event or condition x) remains uncured for a period of thirty (30)
days from date of occurrence and y) could, in the reasonable
opinion of the Agent, subject the Companies to any tax, penalty or
other liability material to the business, operations or financial
condition of the Companies;
h) without the prior written consent of the Agent, the Companies or
the Parent shall x) amend or modify the Subordinated Debt, or y)
make any payment on account of the Subordinated Debt except (i) as
permitted in the Subordination Agreement and (ii) with the
proceeds received by the Companies pursuant to an initial public
offering of the Parent's stock;
i) the occurrence of any default or event of default (after giving
effect to any applicable grace or cure periods) under any
instrument or agreement evidencing (x) Subordinated Debt or (y)
any other Indebtedness of the Companies having a principal amount
in excess of $500,000; , provided that any such default or event
of default under any such other Indebtedness referred to in clause
(y) results in an acceleration of such other Indebtedness;
j) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases for any reason whatsoever (other than as a
result of death) to be actively engaged in the management of the
Companies; or
k) the stock of the Companies presently held (directly or indirectly)
by Parent is transferred.
2. Upon the occurrence of a Default and/or an Event of Default, the
Agent may (at its option) and shall at the direction of the Required Lenders
declare that, all loans, advances and extensions of credit provided for in
Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in the
Agent's sole discretion and the
51
obligation of the Agent and/or the Lenders to make Revolving Loans, open Letters
of Credit, and/or make CAPEX Term Loans shall cease unless such Default or Event
of Default is waived in writing by the Agent or cured to the Agent's
satisfaction, and upon the occurrence of an Event of Default the Agent may (at
its option) and shall at the direction of the Required Lenders declare that: i)
all Obligations shall become immediately due and payable; ii) the Default Rate
of Interest shall be charged on all then outstanding or thereafter incurred
Obligations in lieu of the interest provided for in Section 8 of this Financing
Agreement provided that respect to this clause "ii)" a) the Agent has given the
Companies written notice of the Event of Default, provided, however, that no
notice is required if the Event of Default is the Event listed in paragraph 1(c)
of this Section 10 and b) the Companies have failed to cure the Event of Default
within ten (10) days after x) the Agent deposited such notice in the United
States mail or y) the occurrence of the Event of Default listed in paragraph
1(c) of this Section 10; and iii) this Financing Agreement shall immediately
terminate upon notice to the Companies, provided, however, that no notice of
termination is required if the Event of Default is the Event listed in paragraph
1(c) of this Section 10. The exercise of any option is not exclusive of any
other option which may be exercised at any time by the Agent and/or the Lenders.
3. Immediately upon the occurrence of any Event of Default, the Agent
may and at the request of the Required Lenders shall to the extent permitted by
law: (a) remove from any premises where same may be located any and all
documents, instruments, files and records, and any receptacles or cabinets
containing same, relating to the Accounts, or the Agent may use, at the
Companies' expense, such of the Companies' personnel, supplies or space at the
Companies' places of business or otherwise, as may be necessary to properly
administer and control the Accounts or the handling of collections and
realizations thereon; (b) bring suit, in the name of the Companies or the Agent
in behalf of the Lenders, and generally shall have all other rights respecting
said Accounts, including without limitation the right to: accelerate or extend
the time of payment, settle, compromise, release in whole or in part any amounts
owing on any Accounts and issue credits in the name of the Companies or the
Agent; (c) sell, assign and deliver the Collateral and any returned, reclaimed
or repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at the Agent's sole option and
discretion, and the Agent may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Companies; (d) foreclose the security interests created herein by any available
judicial procedure, or to take possession of any or all of the Inventory,
Equipment and/or Other Collateral without judicial process, and to enter any
premises where any Inventory, Equipment and/or Other Collateral may be located
for the purpose of taking possession of or removing the same and (E) exercise
any other rights and remedies provided in law, in equity, by contract or
otherwise. The Agent shall have the right, without notice or advertisement, to
sell, lease, or otherwise dispose
52
of all or any part of the Collateral whether in its then condition or after
further preparation or processing, in the name of the Companies or the Agent, or
in the name of such other party as the Agent may designate, either at public or
private sale or at any broker's board, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such other terms
and conditions as the Agent in its sole discretion may deem advisable, and the
Agent shall have the right to purchase at any such sale. If any Inventory and
Equipment shall require rebuilding, repairing, maintenance or preparation, the
Agent shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such
saleable form as the Agent shall deem appropriate. The Companies agree, at the
request of the Agent, to assemble the Inventory and Equipment and to make it
available to the Agent at premises of the Companies or elsewhere and to make
available to the Agent the premises and facilities of the Companies for the
purpose of the Agent's taking possession of, removing or putting the Inventory
and Equipment in saleable form. However, if notice of intended disposition of
any Collateral is required by law, it is agreed that ten (10) days notice shall
constitute reasonable notification and full compliance with the law. The net
cash proceeds resulting from the Agent's exercise of any of the foregoing
rights, (after deducting all charges, costs and expenses, including reasonable
attorneys' fees) shall be applied by the Agent to the payment of the Companies'
Obligations, whether due or to become due, in such order as the Agent may elect,
and the Companies shall remain liable to the Agent and the Lenders for any
deficiencies, and the Agent and the Lenders in turn agree to remit to the
Companies or their successors or assigns, any surplus resulting therefrom. The
enumeration of the foregoing rights is not intended to be exhaustive and the
exercise of any right shall not preclude the exercise of any other rights, all
of which shall be cumulative. The mortgage(s), deed(s) of trust and/or
assignment(s) on the Real Estate shall govern the rights and remedies of the
Agent and the Lenders thereto.
SECTION 11. TERMINATION
-----------
Except as otherwise permitted herein, the Companies or any Lender
acting through the Agent may terminate this Financing Agreement and the Line of
Credit only as of the initial or any subsequent Anniversary Date and then only
by giving the other at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing the Lenders acting through the Agent
may terminate the Financing Agreement immediately upon the occurrence of an
Event of Default, provided, however, that if the Event of Default is an event
listed in paragraph 1(c) of Section 10 of this Financing Agreement, the Agent
and the Lenders may regard the Financing Agreement as terminated and notice to
that effect is not required. This Financing Agreement, unless terminated as
herein provided, shall automatically continue from Anniversary Date to
Anniversary Date. Notwithstanding the foregoing, the Companies may terminate
this Financing Agreement, the Line of
53
Credit and the CAPEX Term Loan Line of Credit prior to any applicable
Anniversary Date upon sixty (60) days' prior written notice to the Agent and the
Lenders, provided that the Companies pay to the Agent for the benefit of the
Lenders immediately on demand, an Early Termination Fee and any and all amounts
that may be due under Section 8 hereof as a result of the prepayment of a
Treasury Rate Loan and/or a Libor Loan, if applicable. Termination by any of
the Companies shall constitute termination with respect to all Companies. All
Obligations shall become due and payable as of any termination hereunder or
under Section 10 hereof and, pending a final accounting, the Agent and the
Lenders may withhold any balances in the Companies' accounts (unless supplied
with an indemnity satisfactory to the Agent) to cover all of the Companies'
Obligations, whether absolute or contingent. All of the Agent's and Lenders'
rights, liens and security interests shall continue after any termination until
all Obligations have been paid and satisfied in full.
SECTION 12. MISCELLANEOUS
-------------
1. Each of the Companies hereby waives diligence, demand, presentment
and protest and any notices thereof as well as notice of nonpayment. No delay
or omission of the Agent or the Lenders or the Companies to exercise any right
or remedy hereunder, whether before or after the happening of any Event of
Default, shall impair any such right or shall operate as a waiver thereof or as
a waiver of any such Event of Default. No single or partial exercise by the
Agent or the Lenders of any right or remedy precludes any other or further
exercise thereof, or precludes any other right or remedy.
2. This Financing Agreement and the documents executed and delivered
in connection therewith constitute the entire agreement between the Companies
and the Agent and the Lenders; supersede any prior agreements; and shall bind
and benefit the Companies and the Agent and their respective successors and
assigns. This Financing Agreement can be amended, modified or changed only by a
writing signed by the Companies, the Agent and the Required Lenders (unless the
consent of all Lenders is required pursuant to Section 14, Paragraph 10 hereof).
3. In no event shall the Companies, upon demand by the Agent and/or
the Lenders for payment of any indebtedness relating hereto, by acceleration of
the maturity thereof, or otherwise, be obligated to pay interest and fees in
excess of the amount permitted by law. Regardless of any provision herein or in
any agreement made in connection herewith, the Agent and/or the Lenders shall
never be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Agent and/or the Lenders ever receive,
collect or apply any such excess, it shall be deemed a partial repayment of
principal and treated as
54
such; and if principal is paid in full, any remaining excess shall be refunded
to the Companies. This paragraph shall control every other provision hereof and
of any other agreement made in connection herewith.
4. If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there shall
be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
5. THE COMPANIES, THE AGENT AND THE LENDERS EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
FINANCING AGREEMENT. EACH OF THE COMPANIES HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered or sent by
telegram or telex, or three days after deposit in the United State mails, with
proper first class postage prepaid and addressed to the party to be notified as
follows:
(A) if to the Agent, at:
The CIT Group/Business Credit, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Senior Vice President and Regional Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to CITEF at:
The CIT Group/Equipment Financing, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Vice President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any other party becoming a Lender hereunder to the
address specified in the Assignment and Transfer Agreement.
55
(D) if to the Companies at:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may designate for itself by like notice.
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
SECTION 13. AGREEMENT BETWEEN THE LENDERS
----------- -----------------------------
1. a) The Agent, for the account of the Lenders, shall disburse all
loans and advances to the Companies and shall handle all collections of
Collateral and repayment of Obligations. It is understood that for purposes of
advances to the Companies and for purposes of this Section 13 the Agent is using
the funds of the Agent.
b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Companies that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Companies a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on demand, from the Companies without prejudice to any rights which
the Agent may have against such Lender hereunder. Nothing contained in this
subsection shall relieve any Lender which has failed to make available its
ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate the Agent to make available to the Companies the full amount of a
requested advance when the Agent has any notice (written or otherwise) that any
of the Lenders will not advance its ratable portion thereof.
56
2. On the Settlement Date, the Agent and the Lenders shall each remit
to the other, in immediately available funds, all amounts necessary so as to
ensure that, as of the Settlement Date, the Lenders shall have their
proportionate share of all outstanding Obligations.
3. The Agent shall forward to each Lender, at the end of each month,
a copy of the account statement rendered by the Agent to the Companies.
4. The Agent shall, after receipt of any interest and fees earned
under this Financing Agreement, promptly remit to the Lenders: a) their pro
rata portion of all fees, provided, however, that the Lenders (other than CITBC
in its role as the Agent) shall x) not share in the Collateral Management Fee or
Documentation Fees or the Libor Processing Fee or the fees provided for in
Section 8, Paragraph 13; and y) receive their share of the Loan Facility Fee in
accordance with their respective agreements with the Agent; b) interest computed
at the rate and as provided for in the Assignment and Transfer Agreement on all
outstanding amounts advanced by the Lenders on each Settlement Date, prior to
adjustment, that are subsequent to the last remittance by the Agent to the
Lenders of the Companies's interest; c) its pro rata portion of all principal
repaid on the Term Loans and/or Capex Term Loans; and d) interest on the Term
Loans and Capex Term Loans computed at the rate and as provided for in the
Assignment and Transfer Agreement.
5. (a) The Companies acknowledge that the Lenders may sell
participation in the loans and extensions of credit made and to be made to the
Companies hereunder. The Companies further acknowledge that in doing so, the
Lenders may grant to such participants certain rights which would require the
participant's consent to certain waivers, amendments and other actions with
respect to the provisions of this Financing Agreement, provided that the consent
of any such participant shall not be required except for matters requiring the
consent of all Lenders hereunder as set forth in ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇.
(▇) The Companies authorize each Lender to disclose to any
participant or purchasing lender (each, a "Transferee") and any prospective
----------
Transferee any and all financial information in such Lender's possession
concerning the Companies and their affiliates which has been delivered to such
Lender by or on behalf of the Companies pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Companies in connection
with such Lender's credit evaluation of the Companies and their affiliates prior
to entering into this Agreement.
6. The Companies hereby agree that each Lender is solely responsible
for its portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for the failure of any
Lender to make available its portion of the Line of Credit. Further, should any
Lender refuse to
57
make available its portion of the Line of Credit, then the other Lender may, but
without obligation to do so, increase, unilaterally, its portion of the Line of
Credit in which event the Companies are so obligated to that other Lender.
7. In the event that the Agent, the Lenders or any one of them is
sued or threatened with suit by the Companies or any one of them, or by any
receiver, trustee, creditor or any committee of creditors on account of any
preference, voidable transfer or lender liability issue, alleged to have
occurred or been received as a result of, or during the transactions
contemplated under this Financing Agreement, then in such event any money paid
in satisfaction or compromise of such suit, action, claim or demand and any
expenses, costs and attorneys' fees paid or incurred in connection therewith,
whether by the Agent, the Lenders or any one of them, shall be shared
proportionately by the Lenders. In addition, any costs, expenses, fees or
disbursements incurred by outside agencies or attorneys retained by the Agent to
effect collection or enforcement of any rights in the Collateral, including
enforcing, preserving or maintaining rights under this Financing Agreement shall
be shared proportionately between and among the Lenders to the extent not
reimbursed by the Companies or from the proceeds of Collateral. The provisions
of this paragraph shall not apply to any suits, actions, proceedings or claims
that x) predate the date of this Financing Agreement or y) are based on
transactions, actions or omissions that predate the date of this Financing
Agreement.
8. Each of the Lenders agrees with each other Lender that any money
or assets of the Companies held or received by such Lender, no matter how or
when received, shall be applied to the reduction of the Obligations (to the
extent permitted hereunder) after x) the occurrence of an Event of Default and
y) the election by the Required Lenders to accelerate the Obligations. In
addition, the Companies authorize, and the Lenders shall have the right,
without notice, upon any amount becoming due and payable hereunder, to set-off
and apply against any and all property held by, or in the possession of such
Lender the Obligations due such Lenders.
9. CITBC shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations under this Financing Agreement
(including, without limitation, its obligations under the Line of Credit, Term
Loans, Capex Term Loans, the Revolving Loans and its rights and obligations with
respect to Letters of Credit). Upon execution of an Assignment and Transfer
Agreement, (i) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment, have the rights and obligations of CITBC as the case may be
hereunder and (ii) CITBC shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such assignment, relinquish its
rights and be released from its
58
obligations under this Financing Agreement. The Companies shall, if necessary,
execute any documents reasonably required to effectuate the assignments. No
other Lender may assign its interest in the loans and advances and extensions of
credit hereunder without the prior written consent of the Agent.
SECTION 14. AGENCY
------
1. Each Lender hereby irrevocably designates and appoints CITBC as
the Agent for the Lenders under this Financing Agreement and any ancillary loan
documents and irrevocably authorizes CITBC as the Agent for such Lender, to take
such action on its behalf under the provisions of this Financing Agreement and
all ancillary documents and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and all ancillary documents together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Financing Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
2. The Agent may execute any of its duties under this Financing
Agreement and all ancillary documents by or through agents or attorneys-in-fact
and shall be entitled to the advice of counsel concerning all matters pertaining
to such duties.
3. Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with this Financing Agreement and all ancillary documents (except for
its or such person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Companies or any officer thereof
contained in this Financing Agreement and all ancillary documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Financing Agreement
and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Financing Agreement and all
ancillary documents or for any failure of the Companies to perform their
obligations thereunder. The Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Financing Agreement and all
ancillary documents or to inspect the properties, books or records of the
Companies.
59
4. The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Companies), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence of the Lenders, or the
Required Lenders, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Financing Agreement and all
ancillary documents in accordance with a request of the Lenders, or the Required
Lenders, as the case may be, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders.
5. The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Companies describing such Default or Event
of Default. In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Lenders, or Required Lenders, as the case may be; provided that unless
--------
and until the Agent shall have received such direction, the Agent may in the
interim (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable and in the best interests of the Lenders.
6. Each Lender expressly acknowledges that neither the Agent nor any
of its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Companies shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Companies and made its own decision to enter into this
Financing Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under the Financing
60
Agreement and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition or
creditworthiness of the Companies. The Agent, however, shall provide the
Lenders with copies of all financial statements, projections and business plans
which come into the possession of the Agent or any of its officers, employees,
agents or attorneys-in-fact.
7. The Lenders agree to indemnify the Agent in its capacity as such
(to the extent not reimbursed by the Companies and without limiting the
obligation of the Companies to do so), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever (including negligence on the
part of the Agent) which may at any time be imposed on, incurred by or asserted
against the Agent in anyway relating to or arising out of this Financing
Agreement or any ancillary documents or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
--------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this paragraph shall survive
the payment of the obligations.
8. The Agent may make loans to, and generally engage in any kind of
business with the Companies as though the Agent were not the Agent hereunder.
With respect to its loans made or renewed by it or loan obligations hereunder as
Lender, the Agent shall have the same rights and powers, duties and liabilities
under this Financing Agreement as any Lender and may exercise the same as though
it was not the Agent and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacities.
9. The Agent may resign as the Agent upon 30 days' notice to the
Lenders and such resignation shall be effective upon the appointment of a
successor Agent. If the Agent shall resign as Agent, then the Lenders shall
appoint a successor Agent for the Lenders whereupon such successor Agent shall
succeed to the rights, powers and duties of the Agent and the term "the Agent"
shall mean such successor Agent effective upon its appointment, and the former
Agent's rights, powers and duties as the Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. After any retiring Agent's resignation
hereunder as the Agent the provisions of this Section 14 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent.
10. Notwithstanding anything contained in this Financing Agreement to
the contrary, the Agent will not, without the prior written consent of all
Lenders: a)
61
amend the Financing Agreement to t) increase the Accounts Receivable Advance
Percentage; u) increase the Inventory Advance Percentage; v) increase the Line
of Credit; w) reduce the interest rates; x) reduce or waive i) any fees in which
the Lenders share hereunder; or ii) the repayment of any Obligations due the
Lenders; y) extend the maturity of the Obligations; or z) alter or amend 1) this
Paragraph 10 or 2) the definitions of Eligible Accounts Receivable, Eligible
Inventory, Collateral or Required Lenders, or the Agent's criteria for
determining compliance with such definitions of eligibility; b) release
Collateral in bulk without a corresponding reduction in the Obligations to the
Lenders, or c) intentionally make any Revolving Loan or assist in opening any
Letter of Credit hereunder if after giving effect thereto the total of Revolving
Loans and Letters of Credit hereunder for the Companies would exceed one
hundred and ten percent (110%) of the maximum amount available under Sections 3
and 5 hereof. In all other respects the Agent is authorized to take such
actions or fail to take such actions if the Agent, in its reasonable discretion,
deems such to be advisable and in the best interest of the Lenders, including,
but not limited to, the making of an overadvance or the termination of the
Financing Agreement upon the occurrence of an Event of Default unless it is
specifically instructed to the contrary by the Required Lenders.
11. In the event any Lender's consent is required pursuant to the
provisions of this Financing Agreement and such Lender does not respond to any
request by the Agent for such consent within 10 days after such request is made
to such Lender, such failure to respond shall be deemed a consent. In addition,
in the event that any Lender declines to give its consent to any such request,
it is hereby mutually agreed that the Agent and/or any other Lender shall have
the right (but not the obligation) to purchase such Lender's share of the Loans
for the full amount thereof together with accrued interest thereon to the date
of such purchase.
12. Each Lender agrees that notwithstanding the provisions of Section
11 of this Financing Agreement any Lender may terminate this Financing
Agreement, the Line of Credit and the CAPEX Term Loan Line of Credit only as of
the initial or any subsequent Anniversary Date and then only by giving the Agent
90 days prior written notice thereof. Within 30 days after receipt of any such
termination notice, the Agent shall, at its option, either (i) give notice of
termination to the Companies hereunder or (ii) purchase the Lender's share of
the Obligations hereunder for the full amount thereof plus accrued interest
thereon. Unless so terminated this Financing Agreement and the Line of Credit
shall be automatically extended from Anniversary Date to Anniversary Date.
62
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above. This Financing Agreement shall take
effect as of the date set forth above after being accepted below by an officer
of the Agent and the Lenders after which, the Agent shall forward to the
Companies a fully executed original for their files.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC., as Agent and Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇
__________________________________________
Vice President
THE CIT GROUP/EQUIPMENT
FINANCING, INC. as Lender
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
__________________________________________
Title: SVP
Read and Agreed to:
4MC-BURBANK, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
________________________
Title: Vice President & CFO
DIGITAL MAGIC COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇
________________________
Title: Vice President & CFO
63
EXHIBIT A
---------
REVOLVING LOAN PROMISSORY NOTE
------------------------------
__________, 1996
$__________________________
FOR VALUE RECEIVED, the undersigned, _____________________________, a
_______________________________ corporation (the "Company"), promises to pay to
the order of THE CIT GROUP/BUSINESS CREDIT, INC. (herein "CITBC") as Agent for
the Lenders under a certain Financing Agreement of even date herewith between
CITBC as Agent and Lender, other Lenders parties thereto and the Company (herein
the "Financing Agreement") at its office located at
__________________________________________________________, in lawful money of
the United States of America and in immediately available funds, the principal
amount of _____________________________________________ ($_____________), or
such other principal amount advanced pursuant to Section 3, Paragraph 1 of the
Financing Agreement. The balance of such Revolving Loan will fluctuate as a
result of the daily application of the proceeds of collections of the Accounts
and the making of additional Revolving Loans as described in Section 3. The
Revolving Loans may be borrowed, repaid and reborrowed by the Company. A final
payment in an amount equal to the outstanding aggregate balance of principal and
interest remaining unpaid, if any, under this Revolving Loan Promissory Note as
shown on the books and records of the Agent shall be due and payable upon any
termination of the Financing Agreement.
All capitalized terms used herein shall have the meaning provided therefor in
the Financing Agreement, unless otherwise defined herein.
The Company further promises to pay interest at such office, in like money, on
the unpaid principal amount owing hereunder from time to time from the date
hereof on the dates and at the applicable rates specified in Section 8 of the
Financing Agreement.
If any payment on this Revolving Loan Promissory Note becomes due and payable on
a day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
This Revolving Loan Promissory Note is the Revolving Loan Promissory Note
referred to in the Financing Agreement, and is subject to, and entitled to, all
64
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
The date and amount of the advance(s) made hereunder may be recorded on the
schedule which is attached hereto and hereby made part of this Note or the
separate ledgers maintained by the Agent, provided that any failure to record
any such information on such schedule shall not in any manner affect the
obligation of the Company to make payments of principal and interest in
accordance with the terms of this Revolving Loan Promissory Note. The aggregate
unpaid principal amount of all advances made pursuant hereto may be set forth in
the balance column on said schedule or such ledgers maintained by the Agent.
All such advances, whether or not so recorded, shall be due as part of this
Revolving Loan Promissory Note.
The Company confirms that any amount received by or paid to the Agent in
connection with the Financing Agreement and/or any balances standing to its
credit on any of its accounts on the Agent's books under the Financing Agreement
may in accordance with the terms of the Financing Agreement be applied in
reduction of this Revolving Loan Promissory Note, but no balance or amounts
shall be deemed to effect payment in whole or in part of this Revolving Loan
Promissory Note unless the Agent shall have actually charged such account or
accounts for the purposes of such reduction or payment of this Revolving Loan
Promissory Note.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Revolving Loan Promissory Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
The Company and any and all guarantors, sureties and endorsers jointly and
severally waive grace, demand, presentment for payment, notice of dishonor or
default, notice of intent to accelerate, notice of acceleration, protest and
diligence in collecting.
65
This Revolving Loan Promissory Note shall be governed by, and construed in
accordance with, the laws of the state of California and the applicable federal
laws of the United States.
__________________________________________
By:_______________________________________
Title:
66
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67
EXHIBIT B
---------
TERM LOAN PROMISSORY NOTE A
---------------------------
October _____, 1996
$13,000,000
FOR VALUE RECEIVED, the undersigned, 4MC - Burbank, Inc., a Delaware corporation
(the "Company"), promises to pay to the order of THE CIT GROUP/BUSINESS CREDIT,
INC. (herein "CITBC") as Agent for the Lenders under a certain Financing
Agreement of even date herewith between CITBC, as Agent and Lender, The CIT
Group/Equipment Financing, Inc., as Lender and the Company (herein the
"Financing Agreement") at its office located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, in lawful money of the United States of America and in
immediately available funds, the principal amount of Thirteen Million Dollars
($13,000,000) as follows: 1) eighty-three (83) equal monthly principal
installments of $155,000 each, followed by 2) one (1) final principal
installment of $135,000, whereof the first such installment shall be due and
payable on November 20, 1997 and subsequent installments shall be due and
payable on the 20th day of each month thereafter until this Note is paid in
full.
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the applicable rate specified in Section 8 of the Financing
Agreement.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Term Loan Promissory Note A referred to in the Financing
Agreement, evidences Term Loan A thereunder, and is subject to, and entitled to,
all provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
68
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the
sole election of the Agent, immediately due and payable as provided in the
Financing Agreement.
4MC - BURBANK, INC.
By:_____________________________
Title:
69
EXHIBIT C
---------
TERM LOAN PROMISSORY NOTE B
---------------------------
October ______, 1996
$3,000,000
FOR VALUE RECEIVED, the undersigned, Digital Magic Company, a Delaware
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") as Agent for the Lenders under a
certain Financing Agreement of even date herewith between CITBC, as Agent and
Lender, The CIT Group/Equipment Financing, Inc., as Lender and the Company
(herein the "Financing Agreement") at its office located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, in lawful money of the United States of America
and in immediately available funds, the principal amount of Three Million
Dollars ($3,000,000) as follows: 1) eighty-three (83) equal monthly principal
installments of $35,000 each, followed by 2) one (1) final principal installment
of $95,000, whereof the first such installment shall be due and payable on
November 20, 1997 and subsequent installments shall be due and payable on the
20th day of each month thereafter until this Note is paid in full.
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the applicable rate specified in Section 8 of the Financing
Agreement.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is Term Loan Promissory Note B referred to in the Financing Agreement,
evidences Term Loan B thereunder, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
70
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of the Agent, immediately due and payable as provided in the Financing
Agreement.
DIGITAL MAGIC COMPANY
By:_____________________________
Title:
71
EXHIBIT D
---------
CAPEX TERM LOAN PROMISSORY NOTE
--------------------------------
____________, 1996
$_________________
FOR VALUE RECEIVED, the undersigned, ______________________________, a Delaware
corporation (the "Company"), promises to pay to the order of THE CIT
GROUP/BUSINESS CREDIT, INC. (herein "CITBC") as Agent for the Lenders under a
certain Financing Agreement dated _______________________, 19___ between CITBC,
as Agent and Lender, _____________________, as Lender and the Company (herein
the "Financing Agreement") at its office located at
_______________________________________, in lawful money of the United States of
America and in immediately available funds, the principal amount of
_________________________ ($______________.00) as follows: 1) _________________
( ) equal _______________ principal installments of $______________.00 each,
followed by 2) one (1) final principal installment of $_______________.00,
whereof the first such installment shall be due and payable on _______________,
199___ and subsequent installments shall be due and payable on the first
Business Day of each month thereafter until this Note is paid in full.
Capitalized terms used herein and defined in the Financing Agreement shall have
the same meanings as set forth therein unless otherwise specifically defined
herein.
The Company further agrees to pay interest at said office, in like money, on the
unpaid principal amount owing hereunder from time to time from the date hereof
on the date and at the applicable rates specified in Section 8 of the Financing
Agreement.
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is a Capex Term Loan Promissory Note referred to in the Financing
Agreement, evidences a CAPEX Term Loan thereunder, and is subject to, and
entitled to, all provisions and benefits thereof and is subject to optional and
mandatory prepayment, in whole or in part, as provided therein.
72
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, at the sole
election of the Agent, immediately due and payable as provided in the Financing
Agreement.
________________________________
By:_____________________________
Title:
73
EXHIBIT E - ASSIGNMENT AND TRANSFER AGREEMENT
---------------------------------------------
Dated: ________________, 199______
Reference is made to the Financing Agreement dated as of September _____, 1996,
(as amended, modified, supplemented and in effect from time to time, the
"Financing Agreement"), among 4MC - Burbank, Inc. and Digital Magic Company
(collectively the "Company"), the Lenders named therein, and The CIT
Group/Business Credit, Inc., as Agent (the "Agent"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Financing Agreement. This Assignment and Transfer Agreement, between the
Assignor (as defined and set forth on Schedule 1 hereto and made a part hereof)
and the Assignee (as defined and set forth on Schedule 1 hereto and made a part
hereof) is dated as of Effective Date (as set forth on Schedule 1 hereto and
made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Financing Agreement respecting
those, and only those, financing facilities contained in the Financing Agreement
as are set forth on Schedule 1 (collectively, the "Assigned Facilities" and
individually, an "Assigned Facility"), in a principal amount for each Assigned
Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed in conjunction therewith (collectively the
"Ancillary Documents") or the execution, legality, validity, enforceability,
genuiness, sufficiency or value of the Financing Agreement, any Collateral
thereunder or any of the Ancillary Documents furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim and
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Financing Agreement or any of the Ancillary
Documents furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Transfer Agreement; (ii) confirms
that it has
74
received a copy of the Financing Agreement, together with the copies of the most
recent financial statements of the Company, and such other documents and
information as it has deemed appropriate to make its own credit analysis; (iii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Financing Agreement; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Financing Agreement as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will be bound by the provisions of the Financing Agreement
and will perform in accordance with its terms all the obligations which by the
terms of the Financing Agreement are required to be performed by it as Lender;
and (vi) if the Assignee is organized under the laws of a jurisdiction outside
the United States, attaches the forms prescribed by the Internal Revenue Service
of the United States certifying as to the Assignee's exemption from United
States withholding taxes with respect to all payments to be made to the Assignee
under the Financing Agreement or such other documents as are necessary to
indicate that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement,
such agreement will be delivered to the Agent for acceptance by it and the
Company, effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the assigned interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date made by the
Agent or with respect to the making of this assignment directly between
themselves.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Financing Agreement and, to the extent provided in this Assignment
and Transfer Agreement, have the rights and obligations of a Lender thereunder,
and (ii) the Assignor shall, to the extent provided in this Assignment and
Transfer Agreement, relinquish its rights and be released from its obligations
under the Financing Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
75
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
1. Name of Assignor: ___________________________________
2. Name of Assignee: ___________________________________
3. Effective Date of Assignment: _________________, 199 _____
4. Assigned Interest (inclusive of Letter of Credit
Sub-limit Assigned Interest): $_________________________
Percentage Assigned (Shown as a percentage
of aggregate original principal amount of
all Lenders): __________________________ %
5. Letter of Credit Sub-limit Assigned Interest: $_________________________
Percent Assigned (Shown as a percentage
of aggregate face amount of all Lenders): __________________________%
6. Total Financing Agreement Line of Credit for
All Lenders (inclusive of Letter of Credit Sub-
---
limit for All Lenders) as of Effective Date of
---
Assignment: $________________________
7. Total Financing Agreement Letter of Credit
sub-limit for All Lenders as of Effective
---
Date of Assignment: $________________________
8. Fees to be paid to Assignee:
a) Closing Fee to be paid on Effective Date
of Assignment: $________________________
B) A share of Letter of Credit Guaranty Fee: _________________________
9. Assignee's share of Revolving Loans outstanding will bear interest as the
rates provided for in the Financing Agreement.
[Signature Page to Follow]
76
Accepted:
THE CIT GROUP/BUSINESS
CREDIT, INC., AS AGENT ______________________________________
as Assignor
By:_______________________________ By:___________________________________
Title: ___________________________ Title: _______________________________
4MC-BURBANK, INC. ______________________________________
DIGITAL MAGIC COMPANY as Assignee
By:______________________________ By:___________________________________
Title: __________________________ Title: _______________________________
77
SCHEDULE 1 - EXISTING LIENS
----------
FILING FILING SECURED
LOCATION DEBTOR NUMBER DATE PARTY COLLATERAL
-------- ------ ------ ---- ----- ----------
ALL LIENS REVEALED BY UCC, TAX AND JUDGMENT LIEN SEARCHES CONDUCTED BY NATIONAL
CODE CORPORATION AND DELIVERED TO THE AGENT PRIOR TO THE DATE OF THIS FINANCING
AGREEMENT (EXCEPT LIENS IN FAVOR OF SECURITY PACIFIC BUSINESS CREDIT, INC. AND
THE CIT GROUP/EQUIPMENT FINANCING, INC. OTHER THAN THE LIENS ON CERTAIN
EQUIPMENT SECURING A CERTAIN CITEF LOAN DATED AUGUST 1994 IN THE ORIGINAL
PRINCIPAL AMOUNT OF $619,002.35) AND THE LIENS ON THE SPECIFIC ITEMS OF
EQUIPMENT COVERED BY THE LEASES ATTACHED HERETO.
78
SCHEDULE 2 - COLLATERAL LOCATIONS AND CHIEF EXECUTIVE OFFICE
----------
CHIEF EXECUTIVE OFFICE (4MC)
----------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
COLLATERAL LOCATIONS (4 MC)
--------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CHIEF EXECUTIVE OFFICE AND COLLATERAL LOCATIONS (DMC)
-----------------------------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
79
SCHEDULE 3 - PERMITTED INDEBTEDNESS
-----------------------------------
See Attached
80