Exhibit 10.1
EXECUTION COPY
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SECURED CREDIT AGREEMENT
Dated as of May 12, 1999
among
FIRST SOURCE FINANCIAL LLP,
as Lender,
BROWNSTONE HOLDINGS, INC.,
ECOLOGY KIDS, INC.,
DIPLOMAT HOLDINGS, INC.
and
▇▇▇ ▇▇▇▇▇▇ LTD.
as Borrowers
and
DIPLOMAT DIRECT MARKETING CORPORATION,
as Funds Administrator
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TABLE OF CONTENTS
SECTION 1 CERTAIN DEFINITIONS..........................................................................-1-
1.1 Certain Definitions..................................................................-1-
1.2 Accounting and Financial Determinations.............................................-24-
1.3 Cross References; Headings..........................................................-25-
SECTION 2 COMMITMENTS OF LENDER; LOAN REQUESTS; REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENTS; MAKING OF PAYMENTS; SETOFF...............................................................-25-
2.1 Commitments.........................................................................-25-
2.2 Final Maturity Date.................................................................-27-
2.3 Revolving Loan Requests.............................................................-27-
2.4 Certain Waivers.....................................................................-28-
2.5 Mandatory and Permitted Prepayments of the Term Loans...............................-28-
2.6 Voluntary Reduction or Termination of the Revolving Commitment......................-30-
2.7 Mandatory Prepayments on Revolving Loans............................................-30-
2.8 Prepayment Premium..................................................................-31-
2.9 Making of Payments..................................................................-31-
2.10 Due Date Extension..................................................................-31-
2.11 Setoff..............................................................................-31-
2.12 Certain Matters Relating to LC Guaranties...........................................-32-
2.13 Loan Account........................................................................-34-
2.14 Allocation of Loans and Expenses....................................................-34-
2.15 Statements..........................................................................-35-
SECTION 3 NOTES; RECORDKEEPING........................................................................-36-
3.1 Term Note A.........................................................................-36-
3.2 Term Note B.........................................................................-36-
3.3 Revolving Note......................................................................-36-
SECTION 4 INTEREST....................................................................................-36-
4.1 Interest Rates......................................................................-36-
4.2 Default Interest....................................................................-37-
4.3 Conversion or Continuation..........................................................-37-
4.4 Special Provisions Governing LIBOR Rate Loans.......................................-38-
4.5 Interest Payment Dates..............................................................-40-
4.6 Setting of Rates....................................................................-41-
4.7 Computation of Interest.............................................................-41-
SECTION 5 FEES........................................................................................-41-
5.1 Non-Use Fees........................................................................-41-
5.2 Commitment Fee......................................................................-41-
-i-
5.3 Closing Fee.........................................................................-41-
5.4 Letter of Credit Fees...............................................................-41-
5.5 Audit Fees..........................................................................-42-
5.6 Computation of Fees.................................................................-42-
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS AND ACCOUNT STATEMENTS.......................-42-
6.1 Account Agreements..................................................................-42-
6.2 Accounts............................................................................-43-
6.3 List of Accounts and Account Statements.............................................-44-
SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS; DEEMED LOANS .................................-44-
7.1 Proceeds of Collateral; Notices to Account Debtors; Lockbox.........................-44-
7.2 Calculation of Collected Balance....................................................-45-
7.3 Application of Funds Available for Loan Repayments..................................-45-
7.4 Application Upon an Event of Default................................................-46-
7.5 Deemed Loans........................................................................-46-
7.6 Application of Proceeds.............................................................-46-
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS................................................-48-
8.1 Increased Costs.....................................................................-48-
8.2 Funding Losses......................................................................-49-
8.3 Taxes...............................................................................-49-
8.4 Discretion of Lender as to Manner of Funding........................................-50-
8.5 Conclusiveness of Statements; Survival of Provisions................................-50-
SECTION 9 COLLATERAL AND ELIGIBILITY REQUIREMENTS.....................................................-51-
9.1 Eligible Accounts;..................................................................-51-
9.2 Account Warranties..................................................................-52-
9.3 Verification of Accounts............................................................-54-
9.4 Eligible Inventory..................................................................-54-
9.5 Inventory Warranties................................................................-54-
9.6 Security Interest...................................................................-55-
9.7 Consigned Inventory.................................................................-55-
9.8 Additional Collateral Documents.....................................................-55-
9.9 Subsequently Acquired Property......................................................-56-
9.10 Change of Location or Name..........................................................-56-
9.11 Deliveries; Further Assurances......................................................-57-
SECTION 10 REPRESENTATIONS AND WARRANTIES.............................................................-57-
10.1 Due Organization, Authorization, Etc................................................-57-
10.2 Certain Agreements..................................................................-58-
10.3 Financial Information; Financial Condition..........................................-58-
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10.4 Litigation and Contingent Obligations...............................................-59-
10.5 Liens...............................................................................-59-
10.6 Contracts; Absence of Default.......................................................-60-
10.7 Employee Benefit Plans..............................................................-60-
10.8 Investment Company Act; Public Utility Holding Company Act..........................-61-
10.9 Regulations T, U and X..............................................................-61-
10.10 Proceeds............................................................................-62-
10.11 Confirmation of Warranties..........................................................-62-
10.12 Insurance...........................................................................-62-
10.13 Material Disruptions................................................................-62-
10.14 Patents, Trademarks, etc............................................................-62-
10.15 Ownership of Properties; Property Schedule..........................................-62-
10.16 Business Locations; Trade Names.....................................................-63-
10.17 Accuracy of Information.............................................................-63-
10.18 Subsidiaries........................................................................-63-
10.19 Hazardous Materials.................................................................-63-
10.20 Agent's Fees........................................................................-64-
10.21 Taxes...............................................................................-64-
10.22 Securities Laws.....................................................................-64-
10.23 Governmental Authorizations.........................................................-64-
10.24 Compliance with Laws................................................................-65-
10.25 Employees and Labor.................................................................-65-
10.26 Year 2000...........................................................................-66-
10.27 Solvency............................................................................-66-
10.28 Collateral..........................................................................-66-
10.29 Places of Business..................................................................-66-
10.30 Other Names.........................................................................-66-
10.31 Real Estate.........................................................................-67-
SECTION 11 COVENANTS..................................................................................-67-
11.1 Reports, Certificates and Other Information.........................................-67-
11.2 Corporate Existence; Foreign Qualification..........................................-71-
11.3 Books, Records and Inspections......................................................-71-
11.4 Insurance...........................................................................-72-
11.5 Taxes and Liabilities...............................................................-73-
11.6 Employee Benefit Plans..............................................................-73-
11.7 Collateral Documents................................................................-73-
11.8 Compliance with Laws................................................................-73-
11.9 Maintenance of Permits..............................................................-74-
11.10 Purchase, Redemption, Distribution, Interest and Payment Restrictions...............-74-
11.11 Guaranties, Loans, Advances or Investments..........................................-74-
11.12 Mergers, Consolidations, Sales......................................................-75-
11.13 Unconditional Purchase Obligations..................................................-75-
11.14 Regulations T, U and X..............................................................-75-
11.15 Subsidiaries........................................................................-75-
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11.16 No Amendment of Certain Documents...................................................-75-
11.17 Other Agreements....................................................................-75-
11.18 Business Activities; Name...........................................................-75-
11.19 Transactions with Affiliates........................................................-76-
11.20 Environmental Liabilities...........................................................-76-
11.21 Indebtedness........................................................................-76-
11.22 Liens...............................................................................-76-
11.23 Fiscal Year.........................................................................-76-
11.24 Landlord and Warehouseman Agreements................................................-77-
11.25 Maintenance of Real Estate..........................................................-77-
11.26 Account Records.....................................................................-77-
11.27 Instruments and Chattel Paper.......................................................-78-
11.28 Inventory Records...................................................................-78-
11.29 Collateral Locations................................................................-78-
11.30 Disposal of Property................................................................-79-
11.31 Impairment Agreements...............................................................-79-
11.32 Management Fees.....................................................................-79-
11.33 Corporate Accounts..................................................................-80-
11.34 Financial Covenants.................................................................-80-
11.35 Gross Capital Expenditures..........................................................-80-
11.36 Leases..............................................................................-80-
SECTION 12 CONDITIONS.................................................................................-81-
12.1 Term Loans and Initial Revolving Loans..............................................-81-
12.2 All Loans; LC Guaranties............................................................-82-
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.........................................................-84-
13.1 Events of Default...................................................................-85-
13.2 Effect of Event of Default..........................................................-88-
13.3 Rights and Remedies Generally.......................................................-88-
13.4 Entry Upon Premises and Access to Information.......................................-89-
13.5 Sale or Other Disposition of Collateral by Lender...................................-89-
13.6 Notice to Account Debtors...........................................................-89-
13.7 Waiver of Demand....................................................................-90-
13.8 Waiver of Notice....................................................................-90-
SECTION 14 GENERAL....................................................................................-90-
14.1 Waiver; Amendments..................................................................-90-
14.2 Confirmations.......................................................................-90-
14.3 Notices.............................................................................-90-
14.4 Costs, Expenses and Taxes...........................................................-91-
14.5 Indemnification.....................................................................-91-
14.6 Submission To Jurisdiction..........................................................-93-
14.7 Governing Law; Severability.........................................................-93-
14.8 Sale of Notes; Participations.......................................................-94-
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14.9 Entry Into Agreement................................................................-94-
14.10 Legal Opinions......................................................................-94-
14.11 Jury Trial; Damage Waiver...........................................................-94-
14.12 Successors and Assigns..............................................................-94-
14.13 Marshalling.........................................................................-95-
14.14 Waivers With Respect to Other Instruments...........................................-95-
14.15 Retention of Borrower' Documents....................................................-95-
14.16 Survival of Warranties..............................................................-95-
14.17 Counterparts........................................................................-95-
14.18 Exceptions to Covenants.............................................................-96-
14.19 Construction........................................................................-96-
14.20 Reinstatement.......................................................................-96-
14.21 Entire Agreement....................................................................-96-
14.22 Acknowledgment......................................................................-96-
14.23 Confidentiality.....................................................................-97-
14.24 ....................................................................................-97-
Joint and Several Liability of Borrowers.....................................................-97-
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SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT (this "Agreement") dated as of
May 12, 1999 is entered into among BROWNSTONE HOLDINGS, INC., a Delaware
corporation ("Brownstone"), ECOLOGY KIDS, INC., a Delaware corporation ("Ecology
Kids"), DIPLOMAT HOLDINGS, INC., a California corporation ("Diplomat") and ▇▇▇
▇▇▇▇▇▇ LTD., a New York corporation ("▇▇▇ ▇▇▇▇▇▇"); Brownstone, Ecology Kids,
Diplomat and ▇▇▇ ▇▇▇▇▇▇ are hereinafter referred to, collectively, as
"Borrowers" and individually, as a "Borrower"), FIRST SOURCE FINANCIAL LLP, an
Illinois registered limited liability partnership ("Lender") and DIPLOMAT DIRECT
MARKETING CORPORATION, a Delaware corporation, in its capacity as funds
administrator and borrowing agent for the Borrowers (in such capacity, the
"Funds Administrator").
RECITAL:
Borrowers desire to borrow from Lender and Lender desires to
lend to Borrowers on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual agreements
contained herein, and subject to the terms and conditions hereof, the parties
hereto agree as follows:
SECTION 1 CERTAIN DEFINITIONS.
SECTION 1.1 Certain Definitions. When used herein, the
following terms shall have the following meanings:
"Account Debtor" shall mean any Person who is or may
become obligated on or under an Account of any other Person.
"Accounts" shall mean, with respect to any Person,
all presently existing and hereafter arising or acquired accounts, accounts
receivable, contracts, notes, drafts, acceptances, and other forms of
obligations (including forms of obligations evidenced by Chattel Paper,
Documents or Instruments of such Person) now or hereafter owned or held by or
payable to such Person relating in any way to Inventory or arising from the sale
or lease of Inventory or the rendering of services by such Person or howsoever
otherwise arising, including the right to payment of any interest or finance
charges with respect thereto; all such Goods that may be reclaimed or
repossessed or returned to such Person; all of such Person's rights as an unpaid
vendor, including stoppage in transit, reclamation, rescission, replevin, and
sequestration; all pledged assets and all letters of credit, guaranty claims and
Liens held by or granted to such Person to secure payment of any Accounts; all
proceeds and products of all of the foregoing described properties and interests
in properties; and all proceeds of insurance with respect thereto; and all
customer lists, ledgers, books of account, records, computer programs, computer
disks or tape files (including all microfilm), computer printouts, computer
runs, and other computer prepared
information relating to any of the foregoing. For purposes of this Agreement,
the Credit Card Accounts shall also be included in this definition of Accounts.
"Affiliate" shall mean, with respect to any Person,
(a) any director (or Person holding the equivalent position) or officer (or
Person holding the equivalent position) of such Person or of any Person
described in clause (b) with respect to such Person, and (b) any other Person
which, directly or indirectly, controls or is controlled by or under common
control with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Pension Plan). Lender shall not be deemed
to be an Affiliate of any Borrower. A Person shall be deemed to be (x)
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power (i) to vote 10% or more of the securities or equity interests
having at the time of any determination hereunder voting power for the election
of directors of such Person (or Persons holding equivalent positions); or (ii)
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; or (y) "controlled by" or "under common
control with" such other Person if such other Person is a member of the
immediate family of such Person or is the executor, administrator, or other
personal representative of such Person.
"Allocation Account" - see Section 2.14(b).
"Asset Sale" shall mean any sale, assignment,
conveyance, transfer or other disposition of any Property of any Borrower or any
Subsidiary of any Borrower other than (i) any sale or lease of Inventory in the
ordinary course of business, (ii) any sale of obsolete or unusable items of
Equipment so long as the aggregate proceeds of all such sales do not exceed
$100,000 in any Fiscal Year for all Borrower's combined and (iii) any sale or
trade-in of obsolete or unusable items of Equipment which are promptly replaced
with new items of Equipment of like function and comparable value to the
obsolete or unusable items of Equipment when the same were new or not obsolete
or unusable.
"Asset Sale Proceeds" shall mean the aggregate cash
proceeds payable to any Borrower or any Subsidiary of any Borrower in connection
with any Asset Sale after deduction of all reasonable, customary and documented
costs and expenses of such Asset Sale.
"Audit Fee" shall have the meaning ascribed thereto
in Section 5.5.
"Bank Agent Account" - see Section 6.2.
"Bank Agency Agreement" - see Section 6.1.
"Bankruptcy Code" shall mean ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
Code, as amended from time to time.
"Borrowers" - see Preamble.
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"Borrowing Availability" shall mean, at any time with
respect to any Borrower, the excess at such time of (a) the lesser of (i) such
Borrower's Revolving Commitment Allocation or (ii) such Borrower's Borrowing
Base over (b) such Borrower's Total Revolving and L/C Exposure.
"Borrowing Base" shall mean, at any time with respect
to any Borrower, an amount equal to the sum at such time of:
For Brownstone:
(1) eighty-five percent (85%) of the face amount (less maximum
discounts, credits, allowances and reserves which may have been taken
by or granted to Account Debtors in connection therewith) of existing
Eligible Accounts owing to such Borrower, plus
(2) the lesser of (a) $325,000 and (b) seventy percent (70%)
of the face amount (less maximum discounts, credits, allowances and
reserves which may have been taken by or granted to Account Debtors in
connection therewith) of existing Eligible Deferred Billing Program
Accounts owing to such Borrower, plus
(3) the lesser of (a) $275,000 and (b) one hundred percent
(100%) of the amount of such Borrower's existing Cash In Transit, plus
(4) the lesser of (a) $4,000,000 and (b) the sum of (i)
fifty-seven and one-half percent (57 1/2%) of the book value of all
then existing Eligible Inventory (excluding Store Inventory) of such
Borrower and determined at the lower of cost (determined on a
first-in-first-out ("FIFO") basis) or market and (ii) the lesser of (A)
$275,000 and (B) twenty percent (20%) of the book value of all then
existing Eligible Inventory consisting of Store Inventory of such
Borrower determined on a discounted cost (FIFO) basis, plus
(5) fifty-seven and one-half percent (57 1/2%) of the book
value of all then existing Eligible LC Inventory of such Borrower
determined at the lower of cost (determined on a FIFO basis) or market,
plus
(6) fifty percent (50%) of Pledged Cash Collateral.
For Diplomat: $-0-
For Ecology Kids:
(1) seventy-five percent (75%) of the face amount (less
maximum discounts, credits, allowances and reserves which may have been
taken by or granted to
-3-
Account Debtors in connection therewith) of existing Eligible Accounts
owing to such Borrower, plus
(2) the lesser of (a) $800,000 and (b) fifty-seven and
one-half percent (57 1/2%) of the book value of all then existing
Eligible Inventory of such Borrower determined at the lower of cost
(determined on a FIFO basis) or market, plus
(3) ten percent (10%) of Pledged Cash Collateral.
For ▇▇▇ ▇▇▇▇▇▇:
(1) eighty-five percent (85%) of the face amount (less maximum
discounts, credits, allowances and reserves which may have been taken
by or granted to Account Debtors in connection therewith) of existing
Eligible Accounts owing to such Borrower, plus
(2) the lesser of (a) $1,175,000 and (b) seventy percent (70%)
of the face amount (less maximum discounts, credits, allowances and
reserves which may have been taken by or granted to Account Debtors in
connection therewith) of existing Eligible Deferred Billing Program
Accounts owing to such Borrower, plus
(3) the lesser of (a) $225,000 and (b) one hundred percent
(100%) of the amount of such Borrower's existing Cash In Transit, plus
(4) the lesser of (a) $3,200,000 and (b) the sum of (i)
fifty-seven and one-half percent (57 1/2%) of the book value of all
then existing Eligible Inventory (excluding Store Inventory) of such
Borrower and determined at the lower of cost (determined on a FIFO
basis) or market and (ii) the lesser of (A) 225,000 and (B) twenty
percent (20%) of the book value of all then existing Eligible Inventory
consisting of Store Inventory of such Borrower consisting of Store
Inventory and determined on a discounted cost (FIFO) basis, plus
(5) fifty-seven and one-half percent (57 1/2%) of the book
value of all then existing Eligible LC Inventory of such Borrower
determined at the lower of cost (determined on a FIFO basis) or market,
plus
(6) forty percent (40%) Pledged Cash Collateral.
"Borrowing Base Certificate" shall mean a certificate
in substantially the form of Exhibit A, duly certified by the chief financial
officer or executive vice president of the Funds Administrator.
-4-
"Business Day" shall mean any day of the year (other
than any Saturday or Sunday) on which the Federal Reserve Bank of Chicago,
Illinois is open for business in Chicago, Illinois.
"Cap Amount" shall mean, at any time with respect to
each Borrower, the sum of the reimbursement obligations allocable to such
Borrower pursuant to Section 2.14 hereof and guaranteed by each LC Guaranty at
the time of its issuance (such amount, with respect to any LC Guaranty, being
herein called the "Relevant Cap"); it being understood that:
(a) the Relevant Cap with respect to any LC Guaranty shall be
reduced from time to time by the Stated Amount of a Permitted
LC covered thereby if Lender shall have received evidence
satisfactory to Lender that the following conditions have been
satisfied: (i) such Permitted LC shall have terminated or
expired in accordance with its terms, or (ii) such Permitted
LC shall have been surrendered to the Issuer thereof and
canceled, or (iii) if such Permitted LC shall have been drawn
upon, the Issuer thereof shall have been fully reimbursed for
the amount of such draw or (iv) such Issuer shall have
consented in writing to a reduction, equal to such Stated
Amount in such Relevant Cap; and
(b) the Relevant Cap with respect to any LC Guaranty may be
increased from time to time by the Stated Amount of a
Permitted LC to be covered thereby if Lender shall have
received evidence satisfactory to Lender that such Permitted
LC shall be issued in a manner permitted by this Agreement
concurrently with such increase;
provided, that in no event shall the aggregate Cap Amount of all Borrowers
exceed at any time $1,500,000; and provided, further, that for purposes of
determining the Cap Amount for each Borrower, each LC Guaranty issued hereunder
shall be included unless the applicable Issuer shall have acknowledged in
writing that Lender shall have no further obligations thereunder or Lender shall
have received other assurances from the applicable Issuer that Lender shall have
no further obligations thereunder.
"Capitalized Leases" shall mean, with respect to any
Person at any time, any lease which, in accordance with GAAP, is required to be
capitalized on the balance sheet of such Person at such time, and Capitalized
Lease Obligations shall mean, with respect to any Person at any time, the
aggregate amount which, in accordance with GAAP, is required to be reported as a
liability on the balance sheet of such Person at such time as lessee under
Capitalized Leases.
"Cash Collateral Pledge Agreements" shall mean any
pledge or security agreement relating to Pledged Cash Collateral, as the same
may, in each case, be amended, modified, supplemented or replaced from time to
time.
-5-
"Cash Equivalents" shall mean any or all of the
following: obligations of, or guaranteed as to interest and principal by, the
United States Government maturing within 90 days after the date on which such
obligations are purchased; open market commercial paper of any corporation
(other than any Borrower or any of Borrower's Affiliates) incorporated under the
laws of the United States of America or any State thereof or the District of
Columbia rated "Prime-1" or its equivalent by ▇▇▇▇▇'▇ Investors Service Inc. and
"A-1" or its equivalent by Standard & Poor's Corporation; or certificates of
deposit maturing within 90 days after the issuance thereof issued by commercial
banks organized under the laws of the United States of America or of any
political subdivision thereof and either having a combined capital and surplus
in excess of $500,000,000.
"Cash Instruments" shall mean all cash, checks,
drafts and other similar writings for the payment of money.
"Cash In Transit" shall mean, at any time with
respect to each Borrower, all collected funds in any Depositary Account (i)
attributable to such Borrower, (ii) subject to a Depositary Account Agreement
and (iii) as from time to time reported to such Borrower in a daily account
summary provided by a Depository Bank to Borrower or Funds Administrator and
attached to the then current Borrowing Base Certificate.
"Change of Control" shall mean (i) failure of Parent
to own, legally and beneficially, one hundred percent of the issued and
outstanding capital stock of any Borrower or (ii) when any Person, including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, other than Parent, Borrowers, any of their wholly-owned Subsidiaries
or any of their employee benefit plans, becomes the beneficial owner of the
Parent's Equity Interests having fifty percent (50%) or more of the combined
voting power of the then outstanding Equity Interests of the Parent that may be
cast for the election of directors of the Parent (other than as a result of
issuance of Equity Interests initiated by Parent in the ordinary course of
business), or (iii) two-thirds of the Parent's Board of Directors is removed or
not re-elected, or (iv) any two of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (Senior Vice President of
Merchandising), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (President and CEO), and ▇▇▇▇▇▇ ▇▇▇▇▇▇
(Executive Vice President and COO), shall resign or be terminated, other than
for cause and other than as a result of death or disability, from their
respective current offices and capacities with the Parent and the Borrowers, and
a successor or successors acceptable to Lender shall not have been elected or
appointed, as applicable, within ninety (90) days after such resignation or
termination; provided, that if no such successor is elected or appointed, as
applicable, an Event of Default shall be deemed to have occurred and be
continuing from and after the date of such resignation or termination.
"Chattel Paper" shall mean, with respect to any
Person, any "chattel paper," as such term is defined in the UCC, now owned or
hereafter acquired by such Person, wherever located.
"Closing Date" shall mean the date on which the
initial Loans hereunder are made.
-6-
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any replacements thereof.
"Collateral" shall mean all property and/or rights on
which a Lien is granted to Lender (or to any agent, trustee or other party
acting on behalf of Lender) to secure all or any of the Liabilities, including
any such Lien pursuant to this Agreement or any of the Collateral Documents or
any other agreements, instruments or documents provided for herein or therein or
delivered or to be delivered hereunder or thereunder or in connection herewith
or therewith.
"Collateral Access Agreements" shall mean (i) any
landlord waivers, mortgagee waivers, bailee letters or any similar
acknowledgment agreements of any warehouseman or processor in possession of
Inventory and (ii) acknowledgment agreements of any servicer of the Mailing
Lists, in each case in a form reasonably acceptable to Lender.
"Collateral Documents" shall mean, collectively, the
Security Agreement, the Pledge Agreements, the Guaranties, the Cash Collateral
Pledge Agreements, the Subordination Agreement, the Collateral Access
Agreements, the Bank Agency Agreement, the Depositary Account Agreements, the LC
Guaranties, the LC Reimbursement Agreements, any Uniform Commercial Code
financing statements, and any and all other documents provided for in Section 9
or otherwise pursuant to which a Lien is granted to Lender (or to any agent,
trustee, or other party acting on behalf of Lender) as security for any of the
Liabilities, and all agreements, instruments and documents, including, without
limitation, this Agreement and any security agreements, loan agreements, notes,
guarantees, mortgages, deeds of trust, leasehold mortgages, leasehold deeds of
trust, subordination agreements, pledges, powers of attorney, consents,
assignments, intercreditor agreements, mortgagee waivers, reimbursement
agreements, contracts, notices, leases, financing statements, whether
heretofore, now or hereafter executed by or on behalf of any one or more of the
Borrowers in connection with the Liabilities, in each case as the same may be
amended, modified, continued or supplemented from time to time.
"Collected Balance" - see Section 7.2.
"Commitments" shall mean the Letter of Credit
Commitment, the Term A Commitment, the Term B Commitment and the Revolving
Commitment, and "Commitment" shall mean any thereof.
"Compliance Certificate" - see Section 11.1(e).
"Congress" shall mean Congress Financial Corporation.
-7-
"Congress LC Liabilities" shall mean the obligations
of the Borrowers to reimburse Congress for those letters of credit described in
the pay-off letter from Congress dated as of May 12, 1999.
"Consolidated Entity" shall mean Parent and those of
its Subsidiaries consolidated with it for purposes of financial reporting in
accordance with GAAP, including, in any event, each of the Borrowers.
"Consumer" shall mean any Person who purchases
"consumer goods" as defined by the UCC.
"Contingent Obligation" shall mean, with respect to
any Person, the undrawn face amount of any letters of credit issued for the
account of such Person and shall also mean any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends,
letters of credit or other obligations ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the financial condition or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the obligee under any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the obligee under such primary obligation against loss in respect
thereof; provided, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation or,
where such Contingent Obligation is specifically limited to a portion of any
such primary obligation, that portion to which it is limited or, if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Contract" shall mean, with respect to any Person,
each agreement of such Person with respect to the sale of goods or services by
such Person.
"Contractual Obligation" shall mean, with respect to
any Person, any provision of any security issued by such Person or of any
agreement, document, instrument or undertaking to which such Person is a party
or by which it or any of its property is bound.
"Controlled Group" shall mean, collectively,
Borrowers and any corporation, trade, business or other Person that is, along
with any of the Borrowers, a member of a controlled group of Persons or a
controlled group of trades or businesses or
-8-
an affiliated service group as described in sections 414(b), 414(c) and 414(m),
respectively, of the Code or in section 4001 of ERISA.
"Credit Card Service Agreement" shall mean each
agreement between any Borrower and any Credit Card Servicer for the servicing,
collection and payment of credit card sales.
"Credit Card Servicers" shall mean American Express
Travel Related Services Company, Inc., Paymentech Merchant Services, Inc., NOVUS
Services, Inc., and Shopper's Charge Accounts Co., a division of ▇▇▇▇▇▇ United
Bank and any other Person which contracts with any Borrower after the Closing
Date for the servicing, collection and payment of credit card sales.
"Default Interest Period" - see Section 4.2(b).
"Default Rate" - see Section 4.2(a).
"Deferred Billing Program Accounts" shall mean, with
respect to any Borrower, those specific Accounts of such Borrower with respect
to which the Consumer Account Debtors thereunder are permitted to pay, at a
future date, for Inventory purchased from such Borrower.
"Depositary Account" shall mean, with respect to any
Borrower, each depositary account maintained by such Borrower solely for the
purpose of depositing Cash Instruments.
"Depositary Account Agreement" - see Section 6.1.
"Depository Bank" shall mean each bank which
maintains a Depositary Account for any Borrower and which has executed a
Depositary Account Agreement in form and substance satisfactory to Lender.
"Documents" shall mean, with respect to any Person,
any "documents" as such term is defined in the UCC, now owned or hereafter
acquired by such Person wherever located.
"Dollar(s)" and the sign "$" shall mean lawful money
of the United States of America.
"EBITDA" shall mean, for any period, Net Income for
such period, plus, to the extent deducted in computing such Net Income, the sum
of (a) all Federal, state, local and foreign income tax expense, (b) Interest
Expense, (c) depreciation and amortization expenses, and (d) any extraordinary
pre-tax non-cash losses, minus, to the extent added in computing such Net
Income, (i) any interest income and (ii) any
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extraordinary pre-tax non-cash gains, all as determined for the Consolidated
Entity in accordance with GAAP.
"Eligible Accounts" shall have the meaning ascribed
thereto in Section 9.1(a).
"Eligible Deferred Billing Program Accounts" shall
have the meaning ascribed thereto in Section 9.1(b).
"Eligible Inventory" shall have the meaning ascribed
thereto in Section 9.4.
"Eligible LC Inventory" shall mean, with respect to
any Borrower, Inventory of such Borrower which is being shipped pursuant to a
Letter of Credit and which, except for the requirements regarding location of
Inventory in clauses (iv) and (ix) of Section 9.4 hereof, would otherwise
constitute Eligible Inventory.
"Employee Benefit Plan" shall mean any "employee
benefit plan," as defined under Section 3(3) of ERISA or any other plan, policy,
program, arrangement or agreement, whether or not written, with respect to
current employees, former employees, independent contractors or leased
employees, as defined in Code ss. 414(n), or the beneficiaries or dependents
thereof, which is or has been maintained by any Borrower or a current or past
member of the Controlled Group or as to which any Borrower or any current or
past member of the Controlled Group otherwise has or could have any liability.
"Equipment" shall mean, with respect to any Person,
all of such Person's machinery, equipment and furniture of every kind and
nature, trade fixtures and fixtures not forming a part of real property, all
whether now owned or hereafter acquired, and wherever situated, together with
all appurtenances, additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and all
products and proceeds thereof and condemnation awards and insurance proceeds
with respect thereto.
"Equity Interests" shall mean, with respect to any
Person, all of the membership interests, capital stock and options, warrants and
other rights to acquire membership interests, capital stock or other equity
interests of such Person.
"Equity Sale" shall mean any capital contribution to,
or any issuance, sale, give away, conveyance, transfer or other disposition of
any of its Equity Interests by any Borrower, any Subsidiary of any Borrower or
Parent, or any other change in the capital structure of any Borrower, any
Subsidiary of any Borrower or Parent which occurs on or after December 31, 1998
other than as described in Schedule 1.1(a) hereof.
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"Equity Sale Proceeds" shall mean the aggregate cash
proceeds paid or payable to any Borrower, any Subsidiary of any Borrower or
Parent in connection with any Equity Sale, after deduction of all reasonable,
customary and documented costs and expenses of such Equity Sale.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Event of Default" shall mean any of the events or
conditions described in Section 13.1.
"Facility" shall mean the facilities of the
respective Borrowers listed on Schedule 10.29.
"Final Maturity Date" shall mean the earlier of (i)
May 13, 2002 and (ii) the date upon which the Liabilities are declared due
pursuant to Section 13.2 hereof.
"fiscal quarter" shall mean each fiscal quarter of
the Consolidated Entity for financial accounting purposes, which ends on a date
designated in Schedule 11.23.
"Fiscal Year" shall mean each fiscal year of the
Consolidated Entity for financial accounting purposes which ends on the dates
designated in Schedule 11.23.
"Fixed Charge Coverage Ratio" shall mean, for any
period, the ratio for such period of (i) an amount equal to (a) EBITDA for such
period, less (b) Net Capital Expenditures, less (c) income taxes paid or payable
with respect to such period directly to any governmental authority incurred
during such period, to (ii) Total Fixed Charges, all as determined for the
Consolidated Entity in accordance with GAAP.
"Fixtures" shall mean, with respect to any Person,
all "fixtures" as such term is defined in the UCC, now owned or hereafter
acquired by such Person, wherever located.
"Force Majeure" shall mean acts of God, acts of
public enemies, insurrections, riots, civil disturbances, strikes, boycotts,
other direct consequences of a labor dispute, other industrial disturbances,
fires, explosions, floods, epidemics, quarantine restrictions, shortages of
materials, equipment or transportation, freight embargoes, power or utility
failures, orders or acts, or failures to act, of civil or military authority or
other similar causes beyond the control of Borrowers.
"Funds Administrator" - see Preamble.
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"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time to time
consistently applied.
"General Intangibles" shall mean, with respect to any
Person, any "general intangibles" as defined in the UCC of such Person.
"Gross Capital Expenditures" shall mean, for any
period, the aggregate of all expenditures incurred by the Consolidated Entity
determined on a consolidated basis in respect of the purchase or other
acquisition of fixed or capital assets during such period, without any deduction
for trade-ins, salvage values, resales or similar recoveries, including the
amount which, in accordance with GAAP, is or should be initially posted to a
balance sheet of the Consolidated Entity with respect to Capitalized Leases.
"Guaranties" shall mean the Parent Guaranty, the
▇▇▇▇▇ Guaranty and all other guaranties of the Liabilities.
"Guarantors" shall mean Parent, ▇▇▇▇▇▇ ▇▇▇▇▇ and each
other guarantor of the Liabilities.
"Hazardous Material" shall mean: (a) any "hazardous
substance" as now defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.A. ss. 9601(14), as amended
by the Superfund Amendments and Reauthorization Act ("▇▇▇▇"), and including any
judicial interpretations thereof; (b) any "pollutant or contaminant" as defined
in 42 U.S.C.A. ss. 9601(33); (c) any material now defined as "hazardous waste"
pursuant to 40 C.F.R. Part 261; (d) any petroleum, including crude oil and any
fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas,
or synthetic gas usable for fuel; (f) any "hazardous chemical" as defined
pursuant to 29 C.F.R. Part 1910; (g) any asbestos, polychlorinated biphenyl
(PCB), or isomer of dioxin, or any material or thing containing or composed of
such substance or substances; and (h) any other substance, regardless of
physical form, that is subject to any past, present or future Federal, state or
local governmental statute, rule or regulation relating to the protection of
human health, plant life, animal life, natural resources, property or the
reasonable enjoyment of life or property from the presence in the environment of
any solid, liquid, gas, odor or any form of energy, from whatever source.
"Indebtedness" shall mean, with respect to any
Person, the following, without duplication, of such Person: (a) indebtedness for
borrowed money or for the deferred purchase price of property or services (other
than deferred compensation to employees and trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
whether on open account or evidenced by a note, bond, debenture or similar
instrument, (b) obligations under Capitalized Leases, (c) reimbursement
obligations for letters of credit, banker's acceptances or other credit
accommodations, whether drawn or undrawn, (d) liabilities, as determined by
Lender, under any interest rate agreement, (e) Contingent Obligations and (f)
Indebtedness
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secured by any Lien on any property of such Person, even if such Person has not
assumed such Indebtedness.
"Indebtedness to be Refinanced" - see Section
12.1(j).
"Intangible Assets" shall mean licenses, franchises,
Mailing Lists, customer names, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright applications,
computer software rights, goodwill and research and development expense or other
intangibles shown on the balance sheet of the Consolidated Entity.
"Instrument" shall mean, with respect to any Person,
any "instrument" as defined in the UCC, now owned or hereafter acquired by such
Person, wherever located, other than instruments that constitute, or are a part
of a group of writings that constitute, Chattel Paper of such Person.
"Intellectual Property" shall mean, with respect to
any Person, all of such Person's present and future designs, patents, patent
rights and applications therefor, technology, trademarks and registrations or
applications therefor, service marks, trade names, inventions, copyrights and
all applications and registrations therefor, advertising matter, software or
computer programs, license rights, trade secrets, methods, processes, logos,
knowhow, drawings, specifications, descriptions and licenses with respect
thereto, and all memoranda, notes, and records with respect to any research and
development, whether now owned or hereafter acquired by such Person, and
proceeds of all of the foregoing, including proceeds of insurance policies
thereon.
"Interest Coverage Ratio" shall mean, for any period,
the ratio for such period of (i) EBITDA to (ii) Interest Expense, all as
determined for the Consolidated Entity in accordance with GAAP.
"Interest Expense" shall mean, for any period, the
gross interest expense accrued or paid by the Consolidated Entity during such
period, determined in accordance with GAAP. For the purposes of the foregoing,
gross interest expense shall be determined after giving effect to any net
payments made or received by the Consolidated Entity with respect to interest
rate protection agreements.
"Interest Period" shall mean with respect to any
LIBOR Rate Loan, a period of one, three or six months commencing on a Business
Day selected by the Funds Administrator pursuant to this Agreement. Each such
Interest Period shall end on (but exclude) the date which numerically
corresponds to such date one, three or six months thereafter, provided, however,
that if there is no such numerically corresponding day in such next, third or
sixth succeeding month, such Interest Period shall end on the first Business Day
of the month next succeeding such next, third or sixth succeeding month. If any
Interest period would otherwise end on a day which is not a Business Day, such
Interest Period shall end on the next succeeding Business Day.
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"Inventory" shall mean, as to any Person, all of the
inventory of such Person of every kind and description, now or at any time
hereafter owned by or in the custody or possession, actual or constructive, of
such Person, wherever located, including all merchandise, raw materials, parts,
supplies, work-in-process and finished goods intended for sale, together with
all the containers, packing, packaging, shipping and similar materials related
thereto, and including such inventory as is temporarily out of such Person's
custody or possession, including inventory on the premises of other Persons and
items in transit, and including any goods reclaimed, returned or repossessed
upon any Accounts, Documents, Instruments or Chattel Paper relating to or
arising from the sale of inventory, and all substitutions and replacements
therefor, and all additions and accessions thereto, and all ledgers, books of
account, records, computer printouts, computer runs, microfilm, microfiche and
other computer-prepared information relating to any of the foregoing, and any
and all proceeds of any of the foregoing, including proceeds of insurance
policies thereon.
"Investment Property" shall mean, with respect to any
Person, all "investment property" as defined in Section 9-115 of the Uniform
Commercial Code in those jurisdictions in which such definition has been adopted
and shall include (i) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership
interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of such Person, including the rights of such Person to
any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account; (iii)
all securities accounts held by such Person; (iv) all commodity contracts held
by such Person; and (v) all commodity accounts held by such Person.
"Issuer" shall mean LaSalle Bank National
Association, or any other financial institution which any Borrower, from time to
time with the prior written consent of Lender, may select to issue Permitted
LCs.
"LC Exposure" shall mean, at any time with respect to
any Borrower, the sum of (a) the Cap Amount of such Borrower at such time, plus
(b) the then aggregate amount of outstanding Reimbursement Obligations allocable
to such Borrower pursuant to Section 2.14 hereof.
"LC Guaranty" - see Section 2.1(c).
"LC Guaranty Request" - see Section 12.2(c).
"LC Reimbursement Agreement" - see Section 2.1(d).
"LC Utilization" - see Section 5.4.
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"Lease Obligations" shall mean, at any date, the
rental commitments of a Person under leases for real and/or personal property
(including taxes, insurance, maintenance and similar expenses which such Person
is obligated to pay under the terms of said leases) on such date, whether or not
such obligations are reflected as liabilities or commitments on a balance sheet
of such Person or in the notes thereto, excluding, however, Capitalized Lease
Obligations of such Person.
"Lender" - see Preamble.
"Lender Party" - see Section 14.5.
"Letter of Credit" shall mean a letter of credit
issued by an Issuer for the account of a Borrower pursuant to an LC
Reimbursement Agreement.
"Letter of Credit Commitment" - see Section 2.1(d).
"Liabilities" shall mean all of the following, in
each case howsoever created, arising or evidenced, whether direct or indirect,
joint or several, absolute or contingent, or now or hereafter existing or
arising, or due or to become due: (i) all liabilities, obligations and
indebtedness to Lender of any one or more of the Borrowers and their respective
successors and assigns under or in connection with this Agreement, any Note, any
Letter of Credit, any LC Guaranty, or any of the other Related Documents, (ii)
all other liabilities, obligations and indebtedness of any one or more of the
Borrowers to Lender, whether or not arising out of or in connection with this
Agreement, any Note, or the other Related Documents, and (iii) all other
obligations of any one or more of the Borrowers or their respective successors
and assigns to Lender in connection with the Related Transactions.
"LIBOR Interest Payment Date" shall mean, with
respect to any LIBOR Rate Loan, the fifteenth day of each month and the last day
of each Interest Period applicable thereto, commencing with the first of such
dates to occur after the making of such Loan.
"LIBOR Interest Rate Determination Date" shall mean
each date of determining the LIBOR Rate with respect to an Interest Period which
date shall be the first Business Day prior to the first day of the applicable
Interest Period for any LIBOR Rate Loan.
"LIBOR Rate" shall mean, for any Interest Period, an
interest rate per annum obtained by dividing (i) the rate of interest published
in The Wall Street Journal on the LIBOR Interest Rate Determination Date in the
column captioned "Money Rates" under the heading "London Interbank Offered Rates
(LIBOR)", with respect to a time period equal to such Interest Period, by (ii) a
percentage equal to 100% minus the LIBOR Reserve Percentage, if any, in effect
on the applicable LIBOR Interest Rate Determination Date; provided, however,
that if such publication is not available or such rate is not set forth
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therein, the LIBOR Rate shall be determined on the basis of any other source
determined by Lender in its reasonable discretion.
"LIBOR Rate Loans" shall mean, collectively, LIBOR
Rate Term Loans and LIBOR Rate Revolving Loans.
"LIBOR Rate Revolving Loan" shall mean a Revolving
Loan which bears interest for a specific Interest Period based on the LIBOR
Rate.
"LIBOR Rate Term Loan" shall mean that portion of any
Term Loan which bears interest for a specific Interest Period based on the LIBOR
Rate.
"LIBOR Reserve Percentage" shall mean, for any day,
the aggregate of the rates (expressed as a decimal) of any reserve requirements
current on such day (including, without limitation, basic, supplemental,
marginal and emergency reserves) under any regulation promulgated by the Board
of Governors of the Federal Reserve System (or any successor thereto) as in
effect from time to time dealing with reserve requirements prescribed for
eurocurrency funding, including any reserve requirements with respect to
"eurocurrency liabilities" under Regulation D of the Board of Governors of the
Federal Reserve System.
"Lien" shall mean, when used with respect to any
Person, any interest in any real or personal property, asset or other right
held, owned or being purchased or acquired by such Person which secures payment
or performance of any obligation and shall include any security interest,
mortgage, lien, pledge, encumbrance, charge, retained security title of a
conditional vendor or lessor, or other security interest of any kind, whether
arising under a security agreement, mortgage, deed of trust, chattel mortgage,
assignment, pledge, retention of security title, financing or similar statement
or notice or arising as a matter of law, judicial process or otherwise.
"Loans" shall mean, collectively, all Revolving
Loans, the Term A Loan and the Term B Loan, and "Loan" shall mean any thereof.
"Lockbox" - see Section 6.2(a).
"Loss Property" - see Section 7.6.
"Loss Proceeds" - see Section 7.6.
"Mailing Lists" shall mean [the proprietary mailing
lists of any Borrower which are serviced, on the date hereof, by data processing
servicers MBS Multinode and First Data Solutions.
"Manager" shall mean First Source Financial, Inc., a
Delaware corporation, and its successors and assigns, as manager of Lender.
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"Master Accounts" - see Section 6.2(a).
"Master Account Bank" shall mean each bank and other
entity serving in the capacity of agent for Lender under the Bank Agency
Agreement (including any successor Bank Agency Agreement). Initially the Master
Account Bank shall mean LaSalle Bank National Association, a national banking
association.
"Master Agents" - see Section 14.23.
"Master Lender" - see Section 14.23.
"Material Adverse Effect" shall mean (a) a material
adverse effect on the financial condition, operations, assets, business or
prospects of any Borrower, any Subsidiary of any Borrower or Parent, or (b) a
material impairment of the ability of any Borrower, any Subsidiary of any
Borrower or Parent to perform its obligations in connection with this Agreement
or any of the Related Documents to which it is a party or of Lender to enforce
or collect any of the Liabilities.
"Material Contract" - see Section 10.6.
"Material Intellectual Property Right" - see Section
10.14.
"Monthly Report" shall have the meaning ascribed
thereto in Section 11.1(m).
"Multiemployer Plan" shall mean any "multiemployer
plan" within the meaning of Section 3(37) or 4001(a)(3) of ERISA to which any
Borrower or a current or past member of the Controlled Group is making or has
made contributions, or as to which any Borrower or any current or past member of
the Controlled Group otherwise has or could have any liability.
"Net Capital Expenditures" shall mean for any period
Gross Capital Expenditures minus proceeds from Permitted Purchase Money Debt (as
hereinafter defined) used to finance Gross Capital Expenditures.
"Net Income" shall mean, for any period, net income
or loss of the Consolidated Entity as it would appear on an income statement of
the Consolidated Entity for such period prepared in accordance with GAAP, less,
to the extent not subtracted from gross income in computing net income, the
amounts paid or payable by Parent under Section 11.10(b)(iii) hereof.
"Net Worth" shall mean total assets minus total
liabilities of the Consolidated Enity as it would appear on a balance sheet of
the Consolidated Entity prepared in accordance with GAAP.
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"Note" and "Notes" shall mean Term Note A, Term Note
B and the Revolving Note, or any of them.
"Operating Accounts" - see Section 6.2(b).
"Organization Documents" of a Person shall mean, as
applicable, the articles or certificate of incorporation, articles of
organization, operating agreement, bylaws, partnerships agreement and all other
organization documents of such Person.
"Parent" shall mean Diplomat Direct Marketing
Corporation, a Delaware corporation.
"Parent Guaranty" shall mean the Guaranty executed by
Parent in favor of Lender dated even date herewith.
"PBGC" shall mean Pension Benefit Guaranty
Corporation, and any entity succeeding to any or all of its functions under
ERISA.
"Pension Plan" shall mean any "employee pension
benefit plan", as such term is defined in Section 3(2) of ERISA (other than a
Multiemployer Plan), which is (a) subject to Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code or Section 302 of ERISA
and (b) is or has been maintained by any Borrower or a current or past member of
the Controlled Group, or as to which any Borrower or any member of the
Controlled Group otherwise has or could have any liability.
"Permitted LC" shall mean a Letter of Credit issued
with Lender's prior written consent; provided, that (a) each such Letter of
Credit shall expire pursuant to its terms on or before the Revolving Loan
Termination Date, (b) at no time shall aggregate Total Revolving and LC Exposure
of the Borrowers exceed the amount of the Revolving Commitment in effect at such
time, (c) any Borrower's reimbursement obligations with respect to each such
Letter of Credit shall be secured by an LC Guaranty and (d) Lender and the
respective Issuer shall have agreed in writing that the Relevant Cap for such LC
Guaranty shall be increased by an amount equal to the Stated Amount of such
Letter of Credit.
"Permitted Liens" shall mean any of the following
Liens:
(a) Liens in favor of Lender, granted pursuant to the
Collateral Documents;
(b) Liens (i) in connection with the acquisition of
fixed assets after the date hereof and attaching only to the
Property being acquired, if the Indebtedness secured thereby
is incurred in connection with the acquisition and does not
exceed eighty percent (80%) of the fair market value of such
Property at the time of acquisition thereof, and (ii) Liens
on property being
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leased pursuant to leases which are Capitalized Lease
Obligations permitted under this Agreement, provided that the
aggregate outstanding amount of all such Indebtedness and
Capitalized Lease Obligations described in the preceding
clauses (i) and (ii) does not at any time exceed $1,000,000
("Permitted Purchase Money Debt");
(c) Liens for current taxes or other governmental
charges or levies which are not delinquent or are being
contested in good faith and by appropriate proceedings, and
with respect to which adequate reserves have been established,
and are being maintained, in accordance with GAAP;
(d) mechanic's, worker's, materialmen's and other
like Liens arising in the ordinary course of business in
respect of obligations which are not delinquent or which are
being contested in good faith and by appropriate proceedings,
and with respect to which adequate reserves have been
established, and are being maintained, in accordance with
GAAP;
(e) Liens arising in the ordinary course of business
for sums being contested in good faith and by appropriate
proceedings, and with respect to which adequate reserves have
been established, and are being maintained, in accordance with
GAAP, or for sums not due, and in any case not involving any
deposits or advances for borrowed money or the deferred
purchase price of Property or services;
(f) zoning ordinances, easements, licenses,
reservations, covenants, conditions or restrictions on the use
of real property which, in Lender's determination, are not
violated by existing uses or improvements, do not in the
aggregate interfere with the use of the related real property
and do not adversely affect the marketability of the title to
the related real property;
(g) Liens incurred in the ordinary course of business
in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or
benefits;
(h) the Lien in favor of Congress on cash collateral
to secure the Congress LC Liabilities;
(i) the Lien to secure Subordinated Debt pursuant to
and under the terms described in the Subordination Agreement;
and
(j) Liens shown on Schedule 10.5.
"Person" shall mean any natural person, corporation,
firm, partnership, limited liability company, limited liability partnership,
firm, trust, association,
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government, governmental agency, Employee Benefit Plan or other entity, whether
acting in an individual, fiduciary or other capacity.
"Pledge Agreements" shall mean the (i) Pledge
Agreement from Parent and (ii) Pledge Agreement from ▇▇▇▇▇▇ ▇▇▇▇▇, each in favor
of Lender dated of even date herewith, as the same may, in each case, be
amended, modified, supplemented or replaced from time to time.
"Pledged Cash Collateral" shall mean any certificates
of deposit or other deposits or depositary accounts (i) pledged by ▇▇▇▇▇▇ ▇▇▇▇▇
to Lender and maintained at the Master Account Bank pursuant to a pledge or
security agreement in form and substance satisfactory to the Lender and the
Master Account Bank and (ii) in which Lender shall have a valid and perfected
first priority Lien.
"Preferred Stock Documents" shall mean the
Certificates of Designation (as amended and filed with the Delaware Secretary of
State) for Series B, C, D, E and F Preferred Stock of Parent.
"Prime Rate" shall mean the highest "prime rate" of
interest reported, from time to time, by The Wall Street Journal; provided, that
in the event that The Wall Street Journal ceases to be published or to report
rates of the aforesaid type, the "Prime Rate" shall be determined from a
comparable source chosen by Lender in good faith. The "Prime Rate" shall change
effective on the date of the publication of any change in the applicable index
by which such "Prime Rate" is determined.
"Prime Rate Loans" shall mean Loans or the portion
thereof which bear interest determined by reference to the Prime Rate.
"Prime Rate Revolving Loan" shall mean a Revolving
Loan which bears interest based on Prime Rate.
"Prime Rate Term Loan" shall mean that portion of any
Term Loan which bears interest based on the Prime Rate.
"Property" shall mean all types of real, personal or
mixed property and all types of tangible or intangible property.
"Real Estate" of a Person shall mean the real
property, mineral rights, leasehold or other interests in real property together
with any purchase options and other rights related to such leaseholds or other
interests owned, leased, used or operated now or hereafter by such Person, all
Fixtures and personal property used in conjunction therewith and such Person's
rights to leases, rents and profits with respect thereto.
"Reimbursement Obligations" - see Section 2.12(a).
-20-
"Related Documents" shall mean, collectively, the
Notes, this Agreement and the Collateral Documents, in each case as the same may
be amended, modified or supplemented from time to time pursuant to the terms
hereof or thereof.
"Related Transactions" shall mean all transactions
contemplated by this Agreement and the Related Documents, including, without
limitation, the making of any Loans and the granting of Liens on the Collateral
to secure the Liabilities.
"Reportable Event" shall have the meaning given to
such term under Section 4043 of ERISA or the regulations issued thereunder.
"Requirement of Law" for any Person shall mean the
corporate charter and by-laws or other Organization Documents of such Person,
and any law, treaty, rule, ordinance or regulation or determination of an
arbitrator or a court or other governmental authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its Property is subject.
"Responsible Officer" shall mean, for any Person, the
chief executive officer or chief operating officer of such Person.
"Revolving Commitment" - see Section 2.1(c).
"Revolving Commitment Allocation" shall mean, with
respect to any Borrower, that portion of the Revolving Commitment which may be
utilized by such Borrower for Revolving Loans and LC Guaranties as set forth
below:
--------------------------------------------------------------------------------
Borrower Revolving Commitment Allocation
--------------------------------------------------------------------------------
Brownstone $5,500,000
--------------------------------------------------------------------------------
Ecology Kids $1,800,000
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇ $5,700,000
--------------------------------------------------------------------------------
Diplomat $-0-
--------------------------------------------------------------------------------
Total $13,000,000
--------------------------------------------------------------------------------
"Revolving Loan" - see Section 2.1(c).
"Revolving Loan Termination Date" - see Section
2.1(c).
"Revolving Note" - see Section 3.3.
"▇▇▇▇▇ Guaranty" shall mean the Guaranty executed by
▇▇▇▇▇▇ ▇▇▇▇▇ in favor of the Lender and dated even date herewith.
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"Security Agreement" - shall mean the Security
Agreement of the Borrowers made in favor of the Lender dated of even date
herewith, as the same may be amended, modified, supplemented or replaced from
time to time.
"Solvent" with respect to any Person on any date of
determination, shall mean that (i) the fair saleable value of such Person's
Property is in excess of the total amount of the present value of its
Liabilities (including for purposes of this definition all liabilities, whether
or not reflected on a balance sheet prepared in accordance with Generally
Accepted Accounting Principles, and whether direct or indirect, fixed or
contingent, liquidated or unliquidated, secured or unsecured, disputed or
undisputed), (ii) such Person is able to pay its debts or obligations in the
ordinary course as they mature, and (iii) such Person has capital sufficient to
carry on its business as conducted and as proposed to be conducted. In computing
the amount of contingent, unliquidated or disputed liabilities at any time, such
liabilities will be computed at the amount which, in light of all of the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability. "Solvency"
shall have a correlative meaning.
"Store Inventory" shall mean Inventory of any
Borrower which is located at a store of such Borrower maintained for sales to
Consumers.
"Subordinated Debt" shall have the meaning assigned
to that term in the Subordination Agreement.
"Subordinated Debt Documents" shall have the meaning
assigned to that term in the Subordination Agreement.
"Subordination Agreement" shall mean that certain
Intercreditor and Subordination Agreement dated of even date herewith between
FINOVA Mezzanine Capital Inc. and Lender.
"Subsidiary" shall mean, with respect to any Person
(herein referred to as the "parent"), any corporation, association or other
business entity (whether now existing or hereafter organized) of which at least
a majority of the securities or other ownership interests having ordinary voting
power for the election of directors (or their equivalent under the laws of the
jurisdiction of organization of such person) is, at the time any determination
is being made, owned or controlled by the parent or one or more subsidiaries of
the parent or by parent and one or more subsidiaries of the parent.
"Term A Commitment" - see Section 2.1(a).
"Term B Commitment" - see Section 2.1(b).
"Term A Loan" - see Section 2.1(a).
-22-
"Term B Loan" - see Section 2.1(b).
"Term Loans" shall mean the Term A Loan and the Term
B Loan, and "Term Loans" shall mean any of them.
"Term Note A" - see Section 3.1.
"Term Note B" - see Section 3.2.
"Total Fixed Charges" shall mean, for any period, the
sum of (i) all scheduled payments of interest or principal on account of
Indebtedness of the Consolidated Entity, including any and all penalties,
premiums, prepayment fees or the like thereon (including without limitation any
scheduled payments on the Term Loans with respect to such period, plus (ii) to
the extent not subtracted in determining Net Income and without double counting,
all amounts paid by the Consolidated Entity with respect to such period (A) to
purchase, redeem or otherwise acquire any Equity Interests, or (B) in respect of
the purchase of or satisfaction of any principal installment or any Indebtedness
of any Affiliate of any Borrower, all as determined for the Consolidated Entity
in accordance with GAAP. Nothing contained herein shall be deemed to permit any
Borrower or any Subsidiary of any Borrower to take any action otherwise
prohibited by this Agreement. For purposes of the foregoing, (1) "scheduled
payments" shall not include repayments of Loans pursuant to Section 7.3 and (2)
prepayments of Indebtedness and redemptions of Equity Interests made with Equity
Sale Proceeds and permitted by this Agreement shall not be included in the
calculation of Total Fixed Charges, except to the extent regularly scheduled
payments of principal were otherwise required during the period such prepayment
occurred.
"Total Revolving and LC Exposure" shall mean, at any
time with respect to any Borrower, the sum of (a) such Borrower's LC Exposure,
if any, at such time and (b) the then aggregate outstanding principal amount of
all Revolving Loans allocated to such Borrower pursuant to Section 2.14 hereof.
"Unapplied Insurance or Condemnation Proceeds" -
shall mean Loss Proceeds which Lender may apply against the Liabilities in
accordance with Section 7.6.
"Unmatured Event of Default" shall mean any event or
condition which if it continues uncured will, with lapse of time or notice or
lapse of time and notice, constitute an Event of Default.
"Week" shall mean the time period commencing with the
opening of business on a Tuesday and ending at the close of business the
following Monday.
-23-
"Welfare Plan" shall mean any "employee welfare
benefit plan", as such term is defined in Section 3(1) of ERISA.
SECTION 1.2 Accounting and Financial Determinations. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Agreement or the Related Documents, such determination
or calculation shall be made, to the extent applicable and except as otherwise
specified in this Agreement or such Related Document, in accordance with GAAP;
provided, that if any change in generally accepted accounting principles from
those applied in the preparation of the financial statements referred to in
Section 10.3 hereof is occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), the initial announcement of which
change is made after the Closing Date, results in a change in the method of
calculation of financial covenants, standards or terms found in Sections 1 or 11
hereof, the parties hereto agree to enter into good faith negotiations in order
to amend such provisions so as to reflect such changes with the desired result
that the criteria for evaluating the Consolidated Entity's or any Borrower's
financial condition shall be the same after such changes as if such changes had
not been made; and provided, that until such time as the parties hereto agree
upon such amendments, such financial covenants, standards and terms shall be
construed and calculated as though such change had not taken place. When used
herein, the term "financial statement" shall include the notes and schedules
thereto, if any. All other terms contained in this Agreement (and which are not
otherwise specifically defined herein) shall have the meanings provided in
Article 9 of the Uniform Commercial Code of the State of Illinois (the "UCC") to
the extent the same are used or defined therein. All determinations of the book
value of Inventory contemplated hereby shall be at the lower of cost (on a
first-in, first-out basis) or market.
SECTION 1.3 Cross References; Headings. The words "hereof",
"herein" and "hereunder" and words of a similar import when used in this
Agreement or in any of the Related Documents shall refer to this Agreement or
such Related Document as a whole and not to any particular provision of this
Agreement or such Related Document. Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits
in or to this Agreement unless otherwise specified. Any reference in any Section
or definition to any clause is, unless otherwise specified, to such clause of
such Section or definition. The various headings in this Agreement and the
Related Documents are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such Related Document or any
provision hereof or thereof.
SECTION 2 COMMITMENTS OF LENDER; LOAN REQUESTS; REDUCTION OR
TERMINATION OF THE COMMITMENTS; PREPAYMENTS; MAKING OF PAYMENTS; SETOFF.
-24-
SECTION 2.1 Commitments. Subject to the terms and conditions
of this Agreement, Lender shall:
(a) Term A Commitment. Make a loan on a joint and several
basis to Borrowers on the Closing Date in the amount of $3,000,000 (herein
referred to the "Term A Loan"). Amounts borrowed under this Section 2.1(a) and
repaid may not be reborrowed. The foregoing commitment of Lender is herein
called the "Term A Commitment." For purposes of calculating the Allocation
Accounts contemplated by Section 2.14 hereof and without affecting the joint and
several nature of the Liabilities hereunder, the Term A Loan shall be allocated
as follows:
-----------------------------------------------------------
Borrower Allocation of Term A Loan
-----------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇ $1,200,000
-----------------------------------------------------------
Brownstone $1,500,000
-----------------------------------------------------------
Ecology Kids $300,000
-----------------------------------------------------------
(b) Term B Commitment. Make a loan on a joint and several
basis to Borrowers on the Closing Date in the amount of $1,000,000 (herein
referred to the "Term B Loan"). Amounts borrowed under this Section 2.1(b) and
repaid may not be reborrowed. The foregoing commitment of Lender is herein
called the "Term B Commitment." For purposes of calculating the Allocation
Accounts contemplated by Section 2.14 hereof and without affecting the joint and
several nature of the Liabilities hereunder, the Term B Loan shall be allocated
as follows:
-----------------------------------------------------------
Borrower Allocation of Term B Loan
-----------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇ $400,000
-----------------------------------------------------------
Brownstone $500,000
-----------------------------------------------------------
Ecology Kids $100,000
-----------------------------------------------------------
(c) Revolving Commitment. Make loans to Borrowers (herein
collectively called the "Revolving Loans" and individually called a "Revolving
Loan") on a joint and several revolving basis from time to time before May 13,
2002, or such earlier date as the Revolving Commitment may be terminated
pursuant to Section 13.2 hereof (herein called the "Revolving Loan Termination
Date") in such amounts as the Borrowers from time to time may request up to
$13,000,000 (the foregoing commitment
-25-
of Lender, as it may be reduced in accordance with the terms hereof from time to
time, is herein called the "Revolving Commitment"), less all reductions in the
amount of the Revolving Commitment pursuant to Section 2.6 of this Agreement,
provided, that Lender shall not be required to make any Revolving Loan if, after
giving effect to such Revolving Loan, (i) the Total Revolving and LC Exposure
for any Borrower would exceed the amount of such Borrower's Revolving Commitment
Allocation then in effect or (ii) Total Revolving and LC Exposure for any
Borrower would exceed such Borrower's Borrowing Base at such time. Lender
reserves the right in its reasonable business judgment with respect to the
Borrowing Base to (i) adjust any eligibility criteria or establish new
eligibility criteria, (ii) modify the advance rates against Eligible Accounts,
Eligible Credit Card Accounts, Eligible Deferred Billing Program Accounts and
Eligible Inventory and (iii) establish reserves against Borrowing Availability.
(c) Letter of Credit Commitment. Issue guaranties to an
Issuer, or any other assurance of repayment acceptable to such Issuer which
Lender in its sole discretion may offer (each such guaranty or other assurance
herein, together with any extension or renewals thereof, or guaranties issued by
Lender in substitution therefor from time to time, called an "LC Guaranty") of
reimbursement obligations of a Borrower arising under reimbursement agreements
in such form as is satisfactory to Lender (herein collectively called the "LC
Reimbursement Agreements" and individually called an "LC Reimbursement
Agreement"), in each case executed in connection with Permitted LCs; provided,
that Lender shall not be required to issue any LC Guaranty if, after giving
effect to such issuance (i) the Total Revolving and LC Exposure for any Borrower
would exceed the amount of such Borrower's Revolving Commitment Allocation then
in effect or (ii) Total Revolving and LC Exposure for any Borrower would exceed
such Borrower's Borrowing Base at such time, and provided, further, that in no
event shall the aggregate amount of all reimbursement obligations of all
Borrowers secured at any time pursuant to LC Guaranties exceed $1,500,000. All
LC Guaranties shall expire on or before the Revolving Loan Termination Date. The
foregoing commitment of Lender is herein called the "Letter of Credit
Commitment."
SECTION 2.2 Final Maturity Date. This Agreement shall be
effective from the Closing Date until the Final Maturity Date; provided, that
all of Lender's rights and remedies under this Agreement shall survive such
termination until all of the Liabilities have been finally paid in full in cash.
In addition, this Agreement may be terminated as set forth in Section 13.2. Upon
the effective date of termination, all of the Liabilities shall become
immediately due and payable without notice or demand notwithstanding any terms
contained herein or in any Note to the contrary. Notwithstanding any termination
of this Agreement, until (i) all of the Liabilities except unmatured contingent
Liabilities (other than those Liabilities described in clauses (ii) and (iii)
below) for which no claim has been asserted shall have been paid in full in
cash, (ii) each LC Guaranty shall have been terminated and (iii) Borrowers shall
have provided to Lender security on terms satisfactory to Lender with respect to
any pending or overtly threatened action against any Person which could result
in a claim against Borrowers by any Indemnitee for indemnification
-26-
under Section 14.5, Borrowers shall remain bound by the terms of this Agreement
and Lender shall be entitled to retain its Liens on the Collateral.
SECTION 2.3 Revolving Loan Requests.
(a) With respect to borrowings consisting of Prime Rate Loans, the
Funds Administrator shall give notice to Lender of each proposed borrowing by
10:00 A.M. Chicago time on the day of the proposed Funding Date of such
borrowing. Loans made on any Funding Date shall be in an aggregate minimum
amount of $5,000 and integral multiples of $5,000 in excess thereof with respect
to the amount funded to any Operating Account.
(b) With respect to borrowings consisting of LIBOR Rate Loans, the
Funds Administrator shall give notice to Lender of each proposed borrowing by
10:00 A.M. Chicago time no later than three (3) Business Days and no more than
five (5) Business Days prior to the proposed date of such borrowing. With
respect to borrowings comprised of LIBOR Rate Loans, the Funds Administrator
shall deliver to Lender written notice of each such proposed borrowing
substantially in the form set forth in Exhibit B (each a "Notice of LIBOR
Activity") by 10:00 A.M. Chicago time at least three (3) Business Days prior to,
but in any event no more than five (5) Business Days prior to, the proposed date
of such borrowing. LIBOR Rate Loans shall be in an aggregate minimum amount of
$500,000 and integral multiples of $100,000 in excess thereof (or in such other
amount as Lender shall permit as shall be evidenced by the making of such LIBOR
Rate Loan by Lender).
(c) Each notice given pursuant to this Section 2.3 shall be irrevocable
and Borrowers shall be bound to make a borrowing in accordance therewith.
Subject to receipt by Lender of the documents required under Section 12 with
respect to a borrowing and the satisfaction of all other conditions precedent to
such borrowing set forth in this Agreement, on the requested Funding Date Lender
shall pay over such funds by wire transfer to the Operating Account (except
that, with respect to the initial Loans, disbursement shall be according to
instructions to be agreed upon by Lender and Funds Administrator on or prior to
the Closing Date). Such notice shall be in writing or by "Electronic Notice"
and, if by Electronic Notice, shall be confirmed in writing on or before the
fifteenth Business Day of the first calendar month following the date of such
borrowing by delivery of a Borrowing Certificate to Lender. Each such notice
shall specify the date, amount, type of borrowing and the Borrower for whose
account such Loan is being made. "Electronic Notice" shall mean notice sent via
facsimile. Lender shall not incur any liability to Borrowers in acting upon any
Electronic Notice referred to above which Lender believes in good faith to have
been given by a duly authorized officer or other persons authorized to borrow on
behalf of the Funds Administrator or a Borrower or for otherwise acting in good
faith under this Section 2.3 and, upon funding of any Loans by Lender in
accordance with this Agreement pursuant to any such Electronic Notice, Borrowers
shall have effected a Loan hereunder.
-27-
SECTION 2.4 Certain Waivers. Borrowers waive notice of the
creation of any of the Liabilities and all other notices whatsoever to Borrowers
with respect to the Liabilities except notices required under Section 13.1.
SECTION 2.5 Mandatory and Permitted Prepayments of the Term
Loans.
(a) Scheduled Amortization of the Term Loans.
(i) Term A Loan. Borrowers shall repay the principal
of the Term A Loan in twelve (12) consecutive quarterly installments, each of
the first eleven (11) of which installments shall be in the amount of $250,000
and shall be payable on the fifteenth day of each consecutive calendar quarter
commencing August 15, 1999, and the final of which installments shall be in the
amount of the then remaining outstanding principal balance of the Term A Loan
and shall be payable on the Final Maturity Date.
(ii) Term B Loan. Borrowers shall repay the principal
of the Term B Loan in thirty (30) consecutive monthly installments, each of the
first twenty-nine (29) of which installments shall be in the amount of one
thirtieth (1/30th) of the principal amount of the Term B Loan outstanding and
unpaid as of November 14, 1999, and shall be payable on the fifteenth day of
each consecutive calendar month commencing November 15, 1999, and the final of
which installments shall be in the amount of the then remaining outstanding
principal balance of the Term B Loan and shall be payable on the Final Maturity
Date.
(b) Mandatory Prepayments. Additionally, upon receipt by any
Borrower or any Subsidiary of any Borrower or Parent of (i) with respect to the
Borrowers and their respective Subsidiaries, any Unapplied Insurance or
Condemnation Proceeds (except as to Inventory), Asset Sale Proceeds, and (ii)
with respect to Borrowers, their Subsidiaries and Parent, Equity Sale Proceeds,
Borrowers shall make a mandatory prepayment of the Term Loans as set forth below
in the amount thereof, subject to Lender's right to otherwise apply such
payments after the occurrence and during the continuance of an Event of Default.
Each such payment shall be accompanied by accrued interest on such principal
amount. Each such payment shall be applied to reduce, first, the remaining
regularly scheduled principal installments of the Term B Loan in inverse order
of their maturity until the Term B Loan is paid in full, and second, the
remaining regularly scheduled principal installments of the Term A Loan in
inverse order of their maturity until the Term A Loan is paid in full.
Notwithstanding the foregoing to the contrary, with respect to Equity Sale
Proceeds, the first $1,000,000 of any Equity Sale Proceeds shall be applied to
the Term B Loan as aforesaid, the next $4,000,000 (minus the amount by which
Borrowing Availability (calculated as of the date such Equity Sale Proceeds are
received) in the aggregate for all Borrowers is less than $1,000,000, which
amount shall be applied to the Revolving Loans as a mandatory prepayment in
accordance with Section 7.3) of Equity Sale Proceeds and any excess Equity Sale
Proceeds not applied to the Term B Loan may be retained by the Borrowers and the
Parent for uses consistent with this Agreement and
-28-
the Related Documents, the next $1,000,000 of Equity Sale Proceeds shall be
applied to the Term A Loan as aforesaid, and any Equity Sale Proceeds in excess
of $6,000,000 may be retained by the Borrowers and the Parent for uses
consistent with the terms of this Agreement and the Related Documents.
(c) Voluntary Prepayments. In addition to the mandatory
repayments of the Term Loans under clauses (a) and (b) above, Borrowers may
voluntarily from time to time on at least five (5) Business Days' prior written
irrevocable notice to Lender prepay any Term Loan, in whole or in part. Each
such voluntary prepayment of any Term Loan, if in part, shall be in an aggregate
amount of at least $250,000 and an integral multiple of $100,000. Each such
partial prepayment shall be applied to reduce the remaining regularly scheduled
principal installments of such Term Loan to be prepaid in inverse order of their
maturity. Each such payment shall be accompanied by accrued interest on such
principal amount.
Any prepayments of the Term Loans shall be accompanied by the amounts,
if any, required by Section 4.4. Any prepayments of the Term Loans not made
pursuant to (i) clause (a) above, (ii) in connection with any Equity Sale
Proceeds received by Lender prior to October 14, 1999 or (iii) on the Term B
Loan prior to October 14, 1999, shall be accompanied by the amounts required by
Section 2.8 hereof.
SECTION 2.6 Voluntary Reduction or Termination of the
Revolving Commitment. Borrowers may voluntarily from time to time on at least
five (5) Business Days' prior written irrevocable notice to Lender permanently
reduce the Revolving Commitment in whole or in part. If in part, any such
reduction to be in an aggregate amount of at least $1,000,000 and an integral
multiples of $500,000 and Borrowers shall indicate in such notice the
corresponding reduction(s) in the Revolving Commitment Allocations.
SECTION 2.7 Mandatory Prepayments on Revolving Loans.
(a) Concurrently with each reduction (including any
termination) of the Revolving Commitment (whether pursuant to Section 2.6 or
otherwise), Borrowers shall make a mandatory prepayment of the Revolving Loans
outstanding in the amount, if any, by which (i) the aggregate Total Revolving
and LC Exposure of all Borrowers exceeds (ii) the then reduced amount of the
Revolving Commitment. In addition, if at any time with respect to any Borrower
(x) the Total Revolving and LC Exposure of such Borrower shall exceed (y) such
Borrower's Borrowing Base, Borrowers shall make a mandatory prepayment of the
Revolving Loans in the aggregate amount of such excess. Each such payment shall
be accompanied by accrued interest on such principal amount together with the
amounts required by Section 4.4 hereof.
(b) If at any time the making of a deemed Revolving Loan
pursuant to the first sentence of Section 7.5 causes (a) the aggregate Total
Revolving and LC Exposure
-29-
of all Borrowers to exceed the Revolving Commitment or (b)Total Revolving and LC
Exposure for any Borrower to exceed such Borrower's Borrowing Base, then
Borrowers immediately shall make a mandatory prepayment of Revolving Loans
outstanding in the aggregate amount of such excess. Each such payment shall be
accompanied by accrued interest on such principal amount together with the
amounts required by Section 4.4 hereof.
(c) If the Term Loans have been paid in full, any amount which
would have been required to be applied to the Term Loans pursuant to Section
2.5(b) shall be applied to the Revolving Loans and shall be accompanied by
accrued interest on such principal amount together with the amounts required by
Section 4.4 hereof. If no Revolving Loans are outstanding, such amount shall be
retained as cash collateral for the LC Exposure.
SECTION 2.8 Prepayment Premium. Each voluntary reduction of
the Revolving Commitment pursuant to Section 2.6, and (without duplication) each
prepayment of all or any portion of the outstanding principal balance of the
Term Loans requiring application of this Section 2.8 under Section 2.5 hereof,
shall be accompanied in each case by a prepayment premium ("Prepayment Premium")
paid to Lender in an amount equal to: (a) if such reduction or prepayment is
made at any time during the period from and including the Closing Date to and
including the first anniversary of the Closing Date, two percent (2%) of such
prepayment or commitment reduction; (b) if such reduction or prepayment is made
at any time during the period from and after the first anniversary of the
Closing Date through and including the second anniversary of the Closing Date,
one percent (1%) of such prepayment or commitment reduction; and (c) if such
reduction or prepayment is made at any time during the period from and after the
second anniversary of the Closing Date through and including the third
anniversary of the Closing Date, one half of one percent (1/2%) of such
prepayment or commitment reduction.
SECTION 2.9 Making of Payments. All payments of principal of,
or interest on, the Notes and of all fees and other Liabilities shall be made by
Borrowers to Lender in immediately available Dollars. All such payments shall be
made to Lender's Account No. ▇▇▇▇▇▇▇ at LaSalle Bank National Association, ABA
#▇▇▇▇▇▇▇▇▇ (or such other account as Lender may from time to time specify), not
later than 11:30 A.M. Chicago time, on the date due; and funds received after
that hour shall be deemed to have been received by Lender on the next following
Business Day. Anything in this Agreement to the contrary notwithstanding, under
no circumstances shall receipt by Master Account Bank of funds of any Borrower
into a Master Account, any Bank Agent Account, any Depositary Account or the
holding of funds therein constitute repayment of Loans, or entitle any Borrower
to interest thereon, except that funds received into a Bank Agent Account prior
to 10 A.M. (Chicago time) shall, prior to an Event of Default, be applied to the
Liabilities in the manner specified by Section 7.3 hereof.
SECTION 2.10 Due Date Extension. If any payment of principal,
interest or fees with respect to any of the Loans falls due on a Saturday,
Sunday or other
-30-
day which is not a Business Day, then such due date shall be extended to the
next following Business Day, and additional interest and fees shall accrue and
be payable for the period of such extension.
SECTION 2.11 Setoff. Lender, Master Account Bank (as agent of
Lender) and any holder of a Note shall have all rights of setoff (up to the full
amount of the Liabilities at the time of any such setoff) provided by applicable
law, and in addition thereto, at any time that (a) any payment or amount owing
by any Borrower under or in connection with this Agreement or the Related
Documents is then due to Lender or any such holder of a Note or (b) any Event of
Default exists, Lender (or Master Account Bank as Lender's agent) and any such
holder of a Note may apply to the payment of such payment or other amount due by
a Borrower any and all balances, credits, deposits, accounts or moneys of such
Borrower then or thereafter with Lender (or Master Account Bank as Lender's
agent) or such holder of a Note.
SECTION 2.12 Certain Matters Relating to LC Guaranties.
(a) Notwithstanding any provision herein to the contrary,
immediately upon any Issuer's presentation of any demand for payment under an LC
Guaranty, Borrowers shall be jointly and severally obligated to reimburse Lender
on the date on which Lender honors such demand, in immediately available funds
equal to the amount of such honored demand (such obligations being referred to
herein as "Reimbursement Obligations"). Lender shall use its best efforts to
give notice to the Funds Administrator of the amount of such honored demand by
Lender, provided, that the failure to give such notice shall not relieve
Borrowers of their Reimbursement Obligation nor give rise to or result in any
liability of Lender. If all or any part of such demand is not paid by Borrowers
when due, such unpaid amount shall bear interest for each day during the period
from the day of such demand until it shall be paid in full at a rate equal to
the Default Rate applicable to Revolving Loans. Borrowers shall be deemed to
have requested that such Reimbursement Obligation be converted into a Revolving
Loan. Such Reimbursement Obligation shall be so converted if, and only if, each
of the following conditions shall have been satisfied within three (3) Business
Days after the date the Reimbursement Obligation is incurred: (a) after giving
effect to such conversion, Total Revolving and LC Exposure shall not exceed the
Revolving Commitment then in effect, and (b) all other conditions precedent to
the making of a Revolving Loan shall be satisfied unless Lender shall have
waived the same (and the making of such Loan shall be deemed to be a waiver by
Lender of such right), other than any requirement that the amount of any Loan
funded to an Operating Account shall be in a minimum amount of $5,000 or an
integral multiple of $5,000. Such conversion shall be effective on the date on
which all of the conditions specified in the preceding sentence are satisfied,
and thereafter each reference in this Agreement or any other Related Document to
a Loan or Loans shall be deemed to include reference to such Reimbursement
Obligations as so converted.
(b) The joint and several obligation of Borrowers to reimburse
Lender for demands made under the LC Guaranties shall be unconditional and
irrevocable and shall
-31-
be enforced strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following: (a) lack of
validity or enforceability of the applicable LC Guaranty or Permitted LC; (b)
the existence of any claim, set-off, defense or other right which Borrowers may
have at any time against an Issuer, any Lender Party or any other Person,
whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction between
Borrowers and the beneficiary under a Permitted LC); (c) any draft, demand
certificate or any other document presented under an LC Guaranty or Permitted LC
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, except to the
extent of any gross negligence or willful misconduct of Lender; (d) payment by
Lender under the LC Guaranty against a demand which does not comply with the
terms of the LC Guaranty, provided, that such payment does not constitute gross
negligence or willful misconduct of Lender; (e) any adverse change in the
condition (financial or otherwise) of Borrowers; (f) any breach of this
Agreement by Borrowers or any Lender Party; (g) any other circumstances or
happening whatsoever, which is similar to any of the foregoing; or (h) the fact
that an Event of Default or an Unmatured Event of Default shall have occurred
and be continuing.
(c) In addition to amounts payable as elsewhere provided
herein and to the provisions of Section 14.5 hereof, Borrowers hereby jointly
and severally agree to indemnify, exonerate and hold each Lender Party free and
harmless from and against any and all claims, demands, actions, causes of
action, suits, losses, costs (including attorneys' fees and disbursements),
charges, liabilities and damages, and expenses in connection therewith
(irrespective of whether such Person is a party to the action for which
indemnification hereunder is sought) which such Lender Party incurs or is
subject to as a consequence, directly or indirectly, of (i) the issuance of any
LC Guaranty, other than as a result of the gross negligence or willful
misconduct of such Person as determined by a court of competent jurisdiction, or
(ii) the failure of Lender to honor a demand under an LC Guaranty as a result of
any act or omission relating to an LC Guaranty, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental authority
(herein all such acts or omissions being called "Governmental Acts"). All
obligations under this Section 2.12(c) shall survive any termination of this
Agreement.
(d) As among Borrowers and Lender Parties, Borrowers assume
all risks of the acts and omissions of, or misuse of an LC Guaranty by, the
applicable Issuer or any beneficiary of a Permitted LC. Without limiting the
foregoing, Lender shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of an LC Guaranty
or Permitted LC, even if such document is proven to be in any respect invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
an LC Guaranty or Permitted LC or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) the failure of the beneficiary of a Permitted LC to comply
fully with conditions required in order to draw thereupon, or
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the failure of an Issuer to comply fully with conditions required in order to
demand under an LC Guaranty; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, facsimile,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under a Permitted
LC or a demand under an LC Guaranty or of the proceeds of either thereof; (vii)
the misapplication by an Issuer of the proceeds of any demand under an LC
Guaranty; and (viii) any consequences arising from causes beyond the control of
such Lender Party, including, without limitation, any Governmental Acts. None of
the above shall affect, impair or prevent the vesting of any of any Lender
Party's rights or powers hereunder. Without limiting the foregoing provisions of
this Section 2.12, any action taken or omitted by any Lender Party under or in
connection with an LC Guaranty shall not put Lender Party under any resulting
liability to Borrowers.
SECTION 2.13 Loan Account. Lender shall maintain a loan
account (each, a "Loan Account") on its books for Borrowers in which shall be
recorded (i) all Loans and advances made pursuant to this Agreement, (ii) the
issuance of all LC Guaranties, (iii) all payments made on such Loans and
advances and (iv) all other appropriate debits and credits as provided in this
Agreement including all fees, charges, expenses and interest. The failure so to
record any such information or any error in so recording any such information
shall not, however, limit or otherwise affect the actual joint and several
obligations of Borrowers hereunder or under the Notes to repay the principal
amount of all Loans together with all interest accruing thereon. All entries in
the Loan Accounts shall be made in accordance with Lender's customary accounting
practices as in effect from time to time. Borrowers shall pay the Liabilities
reflected as owing by it under the Loan Accounts and all other Liabilities
hereunder as such amounts become due or are declared due pursuant to the terms
of this Agreement. So long as an Unmatured Event of Default or an Event of
Default shall have occurred and be continuing, Borrowers irrevocably waive the
right to direct the application of any and all payments at any time or times
thereafter received by Lender from or on behalf of Borrowers, and Borrowers do
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and to reapply any and all payments received at any time or times
hereafter against the Liabilities in such manner as Lender may deem advisable
notwithstanding any previous entry by Lender upon the Loan Account or by Lender
on any other books and records.
SECTION 2.14 Allocation of Loans and Expenses.
(a) Borrowers maintain an integrated cash management system
reflecting their interdependence on one another and the mutual benefits shared
among them as a result of their respective operations. In order to efficiently
fund and operate their respective businesses and minimize the number of Loans
which they will request under this Agreement and thereby reduce the
administrative costs and record keeping required in connection therewith,
including the necessity to enter into and maintain separately identified and
monitored borrowing facilities, Borrowers have requested, and the Lender have
agreed that, subject to Section 14.24, (i) all Loans will be advanced to and for
the
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account of Borrowers on a joint and several basis to the Operating Accounts and
(ii) all Letters of Credit will be issued pursuant to an application therefor
executed by the Funds Administrator on behalf and for the account of the
Borrower or Borrowers specified by the Funds Administrator in such application.
Each Borrower hereby acknowledges that it will be receiving a direct benefit
from each Loan made and each Letter of Credit issued pursuant to this Agreement.
(b) In order to track more precisely the respective recipients
of the proceeds of each Loan and the Borrower receiving the primary benefit from
the issuance of each Letter of Credit, and to assist the Funds Administrator,
Borrowers and Lender in administering the Loans and the Letters of Credit, each
Borrower has agreed with Lender to cause the Funds Administrator to establish
and maintain, and the Funds Administrator hereby agrees to establish and
maintain, accounts with respect to each Borrower (each Borrower's "Allocation
Account") in which the Funds Administrator shall record its good faith
allocation to each of the Borrowers of (w) the proceeds, if any, of each Loan
received by or for the account of such Borrower, (x) payments made to Lender on
account of the Liabilities of such Borrower, (y) the aggregate face amount of
all outstanding Letters of Credit with respect to which such Borrower will
receive the benefit and (z) all previously unallocated expenses.
(c) As soon as available, but not later than fifteen (15)
Business Days after the last Business Day of each month ending after the Closing
Date, the Funds Administrator shall deliver to Lender and each Borrower a report
prepared by or under the supervision of the chief financial officer of the Funds
Administrator, and certified by such officer, setting forth with respect to each
Borrower the balance of the Allocation Account of such Borrower as of the end
of, and all activity occurring in such Allocation Account during, such month.
Absent demonstrable error, each such monthly statement shall be final,
conclusive and binding on the respective Borrowers.
SECTION 2.15 Statements. All Loans and advances to the Funds
Administrator or any Borrower, and all other debits and credits provided for in
this Agreement, shall be evidenced by entries made by Lender in the Loan
Accounts and in Lender's books and records showing the date, amount and
character for each such debit or credit. Until such time as Lender shall have
rendered to Borrowers written statements of account as provided herein, the
balance in the Loan Accounts, as set forth on Lender's most recent printout or
other written statement, shall be rebuttably presumptive evidence of the amounts
due and owing to Lender by Borrowers; provided that any failure to so record or
any error in so recording shall not limit or otherwise affect Borrowers'
obligations to pay the Liabilities. Not more than twenty (20) days after the
last day of each calendar month, Lender shall render to the Funds Administrator
statement setting forth the principal balance of the Loan Accounts and the
calculation of interest and Fees due thereon. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors or
omissions, be presumed correct and binding upon Borrowers, and shall constitute
an account stated unless, within thirty (30) days after receipt of any statement
from Lender, Borrowers shall deliver to Lender in accordance with Section 14.3
written
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objection thereto specifying the error or errors, if any, contained in such
statement. In the absence of a written objection delivered to Lender as set
forth in this Section 2.13, Lender's statement of the Loan Account shall be
conclusive evidence of the amount of the Liabilities.
SECTION 3 NOTES; RECORDKEEPING.
SECTION 3.1 Term Note A. The Term A Loan shall be evidenced by
a promissory note of Borrowers (herein, as from time to time supplemented,
extended or replaced, called the "Term Note A") substantially in the form set
forth in Exhibit C, with appropriate insertions, dated the date hereof, payable
to the order of Lender in the maximum principal amount of the Term A Commitment.
SECTION 3.2 Term Note B. The Term B Loan shall be evidenced by
a promissory note of Borrowers (herein, as from time to time supplemented,
extended or replaced, called the "Term Note B") substantially in the form set
forth in Exhibit D, with appropriate insertions, dated the date hereof, payable
to the order of Lender in the maximum principal amount of the Term B Commitment.
SECTION 3.3 Revolving Note. The Revolving Loans shall be
evidenced, in part, by a promissory note of Borrowers (herein, as from time to
time supplemented, extended or replaced, called the "Revolving Note")
substantially in the form set forth in Exhibit E, with appropriate insertions,
dated the date hereof, payable to the order of Lender in the maximum principal
amount of the initial Revolving Commitment.
SECTION 4 INTEREST.
SECTION 4.1 Interest Rates. Borrowers hereby jointly and
severally promise to pay interest on the outstanding principal amount of each
Loan for the period commencing on the date thereof until such Loan is paid in
full, at a rate per annum determined by reference to the Prime Rate or the LIBOR
Rate, respectively. The applicable basis for determining the rate of interest
shall be selected by the Funds Administrator at the time a borrowing is
requested pursuant to Section 2.3 or at the time a Notice of LIBOR Activity is
given pursuant to Section 4.3, as the case may be. If on any day any portion of
any Loan is outstanding with respect to which notice has not been given to
Lender in accordance with the terms of this Agreement specifying the basis for
determining the rate of interest thereon, then for that day, such portion of
such Loan shall be a Prime Rate Loan and shall bear interest at a rate
determined by reference to the Prime Rate. Subject to Section 4.2, (i) each
Prime Rate Revolving Loan and LIBOR Rate Revolving Loan shall bear interest at a
rate per annum determined as follows: (a) if it is a Prime Rate Revolving Loan,
then at the sum of the Prime Rate in effect from time to time plus one and
one-quarter percent (1 1/4%); or (b) if it is a LIBOR Rate Revolving Loan, then
at the sum of the LIBOR Rate for the applicable Interest Period plus three and
one-quarter percent (3 1/4%) (the "LIBOR Revolving Margin"); (ii) each Prime
Rate Term Loan and LIBOR Rate Term Loan shall bear interest at a rate per annum
determined as
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follows: (a) if it is a Prime Rate Term Loan, then at the sum of the Prime Rate
in effect from time to time plus two percent (2%) with respect to the Term A
Loan and the Term B Loan prior to November 15, 1999 and three percent (3%) with
respect to the Term B Loan on and after November 15, 1999; or (b) if it is a
LIBOR Rate Term Loan, then at the sum of the LIBOR Rate for the applicable
Interest Period plus four percent (4%) with respect to the Term A Loan and the
Term B Loan prior to November 15, 1999 and five percent (5%) with respect to the
Term B Loan on and after November 15, 1999.
SECTION 4.2 Default Interest.
(a) During any Default Interest Period, the unpaid principal
amount of all Loans shall bear interest at the rate per annum set forth in
Section 4.1 as to such Liabilities, and (ii) all other Liabilities shall bear
interest at the rate per annum applicable to Prime Rate Revolving Loans, in each
case plus two percent (2%) per annum (the rate described in this clause (a)
being herein called the "Default Rate").
(b) For purposes of this Section 4.2, the term "Default
Interest Period" shall mean a period of time (i) if an Event of Default under
Sections 13.1(a) or 13.1(e) occurs, commencing on the date on which such Event
of Default occurs and ending on the date on which such Event of Default is
waived, or (ii) if an Event of Default (other than under Section 13.1(a) or
13.1(e)) occurs, commencing on the date of written notice to the Funds
Administrator from Lender of such occurrence and ending on the date such Event
of Default is waived by Lender.
SECTION 4.3 Conversion or Continuation.
(a) Subject to the provisions of Section 4.4, the Funds
Administrator shall have, on behalf of the Borrowers, the option (i) to convert
at any time all or any part of the outstanding Loans equal to $500,000 and
integral multiples of $100,000 in excess of that amount (or in such other amount
as Lender shall permit as shall be evidenced by the conversion of such Loan by
Lender) from a Prime Rate Loan to a LIBOR Rate Loan for a specified Interest
Period; (ii) to convert all or any part of its outstanding Loans equal to
$500,000 and integral multiples of $100,000 in excess of that amount (or in such
other amount as Lender shall permit as shall be evidenced by the conversion of
such Loan by Lender) from LIBOR Rate Loans to Prime Rate Loans on the expiration
date of any Interest Period applicable thereto; or (iii) upon the expiration of
the Interest Period with respect to any LIBOR Rate Loans, to continue all or any
portion of such Loans equal to $500,000 and integral multiples of $100,000 in
excess of that amount (or in such other amount as Lender shall permit as shall
be evidenced by the continuation of such Loan by Lender) as LIBOR Rate Loans for
a specified Interest Period, and the succeeding Interest Period(s) of such
continued Loans shall commence on the expiration date of the Interest Period
applicable thereto; provided, however, that, notwithstanding the foregoing,
pursuant to Section 4.4(h), no outstanding Loan may be continued as, or be
converted into, a LIBOR Rate Loan when any Event of Default or Unmatured Event
of Default has occurred and is continuing. The Funds Administrator shall not
select any Interest Period which (a) ends
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on a date which is later than the Final Maturity Date or the Revolving Loan
Termination Date, as applicable or (b) would cause a LIBOR Rate Loan to be
prepaid prior to the end of the relevant Interest Period resulting from a
scheduled amortization of any Term Loan.
(b) In the event the Funds Administrator shall elect, on
behalf of any Borrower, to convert or continue a Loan under Section 4.3(a), the
Funds Administrator shall deliver to Lender a written Notice of LIBOR Activity
which shall set forth the details of such proposed conversion or continuation,
as the case may be, by 10:00 A.M., Chicago time three (3) Business Days prior
to, but in any event not more than five (5) Business Days prior to, the proposed
conversion/continuation date. Upon conversion or continuation by Lender in
accordance with this Agreement pursuant to any Notice of LIBOR Activity, the
Funds Administrator shall have effected the conversion/continuation of Loans
hereunder.
(c) The officers and employees of the Funds Administrator or
any Borrower authorized to request a Loan on behalf of the Borrowers are also
authorized to request a conversion/continuation on behalf of any Borrower.
Lender shall not incur any liability to any Borrower in acting upon any notice
referred to above which Lender believes in good faith to have been given by a
duly authorized officer or other person authorized to act on behalf of the Funds
Administrator or any Borrower or for otherwise acting in good faith under this
Section 4.3.
(d) Each Notice of LIBOR Activity shall be irrevocable and
each Borrower shall be bound to convert or continue in accordance therewith.
SECTION 4.4 Special Provisions Governing LIBOR Rate Loans.
Notwithstanding anything to the contrary contained in this Agreement, the
following provisions shall govern with respect to LIBOR Rate Loans as to the
matters covered:
(a) Determination of Interest Period. By giving notice as set
forth in Sections 2.3 or 4.3(b), as the case may be, the Funds Administrator
shall, subject to the other provisions of this Section 4.4 specify whether the
Interest Period applicable to any requested LIBOR Rate Loan shall be a
one-month, three-month or six-month period. The determination of Interest
Periods shall be further subject to the following provisions: (i) in the case of
immediately successive Interest Periods, each successive Interest Period shall
commence on the day on which the immediately preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day which is not a
Business Day, the Interest Period shall be extended to expire on the next
succeeding Business Day; (iii) the Funds Administrator may not select an
Interest Period for the Term Loan which terminates later than the Final Maturity
Date or for any Revolving Loan which terminates later than the Revolving Loan
Termination Date then in effect; (iv) the Funds Administrator may not select an
Interest Period with respect to any portion of principal of a Loan which extends
beyond a date on which Borrowers could reasonably be expected to be required to
make a mandatory payment or prepayment of that portion of principal; (v) any
Interest Period which begins on a day for which there is no numerically
corresponding day in the calendar month during which such Interest Period is to
end shall (subject to clause (ii) above) end
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on the first Business Day following the last day of such calendar month; and
(vi) there shall be no more than four (4) LIBOR Rate Loans in effect at any one
time.
(b) Determination of Interest Rate. As soon as practicable on
the LIBOR Interest Rate Determination Date, Lender shall determine (which
determination shall, absent manifest error, be presumptively correct) the
interest rate which shall apply to such Loans for such Interest Period and shall
promptly give notice thereof (in writing or by telephone) to the Funds
Administrator.
(c) Substituted Rate of Borrowing. In the event that on any
LIBOR Interest Rate Determination Date with respect to any Loans, Lender shall
have determined (which determination shall be presumptively correct and binding
upon all parties) that, by reason of any changes arising after the date of this
Agreement affecting the London interbank market, adequate and fair means do not
exist for ascertaining the LIBOR Rate on a basis consistent with the essential
intent of the parties hereto, then, and in each such event, the right of the
Funds Administrator to select, on behalf of the Borrowers, the LIBOR Rate with
respect to such Loans shall be suspended until Lender shall notify the Funds
Administrator that the circumstances causing such suspension no longer exist,
and such Loans shall be Prime Rate Loans.
(d) Illegality. Notwithstanding anything to the contrary
contained in this Agreement, in the event that on any date Lender shall have
reasonably determined (which determination shall be final and conclusive and
binding upon all parties) that the making or continuation of its LIBOR Rate
Loans violates any applicable law, treaty, governmental rule, regulation or
order (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful), then, and in any such event, Lender shall
promptly give notice (by telephone confirmed in writing) to the Funds
Administrator of that determination. Subject to the prior withdrawal of a Notice
of LIBOR Activity or prepayment of the LIBOR Rate Loans of the Lender as
contemplated by the following Section 4.4(e), the obligation of Lender to make
or maintain its LIBOR Rate Loans during any such period shall be terminated at
the earlier of the termination of the Interest Period then in effect or when
required by law, and Borrowers shall no later than the termination of the
Interest Period in effect at the time any such determination pursuant to this
Section 4.4(d) is made or, earlier, when required by law, repay the LIBOR Rate
Loans of the Lender, together with all interest accrued thereon and amounts
payable under Section 4.4(f).
(e) Options of Borrower. In lieu of prepaying Lender as
required by Section 4.4(d) above, the Funds Administrator may, on behalf of the
Borrowers, by giving notice (by telephone confirmed immediately by telecopy) to
Lender and subject to the other terms of this Agreement, request the Lender to
make the LIBOR Rate Loan then being requested as a Prime Rate Loan or to
continue to maintain its outstanding Prime Rate Loan then the subject of a
Notice of LIBOR Activity as a Prime Rate Loan or to convert its LIBOR Rate Loans
then outstanding that are so affected into Prime Rate Loans at the end of the
then current Interest Period (or at such earlier time as prepayment is otherwise
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required) in the manner contemplated by Section 4.4 but without satisfying the
advance notice requirements therein.
(f) Compensation. In addition to (but without duplication of)
such amounts as are required to be paid by Borrowers pursuant to Sections 4.1,
4.2, 8.1, 8.2, 8.3 and 8.4, Borrowers shall compensate Lender for all losses,
costs, expenses and liabilities and all customary administrative charges and
fees, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
Lender to fund or maintain such Lender's LIBOR Rate Loans to Borrowers and all
customary administrative charges and fees, which Lender may sustain (i) if for
any reason a borrowing of any LIBOR Rate Loan does not occur on a date specified
therefor in a Notice of LIBOR Activity , or if a successive Interest Period does
not commence after notice therefor is given pursuant to Section 4.3(b), (ii) if
any voluntary or mandatory prepayment of any LIBOR Rate Loan occurs for any
reason on a date which is not the last day of an Interest Period, (iii) as a
consequence of any required conversion of a LIBOR Rate Loan to a Prime Rate Loan
as a result of any of the events indicated in Sections 4.4(d) or 4.4(e), or (iv)
as a consequence of any other default by any Borrower to repay any LIBOR Rate
Loan when required by the terms of this Agreement. In addition, Borrowers shall
pay, jointly and severally, Lender its customary administrative charges and fees
incurred in connection with any of the foregoing.
(g) Manner of Funding of LIBOR Rate Loans. Lender shall be
entitled to fund and maintain its funding of all or any part of any LIBOR Rate
Loan requested by the Funds Administrator on behalf of the Borrowers hereunder
in any manner it sees fit, it being understood and agreed, however, that for the
purposes of this Agreement, all determinations hereunder shall be made as if
Lender had actually funded and maintained each LIBOR Rate Loan during each
Interest Period for such Loan through the purchase of deposits in the London
interbank market having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the LIBOR Rate for such Interest Period.
(h) LIBOR Rate Loans After Default. Unless the Lender shall
otherwise agree in writing, after occurrence and during the continuance of an
Unmatured Event of Default or an Event of Default, the Funds Administrator may
not elect to have a Loan be made or continued as, or converted to, a LIBOR Rate
Loan after the expiration of any Interest Period then in effect for that Loan.
SECTION 4.5 Interest Payment Dates. Accrued interest on each
Prime Rate Loan shall be payable in arrears on the fifteenth day of each month,
and at maturity, commencing on June 15, 1999. Accrued interest on each LIBOR
Rate Loan shall be payable in arrears on each LIBOR Interest Payment Date
applicable to such Loan and, in any event, at maturity. After maturity (whether
by acceleration or otherwise), accrued interest on all Loans shall be payable on
demand.
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SECTION 4.6 Setting of Rates. Interest rates hereunder shall
be calculated from time to time by Lender and each such calculation of an
interest rate shall be conclusive and binding on Borrowers in the absence of
demonstrable error.
SECTION 4.7 Computation of Interest. Interest on each Loan
shall be computed for the actual number of days elapsed on the basis of a year
consisting of 360 days. In computing interest on any Loan, the date of the
making of the Loan or the first day of an Interest Period, as the case may be,
shall be included and the date of payment of the Loan or the expiration date of
an Interest Period, as the case may be, shall be excluded; provided, that if a
Loan is repaid on the same day on which it is made, one day's interest shall in
any event be paid on that Loan. The interest rate applicable to each Prime Rate
Loan shall change simultaneously with each change in the Prime Rate.
SECTION 5 FEES.
SECTION 5.1 Non-Use Fees. Borrowers jointly and severally
agree to pay to Lender, on a quarterly basis, a non-use fee for the period from
and including the date hereof to but excluding the Revolving Loan Termination
Date (or such earlier date on which the Revolving Loan Commitment shall be
terminated pursuant to Section 2.6 or 13.2 hereof) of three eighths of one
percent (0.375%) per annum on the excess of (i) the daily average of the then
applicable Revolving Commitment (as may be reduced in accordance with the terms
of Section 2.6 hereof) over (ii) the daily average of the aggregate principal
amount of the Total Revolving and LC Exposure. Such non-use fees shall be
payable in arrears on the fifteenth day of each February, May, August and
November (commencing on August 15, 1999) and on the Revolving Loan Termination
Date (or such earlier date on which the Revolving Loan Commitment shall
terminate) for any period then ending for which such fee shall not have been
theretofore paid.
SECTION 5.2 Commitment Fee. If not previously paid to Lender,
Borrowers jointly and severally agree to pay to Lender on the date of the
initial Loan a non-refundable commitment fee as set forth in the fee letter
between Parent and Lender dated as of April 20, 1999 (the "Fee Letter").
SECTION 5.3 Closing Fee. On the date of the initial Loan,
Borrowers jointly and severally agree to pay to Lender a non-refundable closing
fee in the amount of $106,700.
SECTION 5.4 Letter of Credit Fees. Borrowers shall pay to
Lender a fee for the period from and including the first date on which any
Permitted LC issued at its request is outstanding to but excluding the Revolving
Loan Termination Date (or such earlier date on which all of the LC Guaranties
shall no longer be of any force or effect and the originals thereof are returned
by the appropriate Issuer to Lender and the applicable Issuer shall have
acknowledged in writing that Lender shall have no further obligations
thereunder) two percent (2%) per annum on the daily average of the aggregate
stated amounts of outstanding Permitted LCs (the "LC Utilization"). Such fees
shall be payable
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in arrears on the fifteenth day of each February, May, August and November
(commencing on August 15,1999) and on the date on which all of the LC Guaranties
shall no longer be of any force or effect. The LC Utilization shall be
rebuttably presumed to equal the Cap Amount at such time, unless Lender has
actually received certification from the applicable Issuer to the contrary. All
LC Reimbursement Agreements shall require the applicable Issuer to provide
certification of the daily LC Utilization, but in the event such Issuer fails to
comply with such requirement, the preceding sentence shall apply.
SECTION 5.5 Audit Fees. Borrowers jointly and severally agree
to pay to Lender a collateral audit fee (the "Audit Fee") in an amount equal to
(i) Lender's reasonable out-of-pocket costs, plus $750 per day per person for
each field audit conducted by Lender or its agents pursuant to Section 11.3;
provided, that so long as no Unmatured Event of Default or Event of Default
shall have occurred and be continuing, Borrowers shall not be liable for
reimbursing Lender for the costs and expenses of more than four (4) field audits
in any Fiscal Year plus (ii) Lender's reasonable out-of-pocket costs of
performing semi-annual "desk-top" appraisal updates of Inventory; provided, that
so long as no Unmatured Event of Default or Event of Default shall have occurred
and be continuing, Borrowers shall not be liable for reimbursing Lender for the
costs and expenses of more than two (2) such appraisals in any 365 day period
plus (iii) so long as the Term Loan remains outstanding, Lender's reasonable
out-of-pocket costs of performing annual "desk-top" appraisal updates of the
Mailing Lists; provided, that so long as no Unmatured Event of Default or Event
of Default shall have occurred and be continuing, Borrowers shall not be liable
for reimbursing Lender for the costs and expenses of more than one such
appraisal in any Fiscal Year.
SECTION 5.6 Computation of Fees. All fees shall be computed
for the actual number of days elapsed on the basis of a year consisting of 360
days.
SECTION 6 ACCOUNT AGREEMENTS; ACCOUNTS; LIST OF ACCOUNTS AND
ACCOUNT STATEMENTS.
SECTION 6.1 Account Agreements. Prior to the date of the initial Loan,
each Borrower and the Master Account Bank and such other Persons as are
designated by Lender shall enter into a Bank Agency Agreement (herein, as it may
be amended, restated, supplemented or otherwise modified from time to time,
called the "Bank Agency Agreement"). Furthermore, each Borrower maintaining a
Depositary Account with any bank other than the Agent Bank shall enter into a
Depositary Account Agreement with the relevant Depository Bank and the Lender
(each, as the same may be amended, restated, supplemented or otherwise modified
from time to time, called a "Depositary Account Agreement"). Pursuant to the
Collateral Documents, including the Bank Agency Agreement and the Depositary
Account Agreements, each Borrower shall grant to Lender a continuing first
priority lien upon, and security interest in, the Master Account, the Agent Bank
Accounts, the other Depositary Accounts and the Operating Account, respectively,
in each case as described below (collectively, with respective to each Borrower,
such Borrower's "Accounts"), all funds, items, instruments, investments,
securities and other
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things of value at any time paid, deposited, credited to or held in the Lockbox
or Accounts (whether for collection, provisionally or otherwise), and all other
Property of such Borrower from time to time in the possession or under the
control of, or in transit to, any Lender Party, any Depository Bank or any
agent, bailee or custodian therefor, and all proceeds of all of the foregoing.
The Bank Agency Agreement and the Depositary Account Agreements shall each
specify that throughout the term of this Agreement, the Master Account Bank and
each Depository Bank (i) shall be pledgee-in-possession (for the benefit of
Lender) of the Accounts of each Borrower described therein, all Cash Instruments
of each Borrower held by such Person, and all such funds, items, instruments,
investments, securities, other things of value, Property and proceeds, (ii)
shall take such action as shall be specified in written notice from Lender to
enable Lender to exercise its rights with respect to such lien and security
interest, (iii) shall be entitled to exercise all and any rights which any
Lender Party may have under this Agreement and the Related Documents or
applicable law with respect to the Accounts of each Borrower described therein
and such other Property and (iv) shall provide Lender with copies of all
statements relating to the Accounts of the applicable Borrower provided by such
Person to such Borrower. Notwithstanding any provision of this Section 6.1,
Lender shall have no obligation to reconcile or verify, at any time or for any
purpose, any balance in any Account of any Borrower or any other account
maintained by Master Account Bank, as agent for Lender, or any Depository Bank.
SECTION 6.2 Accounts.
(a) Master Account, Bank Agent Accounts and Lockboxes. Lender
shall maintain at Master Account Bank for each Borrower the account
identified as such Borrower's "Master Account" in the Bank Agency
Agreement (herein called the "Master Accounts") and the other accounts
identified as the "Credit Card Accounts", "Operating Accounts", and
"Zero Balance Accounts" in the Bank Agency Agreement (herein called a
"Bank Agent Account"). Ecology Kids and, if requested by Lender, any
other Borrower, shall maintain a lockbox with Master Account Bank
(herein called, collectively, the "Lockbox"). The Master Accounts, the
Bank Agent Accounts, Depositary Accounts and the Lockbox shall be under
the sole dominion and control of Lender, and no Borrower shall have any
right of withdrawal therefrom.
(b) Operating Accounts. Borrowers shall each maintain an
operating account at Master Account Bank described in the Bank Agency
Agreement (such accounts being herein called the "Operating Accounts").
(c) Other Accounts. No Borrower shall maintain any operating
account (other than such Borrower's Operating Account or other accounts
designated as a Bank Agent Account), and agrees that it will not
maintain any bank investment or other account of any kind whatsoever
with any other brokerage house or financial institution; provided,
however, that so long as no Event of Default shall have occurred and be
continuing, each Borrower may maintain the ▇▇▇▇▇ cash and payroll
accounts listed on Schedule 6.3 hereto at the financial institutions
indicated
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thereon, provided that the aggregate amount of funds on deposit in each
such ▇▇▇▇▇ cash account shall not exceed $5,000 and each such payroll
account shall not at any time exceed the sum of all accrued payroll and
payroll taxes then payable by the applicable Borrower on account of
payroll obligations of such Borrower payable from such account; and
provided, further, that (i) each Borrower shall have irrevocably
instructed the relevant financial institution, at the request of the
Lender, to provide Lender with information concerning such accounts,
(ii) such financial institution shall acknowledge such instructions in
writing for the benefit of Lender, and (iii) at any time when an Event
of Default has occurred and is continuing, each Borrower shall, at the
request of the Lender, promptly cause each such financial institution
to provide Lender with daily reports of the balance in each such
account.
SECTION 6.3 List of Accounts and Account Statements. All Accounts of
each Borrower and all payroll and ▇▇▇▇▇ cash accounts of each Borrower are
described on Schedule 6.3. In the event any Borrower opens any new accounts or
closes any account in accordance with the terms of this Agreement, the Funds
Administrator shall deliver to Lender a revised version of Schedule 6.3 showing
any changes thereto within three (3) Business Days of any such change. Each
Borrower shall instruct each bank listed on Schedule 6.3 at which such Borrower
maintains any Account to provide Lender with copies of all statements issued by
such bank with respect to such Account.
SECTION 7 PROCEEDS OF COLLATERAL; APPLICATION OF FUNDS;
DEEMED LOANS.
SECTION 7.1 Proceeds of Collateral; Notices to Account
Debtors; Lockbox. Each Borrower for which Agent Bank maintains a Lockbox shall
direct all its Account Debtors to pay all Accounts and other proceeds of
Collateral directly to the Lockbox for deposit into such Borrower's Master
Account. Each Borrower shall direct each Credit Card Servicer to pay all
Accounts and other monies owing under any Credit Card Service Agreement to the
relevant Bank Agent Account maintained for such payments. In addition, each
Borrower shall take all such actions as Lender in good ▇▇▇▇▇ ▇▇▇▇▇ necessary or
appropriate to ensure that at all times on and after the date hereof all
proceeds of its Collateral (including, without limitation, all Cash Instruments)
are sent directly to the Lockbox or a Depositary Account with a Depository Bank.
If, notwithstanding the actions provided for in the preceding sentences of this
Section 7.1, any Borrower shall receive, or any financial institution shall
receive for the account of any Borrower, any Cash Instruments, such Borrower
shall, or shall cause such financial institution to, transmit in the form
received, before the close of business on the next succeeding Business Day, all
such Cash Instruments (properly endorsed, where required, so that all items
delivered may be collected by such Person) to Master Account Bank. Borrowers
shall not, and Borrowers shall not permit or cause any such financial
institution to, commingle any Cash Instrument so received except in such
Borrower's Master Account, and Borrowers shall hold separate and apart from all
other Property, all such Cash Instruments in express trust for the benefit of
Lender until delivery thereof is made to the Master Account Bank. Pursuant to,
and subject to the terms and conditions of the Bank Agency Agreement, items
deposited in the
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Lockbox, any Bank Agent Account or any Depositary Account shall be credited to
the relevant Borrower's Master Account. Borrowers and any of their Affiliates,
employees, or other Persons acting for or in concert with Borrowers, shall,
acting as trustee for Lender, receive, as the sole and exclusive property of
Lender any monies, checks, notes, drafts or any other payments relating to
and/or proceeds of Accounts or other Collateral which come into the possession
or under the control of Borrowers or any Affiliates, employees or other Persons
acting for or in concert with Borrowers, and immediately upon receipt thereof,
Borrowers or such other Persons shall remit the same or cause the same to be
deposited, in kind, into the relevant Borrower's Master Account or, at the
direction of Lender, shall remit the same, or cause the same to be remitted, in
kind, to Lender at Lender's address set forth in Section 14.3.
SECTION 7.2 Calculation of Collected Balance. At the opening
of business on each Business Day, Master Account Bank shall calculate the amount
of collected funds on deposit in each Borrower's Master Account (herein, with
respect to each Borrower's Master Account, the "Collected Balance" for such
day).
SECTION 7.3 Application of Funds Available for Loan
Repayments. Promptly following the calculation of the Collected Balance in each
Borrower's Master Account pursuant to Section 7.2, Master Account Bank shall
transfer to Lender the Collected Balance of each Master Account in excess of
$5,000 in integral multiples of $5,000. Any amounts received by Lender pursuant
to this Section 7.3 shall be applied, prior to the existence of an Event of
Default, to the outstanding obligations of Borrowers in the following order of
priority: first, to principal of the Reimbursement Obligations and the Revolving
Loans and any other Loans then due and payable, in such order as Lender shall
elect; second, to interest on the Loans then due and payable, in such order as
Lender may elect; third, to any fees hereunder then due and payable, in such
order as Lender may elect; and fourth, to the payment of any other Liabilities
then due and payable to Lender. All such payments made from Collected Balances
shall, prior to the existence of an Event of Default, be for such Borrower's
Allocation Account described in Section 2.14 hereof. To the extent the foregoing
application would cause a Borrower to, in effect, pay more than the amount
allocated to such Borrower for Loans and Letters of Credit, an intercompany loan
shall be deemed made from such Borrower to the Borrower for whose Allocation
Account such payment was applied so long as, after giving effect to such
payment, the intercompany Indebtedness would not exceed the amounts permitted by
Section 11.21 hereof.
SECTION 7.4 Application Upon an Event of Default. If an Event
of Default shall have occurred and be continuing, and notwithstanding the
foregoing Sections 2.5, 2.7 or 7.3, at the request of Lender, Master Account
Bank from time to time shall transfer the Master Accounts' Collected Balances to
Lender for application to the Liabilities in such order as Lender, in its sole
discretion, shall elect. Master Account Bank shall be entitled to rely on a
written statement of Lender to the effect that an Event of Default has occurred
and is continuing.
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SECTION 7.5 Deemed Loans. Notwithstanding any provision
contained herein to the contrary, and in addition to, and not in limitation of,
any of the other rights or remedies of Lender set forth herein, including,
without limitation, pursuant to Section 7.4, at the sole option of Lender, in
order to facilitate timely payment hereunder of all Liabilities in respect of
(i) payments of interest due on any Loans, (ii) payments of principal due on the
Term Loans, (iii) payments of cash, fees, expenses and other Liabilities due and
payable by Borrowers to Lender hereunder or under any of the Related Documents
and (iv) payments by Lender of any amount due and payable under the Bank Agency
Agreement or any other agreement entered into by Lender and Master Account Bank
in connection with this Agreement (including, without limitation, any amount
resulting from the return, dishonor or other non-payment of items deposited with
Master Account Bank by or on behalf of Borrowers), then, whether or not there is
Borrowing Availability under the Revolving Commitment or any Revolving
Commitment Allocation, Borrowers shall be deemed automatically to have made a
request for, and upon such payment Lender shall be deemed to have made, a Prime
Rate Revolving Loan, in the full amount of such payment. Each Revolving Loan
made in payment of principal and interest on the Loans shall be allocated, prior
to an Event of Default, to each Borrower according to such Borrower's pro rata
share of the Liability being so paid. Borrowers acknowledge that such Revolving
Loan may cause a Borrower to exceed the Revolving Commitment or a Borrower's
Revolving Commitment Allocation or a Borrower's Borrowing Base, in which event
Borrowers shall be obligated to immediately make a prepayment pursuant to
Section 2.7(c) unless, prior to the existence of an Event of Default, the Funds
Administrator shall notify Lender in writing that an intercompany loan permitted
by Section 11.21 has been made.
SECTION 7.6 Application of Proceeds. In the event Borrowers
shall suffer any loss covered by insurance, Borrowers shall immediately notify
Lender in writing, and each Borrower for itself, hereby agrees to and hereby
authorizes and directs each and every insurance company concerned to make
payments for such loss directly and solely to Lender (who may, but need not,
make proof of loss) and Lender is hereby authorized to adjust, collect and
compromise in its discretion all claims under all such policies, and each
Borrower shall sign, upon demand by Lender, all receipts, vouchers and releases
required by such insurance companies; provided, that other than after the
occurrence and during the continuance of an Event of Default, any Borrower may
adjust, collect and compromise insurance claims upon notice to and with Lender's
consent (which shall be exercised reasonably and in good faith), provided
further such Borrower is acting reasonably and diligently. In the event any
Borrower shall be awarded any amount pursuant to any condemnation proceeding or
the taking or injury to any property for public use, Borrowers shall immediately
notify Lender in writing and Borrowers agree that the proceeds of all such
awards shall be paid to Lender and authorize Lender, on behalf and in the name
of Borrowers to execute and deliver valid acquittances for and to appeal from
any such award. Borrowers shall also immediately notify Lender of any actual or
threatened condemnation or eminent domain proceedings and shall give Lender at
any time any additional instruments requested by Lender for the purpose of
validly and sufficiently assigning all awards or appealing any such award.
Insurance proceeds and
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awards described in this Section 7.6 (collectively, "Loss Proceeds"), or any
part thereof, received by Lender, after deducting therefrom any expenses
incurred, may be applied by Lender at its option (i) to the repair or
restoration of the property suffering any loss, condemnation or taking ("Loss
Property"), (ii) to the payment of the Liabilities, whether or not due and in
whatever order Lender elects, or (iii) to any other purpose or objects for which
Lender is entitled to advance funds under this Agreement, all without affecting
the lien or security interest created by the Collateral Documents, and any
balance of such monies shall be paid to Borrowers or the Person lawfully
entitled thereto. Lender shall not be held responsible for any failure to
collect any insurance proceeds due under the terms of any policy regardless of
the cause of such failure unless due to the gross negligence or wilful
misconduct of Lender. Notwithstanding the foregoing, Lender agrees any Loss
Proceeds shall be applied as follows:
(a) If no Unmatured Event of Default or Event of Default has
occurred and is continuing at the time of the insured loss, condemnation or
taking and the amount of such Loss Proceeds together with all other Loss
Proceeds previously or contemporaneously paid to Lender hereunder is less than
$100,000, then such Loss Proceeds shall be paid into the relevant Borrower's
Master Account for application pursuant to this Agreement.
(b) If no Unmatured Event of Default or Event of Default has
occurred and is continuing at the time of the insured loss, condemnation or
taking and the amount of such Loss Proceeds, together with all other Loss
Proceeds previously or contemporaneously paid to Lender hereunder is $100,000 or
greater, then Lender will permit the Loss Proceeds to be utilized toward the
restoration of the Loss Property, provided that (i) business interruption loss
insurance will be payable to Borrowers during the period necessary to restore
the Loss Property, (ii) the proceeds of such business interruption insurance
together with other funds available to Borrowers will be sufficient to pay all
of Borrowers' obligations during such period, (iii) after giving effect to such
proposed restoration no Event of Default or Unmatured Event of Default will be
in existence and (iv) prior to such utilization of the Loss Proceeds, Lender
shall be provided with (A) a full and complete set of plans and specifications
for the restoration of the Loss Property, and (B) a current appraisal indicating
that the value of the Loss Property following the restoration as contemplated by
such plans and specifications will be of a value at least equal to the greater
of (I) the Loss Property prior to the loss or (II) the then outstanding
principal balance of the Liabilities, and (C) all other items that may be
reasonably requested by Lender in form and substance satisfactory to Lender. The
plans and specifications and the appraisal must be in a form and content fully
satisfactory to Lender. Lender shall disburse such Loss Proceeds for the purpose
of restoration of the Loss Property on a monthly basis upon receipt of
satisfactory draw requests and inspection reports of an architect approved by
Lender certifying as to the percentage of completion of the restoration project.
Lender shall retain a ten percent (10%) retainage of all Loss Proceeds disbursed
hereunder pending the issuance of a final certificate of substantial completion
issued by the inspecting architect certifying the completion of the restoration
of the Loss Property in accordance with the approved plans and specifications.
In the
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event of an Unmatured Event of Default or Event of Default at any time following
an insurance loss, condemnation or taking, Lender may apply all Loss Proceeds
then in Lender's possession as a reduction against the Liabilities. No interest
shall be payable by Lender on account of any Loss Proceeds at any time held by
Lender.
SECTION 8 INCREASED COSTS AND OTHER SPECIAL PROVISIONS.
SECTION 8.1 Increased Costs. If, after the date hereof, the
adoption of any applicable "law" (which expression, as used in this Section 8.1,
includes statutes, rules and regulations thereunder and interpretations thereof
by any competent court or by any governmental authority or other regulatory body
or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to Lender by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law))
adopted, becoming effective, or any change in the interpretation or
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such authority or agency, shall
subject Lender to any tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature (other than taxes imposed on or measured by the
overall net income of Lender) or capital adequacy requirement with respect to,
or shall impose or increase or render applicable any special deposit,
assessment, insurance charge, reserve or liquidity or other similar requirement
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or loans made by Lender, or shall otherwise increase the
effective cost of, the Loans, or Lender's obligation to make, issue or maintain
the Loans, or shall change the basis of taxation of payments to Lender of the
principal of or interest on the Loans or any other amounts due under this
Agreement in respect of the Loans, or Lender's obligation to make, issue or
maintain the Loans (except for changes in the rate of tax on the overall net
income of Lender), or shall impose on Lender any other condition or requirement
affecting the Loans or Lender's obligation to make the Loans, and the result of
any of the foregoing is to increase the cost to Lender of making, funding,
issuing or maintaining the Loans, to require Lender to make any payment or to
forego any interest or other sum payable under this Agreement, or to reduce the
amount of any rate of return or any sum received or receivable by Lender under
this Agreement or under the Notes with respect thereto, then upon written notice
of such occurrence to the Funds Administrator by Lender (which notice shall
contain a statement setting forth a description of such occurrence) at any time
and from time to time and as often as the occasion therefor may arise, Borrowers
shall pay to Lender such additional amount or amounts as will compensate Lender
for such increased cost, payment, sum or such reduction.
SECTION 8.2 Funding Losses. Borrowers hereby jointly and
severally agree that if Lender receives a notice (whether written or oral) of
borrowing or repayment pursuant to this Agreement and Borrowers fail to borrow
or repay strictly in accordance therewith, then, upon demand by Lender (which
demand shall be accompanied by a statement setting forth the basis for the
calculations of the amount being claimed) Borrowers will indemnify Lender
against any net loss or expense which Lender may sustain
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or incur (including, without limitation, any net loss or expense incurred by
reason of the liquidation or reemployment of funds acquired by Lender to fund or
maintain Loans), as reasonably determined by Lender, as a result of any failure
of Borrowers to borrow or repay any Loan on a date specified therefor in a
notice (whether written or oral) of borrowing or repayment pursuant to this
Agreement. For this purpose, all notices to Lender pursuant to this Agreement
shall be deemed to be irrevocable.
SECTION 8.3 Taxes.
(a) Any and all payments by Borrowers to Lender under this
Agreement and any of the Related Documents shall be made free and clear of, and
without deduction or withholding for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding such taxes (including income taxes, franchise taxes
or similar taxes) as are imposed on or measured by Lender's net income by the
jurisdiction (or any political subdivision thereof) under the laws of which
Lender is organized or maintains a lending office or by a jurisdiction (or any
political subdivision thereof) in which it is doing business, other than solely
as a result of or related to its actions under this Agreement or any of the
Related Documents (collectively, the "Withholding Taxes"). In addition,
Borrowers shall pay all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the Related Documents
(collectively, the "Documentary Taxes").
(b) Borrowers agree to indemnify and hold harmless Lender for
the full amount of Withholding Taxes or Documentary Taxes paid by Lender and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto. Payment under this indemnification shall be
made within thirty (30) days after the date any Lender or the Lender makes
written demand therefor.
(c) If Borrowers shall be required by law to deduct or
withhold any Withholding Taxes or Documentary Taxes from or in respect of any
sum payable hereunder to the Lender, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section) Lender receives an amount equal to the sum
it would have received had no such deductions or withholdings been
made;
(ii) Borrowers shall make such deductions and
withholdings;
(iii) Borrowers shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
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(iv) Borrowers shall also pay to Lender, at the time
interest is paid, all additional amounts which the Lender specifies as
necessary to preserve the after-tax yield Lender would have received if
such Withholding Taxes or Documentary Taxes had not been imposed.
(d) Within thirty (30) days after the date of any payment by
Borrowers of Withholding Taxes or Documentary Taxes, the Funds Administrator
shall deliver to Lender the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment reasonably satisfactory to Lender.
SECTION 8.4 Discretion of Lender as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, Lender shall be
entitled to fund and maintain its funding of all or any part of the Loans in any
manner it sees fit.
SECTION 8.5 Conclusiveness of Statements; Survival of
Provisions. In making the determinations contemplated by this Section 8, Lender
may make such reasonable estimates, assumptions, allocations and the like that
Lender in good faith determines to be appropriate; and, subject to the foregoing
clause, determinations and statements of Lender pursuant to this Section 8 shall
be conclusive absent demonstrable error. The provisions of this Section 8 shall
survive termination of this Agreement.
SECTION 9 COLLATERAL AND ELIGIBILITY REQUIREMENTS.
SECTION 9.1 Eligible Accounts; Eligible Deferred Billing
Program Accounts.
(a) "Eligible Accounts" shall mean all Accounts of each
Borrower, other than the following: (i) Accounts which remain unpaid as of
ninety (90) days (or one hundred twenty (120) days in the case of Accounts owing
from Mokrynski and Associates, Inc., after the date of the original invoice with
respect thereto; (ii) all Accounts owing by a single Account Debtor, including a
currently scheduled Account, if twenty-five percent (25%) or more of the balance
owing by such Account Debtor is ineligible by reason of the criterion set forth
in clause (i) of this Section 9.1; (iii) Accounts with respect to which the
Account Debtor is an Affiliate of any Borrower or a director, officer or
employee of any Borrower or its Affiliates; (iv) Accounts with respect to which
the Account Debtor is a governmental authority or prime contractor thereof
unless Borrowers have complied in a manner satisfactory to Lender with the
Federal Assignment of Claims Act of 1940, as amended, or similar law or statute
of the relevant state, province, municipality or other jurisdiction and any
amendments thereto, relative to the assignment of such Accounts; (v) Accounts
with respect to which the Account Debtor is not a resident of the United States
unless such Account is payable in United States Dollars and the Account Debtor
has supplied Borrowers with an irrevocable letter of credit, issued by a
financial institution satisfactory to Lender, in an amount sufficient to cover
such Account and in form and substance satisfactory to Lender and without right
of setoff; (vi) Accounts arising with respect to
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goods which have not been shipped and delivered to and accepted as satisfactory
by the Account Debtor or arising with respect to services which have not been
fully performed and accepted as satisfactory by the Account Debtor; (vii)
Accounts for which the prospect of payment in full or performance in a timely
manner by the Account Debtor is or is likely to become impaired as determined by
Lender in the exercise of its discretion; (viii) Accounts which are not invoiced
(and dated as of the date of such invoice) and sent to the Account Debtor within
five (5) days after delivery of the underlying goods to or performance of the
underlying services for the Account Debtor; (ix) Accounts with respect to which
Lender does not have a first and valid fully perfected Lien free and clear of
any other Lien; (x) Accounts with respect to which the Account Debtor is the
subject of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been conveyed to a
receiver or trustee; (xi) Accounts with respect to which the Account Debtor's
obligation to pay the Account is conditional upon the Account Debtor's approval
or is otherwise subject to any repurchase obligation or return right, as with
sales made on a guaranteed sale, ▇▇▇▇-and-hold, sale-or-return, demonstration,
sale on approval or other terms by reason of which the payment by the Account
Debtor is or may be conditional (except with respect to Accounts in connection
with which Account Debtors are entitled to return Inventory solely on the basis
of the quality of such Inventory) or consignment basis; (xii) Accounts to the
extent that the Account Debtor's indebtedness to Borrowers exceeds ten percent
(10%) of the lesser of (A) the Revolving Commitment then in effect or (B) the
aggregate Accounts then owing to Borrowers; (xiii) Accounts with respect to
which any disclosure is required in accordance with Section 9.2; (xiv) contra
Accounts to the extent of the amount of the accounts payable owed by Borrowers
to the Account Debtor unless waived in writing by such Account Debtor; (xv)
Accounts with respect to which the Account Debtor is located in any state
denying creditors access to its courts in the absence of a Notice of Business
Activities Report or other similar filing unless Borrowers have either qualified
as a foreign corporation authorized to transact business in such state or has
filed a Notice of Business Activities Report or similar filing with the
applicable Governmental Authority in such state for the then current year; (xvi)
Accounts evidenced by Chattel Paper or any Instrument of any kind, to the extent
possession of such Chattel Paper or Instrument is not granted to Lender; (xvii)
Accounts which Lender determines in good faith to be unacceptable; (xviii)
Credit Card Accounts; and (xix) Deferred Billing Accounts.
(b) "Eligible Deferred Billing Program Accounts" shall mean
that portion of Deferred Billing Program Accounts which (i) are not unpaid more
than one hundred twenty (120) days from the date the relevant customer order is
received by the relevant Borrower; (ii) are intended to be paid with a credit
card issued and/or serviced by a Credit Card Servicer which has executed and
delivered to the Lender an Irrevocable Assignment in form and substance
satisfactory to Lender (iii) conform and comply with the terms of the applicable
Credit Card Service Agreement (iv) the relevant Borrower has received
authorization from a Credit Card Servicer (1) prior to shipping the Inventory
giving rise to such Deferred Billing Program Account and (2) if such Deferred
Billing Program Account remains unpaid more than 60 days from the date of
shipping the underlying
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Inventory, a subsequent authorization is obtained between 30 and 60 days of the
date such Inventory was shipped; and (v) Deferred Billing Program Accounts which
would not be deemed ineligible as Eligible Accounts under the provisions of
Sections 9.1(a)(iii) through (xvii), inclusive.
SECTION 9.2 Account Warranties. With respect to Accounts
scheduled, listed or referred to on the initial Accounts Trial Balance included
in the initial Monthly Report or on any subsequent Accounts Trial Balance or
Borrowing Base Certificate of Borrowers, each Borrower represents and warrants
to Lender that, except as disclosed in the applicable Accounts Trial Balance or
Borrowing Base Certificate: (i) the Accounts represent bona fide sales of
Inventory by such Borrower or the provision of services to customers in the
ordinary course of business completed in accordance with the terms and
provisions contained in the documents available to Lender with respect thereto
and are not evidenced by a judgment or by an Instrument or Chattel Paper (ii)
with respect to Deferred Billing Program Accounts, arise or are related to bona
fide credit card sales of Inventory by such Borrower or the provision of
services to Consumers in the ordinary course of business completed in accordance
with the terms and provisions of the applicable Credit Card Service Agreement
with respect thereto and are not evidenced by a judgment or by an Instrument or
Chattel Paper; (iii) the amounts shown on the applicable Accounts Trial Balance
and on such Borrower's books and records and all invoices and statements which
may be delivered to Lender with respect thereto are actually and absolutely
owing to such Borrower and are not in any way contingent; (iv) no payments have
been or shall be made thereon except payments immediately delivered to a Master
Account or other Bank Agent Account maintained for that purpose pursuant to this
Agreement; (v) there are no setoffs, claims or disputes existing or asserted
with respect thereto and Borrowers have not made any agreement with any Account
Debtor for any deduction therefrom except a discount or allowance allowed by
such Borrower in the ordinary course of its business for prompt payment and
which discount and allowance is reflected in the calculation of the face amount
of each invoice related to such Account unless such setoff, claim or dispute has
been waived by such Account Debtor in writing; (vi) to the best of Borrowers'
knowledge, there are no facts, events or occurrences which in any way impair the
validity or enforcement thereof or tend to reduce the amount payable thereunder
as shown on the respective Accounts Trial Balances or Borrowing Base
Certificates, such Borrower's books and records and all invoices and statements
delivered to Lender with respect thereto; (vii) to the best of Borrowers'
knowledge, all Account Debtors have the capacity to contract and are Solvent;
(viii) Borrowers have received no notice of proceedings or actions which are
threatened or pending or have been taken against any Account Debtor which might
result in any material adverse change in such Account Debtor's financial
condition; (ix) Borrowers have no knowledge that any Account Debtor is unable
generally to pay its debts as they become due; (x) the Accounts do not arise
from or relate to the sale of Inventory produced in violation of the Fair Labor
Standards Act so as to be subject to the so-called "hot goods" provision
contained in Title 29 U.S.C., Section 215(a)(1); (xi) the services furnished
and/or Inventory sold giving rise or relating to the Account are not, and will
not be at the time of sale thereof, subject to any Lien except that of Lender;
(xii) the Accounts have not been pledged or sold to any Person
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or otherwise encumbered and such Borrower is the owner of the Accounts free and
clear of any Lien except that of Lender; (xiii) with respect to Accounts for
which the Account Debtor is located in any state denying creditors access to its
courts in the absence of a Notice of Business Activities Report or other similar
filing, such Borrower has either qualified as a foreign corporation authorized
to transact business in such state or has filed all required Notice of Business
Activities Reports or comparable filings with the applicable Governmental
Authority; and (xiv) with respect to Deferred Billing Program Accounts, such
Borrower has received authorization from a Credit Card Servicer prior to
shipping the Inventory giving rise to such Deferred Billing Program Account and,
if the Deferred Billing Program Account is unpaid more than 60 days from the
date the underlying Inventory was shipped, has received subsequent authorization
between 30 and 60 days of shipping such Inventory.
SECTION 9.3 Verification of Accounts. Lender shall have the
right, at any time or times hereafter, in the name of Borrowers or a nominee of
Lender, or during the pendency of an Event of Default, in Lender's name, to
verify with Account Debtors the validity, amount or any other matter relating to
any Account, by mail, telephone, or in person.
SECTION 9.4 Eligible Inventory. "Eligible Inventory" shall
consist of all of the Inventory of a Borrower, except the following: (i) work in
process; (ii) Inventory which is damaged, obsolete, not in good condition, or
not either currently usable or currently saleable in the ordinary course of such
Borrower's business as determined by Lender in its reasonable business
discretion; (iii) Inventory which Lender determines, or which in accordance with
such Borrower's customary business practices, is unacceptable due to age, type,
category and/or quantity, including any Inventory which is in excess of a one
(1) year's supply or is otherwise slow-moving; (iv) Inventory with respect to
which Lender does not have a first and valid, fully perfected Lien except; (v)
Inventory consisting of packaging or supplies; (vi) Inventory in the possession
of such Borrower but not owned by such Borrower; (vii) Inventory produced in
violation of the Fair Labor Standards Act and subject to the so-called "hot
goods" provision contained in Title 29 U.S.C. ss.215(a)(1); (viii) Inventory
with respect to which any disclosure is required in the applicable Monthly
Report or Borrowing Base Certificate in accordance with Section 11.1(n); (ix)
Inventory which is on consignment or is located at a place other than the places
of business and collateral locations of such Borrower listed on Schedule 10.29;
provided that, subject to Section 11.24, in the case of leased or bailment
locations listed on Schedule 10.29, no Inventory located at any such location
shall be "Eligible Inventory" until the applicable landlord or bailee has
executed a lien waiver in form and substance satisfactory to Lender) including
Inventory in transit; (x) Inventory consisting of finished goods which do not
meet the specifications of the purchase order for which such Inventory was
produced; and (xi) Inventory which fails to meet the standards imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such goods, its use and/or sale. In the event that Inventory
previously scheduled in a Monthly Report or Borrowing Base Certificate ceases to
be Eligible Inventory, Borrowers shall notify Lender thereof immediately.
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SECTION 9.5 Inventory Warranties. With respect to Inventory
scheduled, listed or referred to in any Monthly Report or Borrowing Base
Certificate, each Borrower represents and warrants that, except as disclosed in
such Monthly Reports or Borrowing Base Certificate (i) such Inventory is located
at one of the Facilities or locations set forth on Schedule 10.29 as to such
Borrower, (ii) such Borrower has good, indefeasible and merchantable title to
such Inventory and such Inventory is not subject to any Lien or document
whatsoever except for the prior, first perfected Lien granted to Lender
hereunder, (iii) such Inventory is of good and merchantable quality, free from
any defects and is not goods returned to such Borrower by or repossessed from an
Account Debtor or goods taken in trade, (iv) such Inventory is not subject to
any licensing, patent, royalty, trademark, trade name or copyright agreements
with any third parties which materially restricts the ability of such Borrower
or, in the case of the exercise of its remedies, Lender to sell the Inventory,
(v) the completion of manufacture, sale or other disposition of such Inventory
by Lender following an Event of Default shall not require the consent of any
Person and shall not constitute a breach or default under any contract or
agreement to which such Borrower is a party or to which the Inventory is
subject, and (vi) no Inventory has been produced in violation of the Fair Labor
Standards Act so as to be subject to the so-called "hot goods" provision
contained in Title 29 U.S.C., Section 215(a)(1).
SECTION 9.6 Security Interest. All of each Borrower's
Liabilities constitute one loan secured by Lender's Liens on the Collateral now
or from time to time hereafter granted by such Borrower to Lender. To secure
timely payment, performance and observance in full of their respective
Liabilities, Borrowers shall grant to Lender a right of setoff against and a
continuing Lien upon all of their respective right, title and interest in and to
all personal property and fixtures of Borrowers and all other Collateral,
whether now owned or hereafter acquired by Borrowers and wheresoever located. In
addition, concurrently with the acquisition of any real property or interest in
real property after the Closing Date the relevant Borrower or Subsidiary shall
grant and convey to Lender as security for timely payment, performance and
observance of the Liabilities, mortgage Liens on all such real property, which
shall be first Liens unless otherwise consented in writing by Lender.
SECTION 9.7 Consigned Inventory. With respect to consigned
Inventory, Borrowers shall perfect their respective interest in such Inventory
by filing and delivering notice to the creditors of record of the consignee, all
as provided in Section 9- 114 of the UCC, and in form and substance satisfactory
to Lender, and Borrowers shall execute and deliver all financing statements,
security agreements, amendments thereto, or other documents (and pay the cost of
filing or recording the same in all public offices deemed necessary by Lender),
as Lender may request, in a form satisfactory to Lender, to perfect and maintain
the Liens on such Collateral granted by Borrowers to Lender hereunder and under
the Collateral Documents.
SECTION 9.8 Additional Collateral Documents. At any time after
the date hereof that a Subsidiary shall be formed or acquired by a Borrower,
such Borrower
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shall cause such Subsidiary to, execute and deliver to Lender a security
agreement and a guaranty in form and substance satisfactory to Lender with such
changes therein as Lender may reasonably require, together with such other
documents, instruments and things as Lender may reasonably require in connection
therewith; provided, that the foregoing is not intended and shall not be deemed
or construed to permit the formation of any Subsidiary to the extent such
formation is not expressly permitted pursuant to the terms of this Agreement.
SECTION 9.9 Subsequently Acquired Property. As further
security for the payment, performance and observance of the Liabilities,
Borrowers shall so long as any of the Liabilities shall remain outstanding or
Lender shall continue to have any Commitment: (a) acquire and maintain their
respective Property in a manner which will enable Borrowers to allow such
Property to become subject to the Liens of the Collateral Documents; (b) obtain
and maintain the consent or approval of any Person whose consent or approval is
required to the granting of a Lien on any such Property to or for the benefit of
Lender; (c) execute and deliver from time to time within ten (10) days after its
purchase or acquisition of any real property or leasehold interest in real
property or of Property subject to a titling statute or of any other personal
property, asset or other right, amendments and supplements to the Collateral
Documents in form and substance, and together with other documents, satisfactory
to Lender, and in such number of counterparts as Lender may require, by which it
shall (and only in the event that such action shall be required in order to)
pledge, mortgage and grant a perfected Lien on such Property, asset or right to
Lender; (d) execute and deliver to Lender, in form and substance satisfactory to
Lender and in such number of counterparts as Lender may require, (i) an
assignment of Borrowers' rights under any contract to construct any Property
with a fair market value in excess of $250,000 promptly upon entering into such
contract, and (ii) such other agreements and instruments (including, without
limitation, acknowledgments by other contract parties) as may be necessary to
▇▇▇▇▇ ▇ ▇▇▇▇ on and security interest in Borrowers' rights and interests under
each such contract and each such Property, whether under construction or
otherwise, to Lender; and (e) execute and deliver to Lender, in form and
substance satisfactory to Lender and in such number of counterparts as Lender
may require, assignments of Borrowers' rights under each lease to which
Borrowers are a party as landlord or sublandlord, promptly upon entering into
such lease, other than Capital Leases of equipment.
SECTION 9.10 Change of Location or Name. So long as any of the
Liabilities shall remain outstanding or Lender shall continue to have any
Commitment, Borrowers shall not change (a) the location of any such Person's
principal place of business, chief executive office, major executive office,
chief place of business or its records concerning its business and financial
affairs, or (b) such Person's name or the name under or by which it conducts its
business, in each case without first giving Lender at least 30 days' advance
written notice thereof and having taken any and all action required or desirable
by Lender to maintain and preserve the first perfected Lien and security
interest in favor of Lender on all property thereof free and clear of any Lien
whatsoever except for Permitted Liens; provided, that notwithstanding the
foregoing,
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Borrowers shall not change the location of any such Person's principal place of
business, chief executive office, major executive office, chief place of
business or its records concerning its business and financial affairs to any
place outside the contiguous continental United States of America.
SECTION 9.11 Deliveries; Further Assurances. Each Borrower
shall, and shall cause each Subsidiary of any Borrower to, at Borrowers' sole
expense, (i) without any request by Lender, immediately deliver or cause to be
delivered to Lender, in due form for transfer (i.e., endorsed in blank or
accompanied by duly executed undated blank stock or bond powers), all
securities, chattel paper, instruments and documents, if any, at any time
representing all or any of the Collateral, (ii) upon request of Lender, furnish
or cause to be furnished to Lender such surveys, mortgagee title commitments or
policies, appraisals, opinions of counsel and other documents as Lender may
specify, (iii) without request by Lender, cause Lender's Lien hereunder and
under the Collateral Documents to be at all times duly noted on any certificate
of title issuable with respect to any of the Collateral and forthwith deliver or
cause to be delivered to Lender each such certificate of title, and (iv) execute
and deliver, or cause to be executed and delivered, to Lender in due form for
filing or recording (and pay the cost of filing or recording the same in all
public offices deemed necessary or advisable by Lender) such assignments
(including, without limitation, assignments of life insurance), security
agreements, mortgages, deeds of trust, pledge agreements, consents, waivers,
financing statements, stock or bond powers, and other documents, and do such
other acts and things, all as may from time to time be necessary or desirable to
establish and maintain to the satisfaction of Lender a valid first perfected
Lien on and security interest in all assets of each Borrower and each Subsidiary
of any Borrower now or hereafter existing or acquired (free of all other Liens
whatsoever other than Permitted Liens) to secure payment and performance of the
Liabilities.
SECTION 10 REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make Loans
hereunder, each Borrower represents and warrants to Lender that:
SECTION 10.1 Due Organization, Authorization, Etc. Each
Borrower and each Subsidiary of any Borrower is a corporation duly existing and
in good standing under the laws of the jurisdiction of its formation and is duly
qualified and in good standing in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required or where the
failures so to qualify singly or in the aggregate could reasonably be expected
to have a Material Adverse Effect (which jurisdictions shall include, without
limitation, those jurisdictions listed on Schedule 10.1). The execution,
delivery and performance by each Borrower and each Subsidiary of any Borrower of
this Agreement and the Related Documents to which they respectively are parties,
and the consummation of the Related Transactions, are within their respective
corporate powers, have been duly authorized by all necessary corporate action
(including, without limitation, director and shareholder approval, if required),
have received all necessary governmental and other consents and approvals and
made all necessary filings with and given all necessary
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notices to any governmental authority (if any shall be required), and do not and
will not contravene or conflict with, or create a Lien or right of termination
or acceleration under, any Requirement of Law or Contractual Obligation binding
upon it. This Agreement and each of the Related Documents to which any Borrower
or any Subsidiary of any Borrower is a party are (or when executed and delivered
will be) the legal, valid, and binding obligations of such Person enforceable
against such Person in accordance with their respective terms, except as limited
by applicable bankruptcy, reorganization, insolvency or similar laws affecting
the enforcement of creditors' rights generally and except as limited by general
principles of equity.
SECTION 10.2 Certain Agreements. Each Borrower and each
Subsidiary of any Borrower have furnished to Lender true, correct and complete
copies of each of the Related Documents (including all schedules and written
disclosures in connection therewith). All warranties of each Borrower and each
Subsidiary of any Borrower and, to Borrowers' knowledge, all warranties of the
other parties thereto (other than Lender and the Master Account Bank) set forth
in the Related Documents are true and correct in all material respects without
any waiver or modification thereof and no default of any of Borrower or any
Subsidiary of any Borrower and to Borrowers' knowledge, no default of any other
party, exists thereunder.
SECTION 10.3 Financial Information; Financial Condition. All
balance sheets and all statements of operations, of shareholders' equity and of
changes in financial position, and other financial data (other than projections)
which have been or shall hereafter be furnished to Lender by or on behalf of any
Borrower for the purposes of or in connection with this Agreement, the Related
Documents or the Related Transactions (including the financial information
referred to below, except for the projections referred to in clauses (d) and (e)
below) have been and will be prepared in accordance with GAAP consistently
applied throughout the periods involved and do and will present fairly the
financial condition of the entities involved as of the dates thereof and the
results of their operations for the periods covered thereby. All projections
(including, without limitation, the projections described in clauses (d) and (e)
below) which have been or shall be furnished to Lender for purposes of or in
connection with this Agreement, the Related Documents or the Related
Transactions have represented and will, when delivered to Lender, represent each
Borrower's and Parent's management's best estimates of future performance, based
upon historical financial information and reasonable assumptions of management.
Such financial data includes, without limitation, the following financial
statements and reports which have been furnished to Lender on or prior to the
date hereof:
(a) the audited consolidated and consolidating balance sheets
the Consolidated Entity as of September 30, 1998 and the related audited
consolidated and consolidating statements of earnings, shareholders' equity,
cash flow and changes in financial position for the year ending on such date
(the "Financials");
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(b) the consolidated and consolidating balance sheets of the
Consolidated Entity as of December 31, 1998 and the related statements of income
and cash flow of the Consolidated Entity for the one quarter period ending on
such date;
(c) the pro forma consolidated and consolidating balance
sheets of the Consolidated Entity as of March 31, 1999 but after giving effect
to all Related Transactions (the "Pro Forma");
(d) the projected consolidated and consolidating balance
sheets and projected statements of earnings and cash flow for the Consolidated
Entity for each month from January 1, 1999 to September 30, 1999, for each month
or fiscal quarter from November1, 1999 through September 30, 2000, and for each
Fiscal Year through the Fiscal Year ending September 30, 2002, after giving
effect to all Related Transactions.
Except as set forth on Schedule 10.3 hereto, there has been no material adverse
change since December 31, 1998 in the financial condition, operations, assets,
business or prospects of the Consolidated Entity, other than as a result of the
Related Transactions, from that reflected in the financial information as to the
Consolidated Entity referred to in clauses (a) through (c).
SECTION 10.4 Litigation and Contingent Obligations. Except as
set forth in Schedule 10.4 hereto (including estimates of the dollar amounts
involved) and except for claims as to which the insurer has admitted coverage in
writing and which are fully covered by insurance, no claims, litigation
(including, without limitation, derivative actions and litigation with respect
to any Employee Benefit Plan), arbitration, governmental investigation or
proceeding or inquiry is pending or, to the best of Borrowers' knowledge,
threatened against any Borrower, any member of the Controlled Group or any
Employee Benefit Plan fiduciaries (i) which singly or in the aggregate could, if
adversely determined, reasonably be expected to have a Material Adverse Effect,
or (ii) which relates to any of the Related Transactions, and, except as set
forth in Schedule 10.4, there is no basis known to any Borrower for any of the
foregoing. Other than any liability incident to such claims, litigation or
proceedings, no Borrower nor any Subsidiary of any Borrower nor Parent has any
material Contingent Obligations not provided for or referred to in the
Financials or in Schedule 10.4 hereto.
SECTION 10.5 Liens. None of the assets of any Borrower or any
Subsidiary of any Borrower will be subject to any Lien, except for Permitted
Liens, which are junior to the Lien of the Collateral Documents. Except as
described in Schedule 10.5, Lender will obtain, as security for the Liabilities,
(i) a legally valid and binding first mortgage Lien on all real property and
interests in real property now owned or hereafter acquired by any Borrower or
any Subsidiary of any Borrower, and (ii) a first priority perfected Lien on all
other property described in the Collateral Documents as being pledged, assigned
or granted thereby. The descriptions of other property described in the
Collateral Documents correctly describe all Property used in the business or
operations of Borrowers and each
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Subsidiary of any Borrower in a manner sufficient to create an enforceable Lien
on or security interest in such property.
SECTION 10.6 Contracts; Absence of Default. Except as set
forth on Schedule 10.6(a) hereto, no Borrower nor any Subsidiary of any Borrower
is in material default under any Contract or other contracts transferred to or
assumed by any Borrower or any Subsidiary of any Borrower) (a) to which it is a
party or by which it is bound, and (b) (i) pursuant to which such Persons
provide goods or services to one or more customers which contributed more than
ten percent (10%) of gross revenue during the prior Fiscal Year of the
Consolidated Entity which is reasonably expected to contribute more than ten
percent (10%) gross revenue during the current or any future Fiscal Year of the
Consolidated Entity (each, a "Material Contract"), (ii) pursuant to which
Borrower or any Subsidiary of any Borrower incur or are committed to incur Lease
Obligations in excess of $100,000 during any Fiscal Year, (iii) which cannot be
replaced without material expense, delay or interruption of business (including,
without limitation, any Material Intellectual Property Right), or (iv) where
such default could have a Material Adverse Effect. A list of all Material
Contracts existing on the date hereof is attached hereto as Schedule 10.6(b). No
Borrower nor any Subsidiary of any Borrower has received notice that any
Material Contract will be terminated or not extended or renewed.
SECTION 10.7 Employee Benefit Plans. (a) No Borrower nor any
member of the Controlled Group has incurred any liability with respect to any
Pension Plan other than to pay premiums to the PBGC and make required
contributions to such Pension Plans (provided that any such contributions and
premiums which are due have been paid).
(b) With respect to any Employee Benefit Plan, full and timely
payment has been made of all amounts required under Section 412 of the Code,
Section 302 of ERISA or under the terms of each such Plan, no event or condition
has occurred which has or could result in the imposition of a lien or an
accumulated funding deficiency (whether or not waived) under Section 412 of the
Code or Section 302 of ERISA, each Borrower and each current or past member of
the Controlled Group has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the Code, and no security has been posted or is
required to be posted under Section 401(a)(29) of the Code or Section 307 of
ERISA.
(c) No steps have been taken to terminate, or withdraw from,
any Pension Plan or any Multiemployer Plan.
(d) No Reportable Event has occurred.
(e) No Borrower nor any member of the Controlled Group has any
contingent liability with respect to any post-retirement benefits under a
Welfare Plan (other than liability for health care continuation coverage in
compliance with the requirements of Part 6 of Subtitle B of Title I of ERISA or
Section 4980B of the Code).
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(f) Except as described on Schedule 10.7, all Employee Benefit
Plans (i) comply in form with any requirements of ERISA and have been operated
and administered in compliance with their terms and in a manner so as not to
result in any liability to any Borrower or any current or past member of the
Controlled Group for failure to comply with ERISA and all of the applicable
statutes and regulations issued thereunder, and (ii) if intended to qualify
under the Code, are in a form and have been administered in a manner so as not
to result in any liability to any Borrower or any current or past member of the
Controlled Group for failure to comply with the applicable provisions thereof
and are subject to an Internal Revenue Service determination with respect to
such qualification. Except for future funding obligations, no conditions exist
or events or transactions have occurred with respect to any Employee Benefit
Plan which could result in the incurrence by any Borrower or any current or past
member of the Controlled Group of any liability, except to the extent the same
(x) have been funded or adequately reserved on the balance sheet of the
Consolidated Entity, or (y) will not result in the incurrence of any liability
by any Borrower or any current or past member of the Controlled Group in excess
of $50,000 in the aggregate.
(g) No Borrower nor any Subsidiary of any Borrower is an
Employee Benefit Plan, none of their assets constitute assets of an Employee
Benefit Plan and the execution, performance and delivery of this Agreement and
the Related Documents and the consummation of the Related Transactions will not
involve any prohibited transaction, as defined in Section 406 of ERISA or
Section 4975 of the Code, for which an exemption is unavailable.
SECTION 10.8 Investment Company Act; Public Utility Holding
Company Act. No Borrower nor any Subsidiary of any Borrower is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, or a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 10.9 Regulations T, U and X. No Borrower nor any
Subsidiary of any Borrower is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation T, U or X of the Board
of Governors of the Federal Reserve System). No Borrower, nor any Affiliate of
any of them or any Person acting on their behalf has taken or will take action
to cause the execution, delivery or performance of this Agreement or the Notes,
or the other Related Documents, the making or existence of the Loans or the use
of proceeds of the Loans to violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 10.10 Proceeds. The proceeds of the Loans will be used
for working capital purposes, except that proceeds of the Term Loans and the
initial Revolving Loan shall be used to repay in full the Indebtedness to Be
Refinanced.
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SECTION 10.11 Confirmation of Warranties. All representations
and warranties of each Borrower and, to such Borrower's knowledge, each other
party to the Related Documents set forth in the Related Documents are true and
correct in all material respects as if made as of the Closing Date.
SECTION 10.12 Insurance. Schedule 10.12 hereto sets forth a
true and correct summary of all insurance carried by each Borrower and each
Subsidiary of any Borrower. Each Borrower and each Subsidiary of any Borrower is
adequately insured for its benefit under policies issued by insurers of
recognized responsibility. No notice of any pending or threatened cancellation
has been received by any Borrower or any Subsidiary of any Borrower with respect
to any of such insurance policies. Each Borrower and each Subsidiary of any
Borrower is in compliance with all conditions contained in such insurance
policies.
SECTION 10.13 Material Disruptions. Neither the business nor
the properties of any Borrower nor any Subsidiary of any Borrower is affected,
or anticipated to be affected, by any existing events of Force Majeure or other
existing casualties which singly or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
SECTION 10.14 Patents, Trademarks, etc. Each Borrower and each
Subsidiary of any Borrower owns and possesses, or is licensed under valid and
enforceable license agreements, or is otherwise entitled to use without payment,
all such patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service ▇▇▇▇ rights, trade secrets, mask works
and copyrights as are necessary for the conduct of its business as now conducted
or presently proposed to be conducted without any infringement upon rights of
others which could have a Material Adverse Effect, and, except as set forth in
Part 1 of Schedule 10.14, there are no individual patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service ▇▇▇▇ rights, trade secrets, mask works or copyrights the loss of which
singly or in the aggregate could reasonably be expected to have a Material
Adverse Effect (any such item, whether or not set forth on Schedule 10.14, being
herein called a "Material Intellectual Property Right"). Parts 1 and 2 of
Schedule 10.14 together contain a complete list of all license agreements
relating to patent rights, trademark rights, trade name rights, service ▇▇▇▇
rights, trade secrets, mask works and copyrights held by any Borrower or any
Subsidiary of any Borrower under license agreements.
SECTION 10.15 Ownership of Properties; Property Schedule. Each
Borrower and each Subsidiary of any Borrower has good and marketable title to
all of its properties and assets, real and personal, of any nature whatsoever.
Schedule 10.15 contains descriptions of all real and personal property (i) in
which any Borrower and any Subsidiary of any Borrower has an interest as of the
date hereof, (ii) with respect to which the Collateral Documents will not create
a valid and perfected first lien and security interest, and (iii) which cannot
be replaced without material expense, delay or interruption of business.
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SECTION 10.16 Business Locations; Trade Names. Schedule 10.16
lists each of the locations where each Borrower and each Subsidiary of any
Borrower maintains an office, a place of business or any records or has
maintained an office, a place of business or any records at any time during the
during the five year period prior to the Closing Date; and Schedule 10.16 also
lists each name under or by which any Borrower or any Subsidiary of any Borrower
conducts its business or has conducted business at any time during the five year
period prior to the Closing Date and a complete and accurate address and legal
description of each parcel of real estate owned or leased by any Borrower or any
Subsidiary of any Borrower.
SECTION 10.17 Accuracy of Information. All factual information
heretofore or contemporaneously herewith furnished by or on behalf of any
Borrower to Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual information
hereafter furnished by or on behalf of any Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information not misleading.
SECTION 10.18 Subsidiaries. Borrowers have no Subsidiaries.
SECTION 10.19 Hazardous Materials. Except as disclosed in
Schedule 10.19 hereto, (a) no Borrower, nor any Subsidiary of any Borrower has,
nor, to Borrowers' knowledge, has any other Person, ever caused or permitted any
Hazardous Material to be released, treated, stored or disposed of in a manner
which could form the basis for any claim, demand, proceeding or action by any
Person, past, present or future on, under or at any real property legally or
beneficially owned (or any interest or estate in real property which is owned)
or operated by any Borrower or any Subsidiary of any Borrower (including,
without limitation, any property owned by a land trust the beneficial interest
in which is owned in whole or in part by any Borrower or any Subsidiary of any
Borrower), (b) no such real property has ever been used (by any Borrower nor any
Subsidiary of any Borrower or any other Person) as (i) a disposal site for any
Hazardous Material or (ii) a permanent storage site for any Hazardous Material,
and (c) no Borrower nor any of its predecessors or any other Affiliates of any
of Borrower, has ever caused or permitted any Hazardous Material to be
transported, released, treated, stored or disposed of at any location other than
those identified in Schedule 10.19 in a manner which could form the basis for
any claim, demand, proceeding or action by any Person. The matters described on
Schedule 10.19, if adversely determined, neither singly nor in the aggregate
could reasonably be expected to have a Material Adverse Effect.
SECTION 10.20 Agent's Fees. Except as set forth in Schedule
10.20, no agent, broker, investment banker, Person, or firm acting on behalf of
any Borrower or their respective Affiliates, or under the authority of any such
Person, is or will be entitled to any broker's or finder's fee or any other
commission or similar fee, directly or indirectly, from any of the parties
hereto in connection with any of the transactions contemplated herein.
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SECTION 10.21 Taxes. Each Borrower and each Subsidiary of any
Borrower has filed all tax returns that are required to be filed by it or on
behalf of any Employee Benefit Plan, and has paid or provided adequate reserves
for the payment of all taxes, including, without limitation, all payroll taxes
and federal and state withholding taxes, and all assessments payable by it that
have become due, other than those that are not yet delinquent or that are
disclosed on Schedule 10.21 and are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been established,
and are being maintained, in accordance with GAAP. There is no ongoing audit or,
to Borrowers' knowledge, other governmental investigation of the tax liability
of any Borrower or any Subsidiary of any Borrower or any Employee Benefit Plan
and there is no unresolved claim by a taxing authority concerning tax liability
by Borrower or any Subsidiary of any Borrower (or by any governmental authority
with respect to any Employee Benefit Plan), for any period for which returns
have been filed or were due. As used in this Section 10.21, the term "taxes"
includes all taxes of any nature whatsoever and however denominated, including,
without limitation, excise, import, governmental fees, duties and all other
charges, as well as additions to tax, penalties and interest thereon, imposed by
any government or instrumentality, whether federal, state, local, foreign or
other.
SECTION 10.22 Securities Laws. No Borrower, and no Affiliate
of any Borrower, nor anyone acting on behalf of any such Person, has directly or
indirectly offered any interest in the Notes or any other Liability for sale to,
or solicited any offer to acquire any such interest from, or has sold any such
interest to any Person that would subject the issuance or sale of the Notes or
any other Liability to registration under the Securities Act of 1933, as
amended.
SECTION 10.23 Governmental Authorizations. Each Borrower and
each Subsidiary of any Borrower has all licenses, franchises, permits and other
governmental authorizations necessary for all businesses carried on by it
(including owning and leasing the real and personal property owned and leased by
it), except where failures to obtain such licenses, franchises, permits and
other governmental authorizations (a) are not related to any use, manufacture,
generation, storage, transport, release or disposal by any such Person of any
Hazardous Material, and (b) neither singly nor in the aggregate could reasonably
be expected to (i) subject any such Person or any of its officers to criminal
liability or (ii) have a Material Adverse Effect.
SECTION 10.24 Compliance with Laws. Each Borrower and each
Subsidiary of any Borrower: (i) is in compliance in all material respects with
all laws, ordinances, rules, regulations, orders, policies, guidelines or other
requirements of any governmental authority, including the same relating to any
manufacture, use, generation, release, storage, transport or disposal of any
Hazardous Material, (ii) has filed in a timely manner all reports, documents and
other materials required to be filed by it with any governmental bureau, agency
or instrumentality (and the information contained in each of such filings is
true, correct and complete in all material respects), except where failures to
make such filings are not related to the manufacture, use, generation, release,
storage,
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transport or disposal of any Hazardous Material by any Borrower or any
Subsidiary of any Borrower and neither singly nor in the aggregate could
reasonably be expected to have a Material Adverse Effect and (iii) has retained
all records and documents required to be retained by it pursuant to any law,
ordinance, rule, regulation, order, policy, guideline or other requirement of
any governmental authority, except where failures to retain such records are not
related to the use, manufacture, generation, release, storage, transport or
disposal of any Hazardous Material and neither singly nor in the aggregate could
reasonably be expected to subject any Borrower, any Subsidiary of any Borrower
or Parent or any of their officers to criminal liability or have a Material
Adverse Effect.
SECTION 10.25 Employees and Labor. There is no unfair labor
practice complaint against any Borrower nor any Subsidiary of any Borrower
pending before the National Labor Relations Board or any state or local agency
nor is there a labor strike or other labor dispute, pending or, to any
Borrower's knowledge, threatened affecting any of the foregoing which if
adversely resolved singly or in the aggregate could reasonably be expected to
have a Material Adverse Effect; there is no existing representation question
respecting the employees of any Borrower nor any Subsidiary of any Borrower nor
are there organizational attempts affecting any of the employees of Borrowers
nor any of their Subsidiaries which singly or in the aggregate could reasonably
be expected to have a Material Adverse Effect; there is no grievance pending or,
to any Borrower's knowledge, threatened affecting any Borrower nor any
Subsidiary of any Borrower; and no labor disputes or work stoppages involving
any Borrower nor any Subsidiary of any Borrower are pending or, to any
Borrower's knowledge, threatened, which singly or in the aggregate could
reasonably be expected to have a Material Adverse Effect. No Borrower nor any
Subsidiary of any Borrower is a party to any collective bargaining agreements,
except as listed on Schedule 10.25 hereto. To Borrowers' knowledge, no customer
or supplier of any Borrower nor any Subsidiary of any Borrower is involved in,
or threatened with or affected by, any labor dispute, arbitration, lawsuit or
administrative proceeding which singly or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
SECTION 10.26 Year 2000. Each Borrower and each Subsidiary of
any Borrower have conducted a review and assessment of all computer applications
and programs (the "Software") owned, licensed or used by any of them and all
such Software is fully able to perform date-sensitive or other functions on or
after, or as to dates on or after December 31, 1999, except for immaterial
Software where the failure to perform such function could not have a Material
Adverse Effect.
SECTION 10.27 Solvency. Each Borrower and each Subsidiary of
any Borrower are Solvent both before and after giving to the execution and
delivery of this Agreement and any of the other Related Documents to which such
Person is a party and consummation of the transactions contemplated hereunder or
thereunder, including, without limitation, the Related Transactions.
SECTION 10.28 Collateral. Except for the Permitted Liens, all
of the Collateral is and will continue to be owned by Borrower and their
Subsidiaries free and
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clear of all Liens. From and after the making of the first Loan and after the
making of all necessary filings, the provisions of the Security Agreement will
be effective to create and will give Lender as security for the repayment of the
Liabilities, a legal, valid, perfected and enforceable Lien (which priority is
subject only to Permitted Liens) upon all right, title and interest of each
Borrower and each Subsidiary of any Borrower in any and all of the Collateral
(including the Liens on the items and amounts deposited in the Operating Account
and the Depositary Accounts. Upon the acknowledgment of Lender's security
interest in the Depositary Accounts by the banks or other financial institutions
at which such Depositary Accounts are maintained, this Agreement will be
effective to create and will give Lender as security for the repayment of the
Liabilities, a legal, valid, perfected and enforceable first priority Lien on
all deposits or other items in the Depositary Accounts.
SECTION 10.29 Places of Business. As of the Closing Date, the
principal place of business and chief executive office of each Borrower and each
Subsidiary of any Borrower is set forth on Schedule 10.29 and, except as
disclosed on Schedule 10.29, none of such locations have changed within the six
(6) month period prior to the Closing Date. Except for sales offices, no
Borrower nor any Subsidiary of any Borrower has maintained places of business in
the last six (6) months except for those listed on Schedule 10.29. The books and
records of each Borrower and each Subsidiary of any Borrower and all Chattel
Paper, Instruments and all records of accounts of the Borrower and each
Subsidiary of any Borrower are located and hereafter shall continue to be
located at the principal place of business and chief executive office of the
Borrowers.
SECTION 10.30 Other Names. The business conducted by each
Borrower and each Subsidiary of any Borrower has not been in the past five (5)
years, and will not be without the prior written consent of the Lender not to be
unreasonably withheld, conducted under any corporate, trade or fictitious name
other than those names disclosed on Schedule 10.30.
SECTION 10.31 Real Estate. Schedule 10.29 describes all Real
Estate owned or leased or otherwise occupied by each Borrower and each
Subsidiary of any Borrower. The Borrowers represent and warrant to Lender that
such Person has good, indefeasible and merchantable title to and ownership of,
or a valid leasehold interest in, each parcel of Real Estate described in
Schedule 10.29, free and clear of all Liens, except Liens in favor of Lender and
the Permitted Liens.
SECTION 11 COVENANTS.
Until the expiration or termination of the Commitments and
thereafter until the Notes and all other Liabilities are paid and performed in
full, each Borrower agrees that, unless at any time Lender shall otherwise
expressly consent in writing, it will and, as appropriate, cause each of their
respective Subsidiaries to:
SECTION 11.1 Reports, Certificates and Other Information.
Furnish or cause to be furnished to Lender:
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(a) As soon as available, but in any event within 105 days
after the end of each Fiscal Year of the Consolidated Entity: (i) copies of the
balance sheets of the Consolidated Entity as at the end of such Fiscal Year and
the related statements of earnings, shareholders' equity and cash flows for such
Fiscal Year, in each case setting forth in comparative form the figures for the
previous year and, as prepared by the Parent and Borrowers in the current
business plan and containing a narrative discussion by the Parent and Borrowers
of variances reflected by such comparisons, prepared in reasonable detail, on a
consolidated and consolidating basis and in accordance with GAAP applied
consistently throughout the periods reflected therein, such consolidated
financial statements to be certified, without a going concern or like
qualification or qualification arising out of the scope of the audit, by BDO
▇▇▇▇▇▇▇ LLP (or such other independent certified public accountants of
recognized standing as shall be selected by Parent with Lender's approval); and
(ii) a certificate from the accountants identified in clause (i) of this Section
11.1(a) (the "Accountants") containing a computation of, and showing compliance
with, each of the financial ratios and restrictions contained in this Section
11, and to the effect that, in making the examination necessary for the signing
of the annual audit report of the Consolidated Entity by such accountants, they
have not become aware of any non-compliance by Parent or any Borrower with this
Agreement or any Related Document or any Event of Default or Unmatured Event of
Default.
(b) As soon as available, but in any event within 50 days
after the end of each fiscal quarter of the Consolidated Entity, copies of the
unaudited balance sheet of the Consolidated Entity as at the end of such fiscal
quarter and the related unaudited statements of earnings, shareholders' equity
and cash flows for such fiscal quarter and the portion of the Fiscal Year
through such fiscal quarter, in each case setting forth in comparative form the
figures for the corresponding periods of the previous Fiscal Year and in the
current business plan and containing a narrative discussion of variances
reflected by such comparisons, prepared in reasonable detail, on a consolidated
and consolidating basis and in accordance with GAAP applied consistently
throughout the periods reflected therein, accompanied by a "management letter"
containing a narrative discussion of such financial statements and certified by
the Accountants or the chief financial officer of Parent as presenting fairly
the financial condition and results of operations of the Consolidated Entity
(subject to normal year-end audit adjustments).
(c) As soon as available, but in any event within 30 days
after the end of each month, copies of the unaudited balance sheet of the
Consolidated Entity as at the end of such month and the related unaudited
statements of earnings and cash flows for such month and the portion of the
Fiscal Year through such month, in each case setting forth in comparative form
the figures for the corresponding periods of the previous Fiscal Year and in the
current business plan and containing a narrative discussion of variances
reflected by such comparisons, prepared in reasonable detail, on a consolidated
and consolidating basis and in accordance with GAAP applied consistently
throughout the periods reflected therein and certified by the Accountants or the
chief financial officer of Parent as presenting fairly the financial condition
and results of operations of the Consolidated Entity (subject to normal year-end
audit adjustments).
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(d) As soon as available, but in any event within 30 days
after the beginning of each Fiscal Year of the Consolidated Entity, a copy of
the plan and forecast (including a projected consolidated closing balance sheet,
income statement and funds flow statement and amount of the Revolving Commitment
and Borrowing Availability) of the Consolidated Entity for the current Fiscal
Year in monthly detail.
(e) Contemporaneously with the furnishing of a copy of each
annual audit report (i) and of each set of financial statements provided for in
Sections 11.1(b), 11.1(c) and 11.1(d), a duly completed certificate in
substantially the form of Exhibit F or in such other form as Lender may from
time to time require (each a "Compliance Certificate"), signed by the chief
executive officer, chief operating officer or chief financial officer of Parent,
containing, among other things, a computation of, and showing compliance with,
each of the applicable financial ratios and restrictions contained in this
Section 11 and to the effect that as of such date no Event of Default or
Unmatured Event of Default has occurred and is continuing or if such an Event of
Default or Unmatured Event of Default has occurred and is continuing, setting
forth the nature thereof and the actions Borrowers are taking with respect
thereto, and (ii) a report of the President of Parent describing the financial
performance of the Consolidated Entity during the period covered by such set of
financial statements and setting forth any significant events occurring during
such period affecting the Consolidated Entity.
(f) Promptly upon receipt thereof, copies of all financial and
management reports regarding the Consolidated Entity, submitted to any Borrower,
Parent or any shareholder of Parent or any Borrower, by independent public
accountants in connection with each annual or interim audit report made by such
accountants of the books of the Consolidated Entity or any Borrower.
(g) Promptly upon the filing or making thereof, copies of each
filing and each report made by Parent or any Borrower with or to any securities
exchange or the Securities and Exchange Commission and of each written
communication from Parent or any Borrower to its shareholders generally.
(h) Forthwith upon learning of the occurrence of any of the
following, written notice thereof, describing the same and the steps being taken
by any Borrower or any other party with respect thereto: (i) the occurrence of
an Event of Default or an Unmatured Event of Default, (ii) the institution of,
or any adverse determination or materially adverse development in, any
litigation, arbitration proceeding or governmental proceeding which could have a
Material Adverse Effect, (iii) the occurrence of a Reportable Event, (iv) the
institution of any steps to terminate any Pension Plan, (v) the institution of
any steps to completely or partially withdraw from any Multiemployer Plan, (vi)
the failure of any Borrower or any current or past member of the Controlled
Group to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 412 of the Code or Section 302
of ERISA, (vii) the adoption of any amendment which would require any Borrower
or any current or past member of the Controlled Group to provide a bond or other
security to a Pension Plan under Section
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401(a)(29) of the Code or Section 307 of ERISA, (viii) the incurrence of any
increase in the contingent liability of any Borrower or any member of the
Controlled Group or any other conditions, events or transactions with respect to
any present (or future) Employee Benefit Plan which (a) is not adequately
reserved on the balance sheet of the Consolidated Entity, any Borrower or one of
the Controlled Group members and (b) could not reasonably be expected to result
in the incurrence by any Borrower or any member of the Controlled Group of any
liability in excess of $50,000 (in the aggregate), (ix) the commencement of any
dispute which might lead to the modification, transfer, revocation, suspension
or termination of any Related Document, (x) any termination (without renewal),
loss, suspension or other impairment of any Borrower's rights under any Material
Intellectual Property Right or Material Contract or any expectation of any such
termination, loss, suspension or other impairment, (xi) any other material
adverse change in a Material Contract, or (xii) any other event or events which
singly or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
(i) (i) Within 90 days after the end of each Fiscal Year, a
certificate signed by Parent's President or chief financial officer that
summarizes the insurance policies carried by each Borrower and each Subsidiary
of any Borrower (such certificate to be in form and substance satisfactory to
Lender), and (ii) written notification 30 days prior to any cancellation or
material change (other than one which enlarges the scope of coverage, adds
additional insureds or increases coverage limits) of any such insurance by any
Borrower or any Subsidiary of any Borrower and within 5 days after receipt of
any notice (whether formal or informal) of cancellation, reduction in coverage,
or shortening of policy period or material adverse change by any of its
insurers.
(j) With respect to each "Multiemployer Plan", as defined in
section 4001 of ERISA as to which any of Borrower or any current or past member
of the Controlled Group may have any liability, (i) no less frequently than
annually, a written estimate (which shall be based on information received from
each such plan, it being expressly understood that Parent shall take all
reasonable steps to obtain such information) of the withdrawal liability that
would be incurred by any Borrower or any current or past member of the
Controlled Group in the event that any Borrower or any current or past member of
the Controlled Group were to completely withdraw from that plan in a complete
withdrawal as defined in section 4201 of ERISA, and (ii) written notice thereof,
as soon as it has reason to believe (on the basis of the most recent information
available to it) that the sum of (a) the withdrawal liability that would be
incurred by any of Borrower or any current or past member of the Controlled
Group if any Borrower or any current or past member of the Controlled Group
completely withdrew from any Multiemployer Plans as to which any Borrower of any
current or past member of the Controlled Group has an obligation to contribute,
and (b) the amount of the outstanding withdrawal liability (without unaccrued
interest) incurred by any Borrower of any current or past member of the
Controlled Group to Multiemployer Plans, would exceed $50,000 in the aggregate.
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(k) Prompt written notice of execution of any agreement by any
Borrower or any Subsidiary of any Borrower to merge or consolidate into or with,
or purchase or otherwise acquire all or substantially all of the assets or stock
of any class of, or any partnership or joint venture interest in, any other
Person, or for the sale, transfer, lease or conveyance by any Borrower or any
Subsidiary of any Borrower of all or any substantial part of its assets or sale,
or for the assignment by any Borrower or any Subsidiary of any Borrower without
recourse of any of its receivables.
(l) (i) Not more than 10 Business Days after each anniversary
date of the initial Loan, a complete list of the officers, shareholders and
directors of each of the Borrowers and Parent and (ii) within 15 Business Days
of any change in the information provided pursuant to the foregoing clause (i),
written notice of such change.
(m) Not later than the twentieth (20th) day of each month, a
monthly report ("Monthly Report") for each Borrower, accompanied by a
certificate in the form attached as Exhibit G, which shall be signed by the
chief executive officer or chief financial officer of such Borrower. The Monthly
Report shall be in form and substance satisfactory to Lender and shall include,
as of the last Business Day of the preceding month (and with respect to the
initial Monthly Report attached as Exhibit G, as of a date not more than two (2)
Business Days prior to the Closing Date): (i) an aged trial balance of Accounts
("Accounts Trial Balance") of Ecology Kids sorted by Account Debtor in invoice
detail and submitted in hard copy and electronic disk indicating which Accounts
are current, up to 30, 30 to 59, 60 to 89 and 90 days or more past the original
invoice date and listing the names and addresses of all applicable Account
Debtors, (ii) a statement of Accounts of ▇▇▇ ▇▇▇▇▇▇ and Brownstone as received
from Mokrynski and Associates, Inc. (iii) a summary of accounts of such Borrower
payable showing which accounts payable are current, up to 30, 30 to 59, 60 to 89
and 90 days or more past due and listing the names and addresses of applicable
creditors; and (iv) a schedule of Inventory owned by such Borrower and in such
Borrower's possession valued at the lower of cost or market on a FIFO basis. In
addition, each Borrower shall deliver a Borrowing Base Certificate as to such
Borrower to Lender by 10 A.M. (Chicago time) on each Business Day. The Funds
Administrator (i) shall calculate the Cash-In-Transit component of the Borrowing
Base based upon the amounts provided to the Borrowers by the Depositary Banks
for such Business Day, (ii) shall calculate Pledged Cash Collateral based upon
the most recent information provided by the Master Account Bank after giving
effect to any withdrawals or debits, and (iii) shall calculate the Eligible
Accounts, Eligible Deferred Billing Accounts and Eligible Inventory on each
Tuesday as of the previous Friday. Each Borrower shall furnish copies of any
other reports or information, in a form and with such specificity as is
satisfactory to Lender, concerning Accounts and Inventory of such Borrower
included, described or referred to in any Borrowing Base Certificate and any
other documents in connection therewith requested by Lender, including but only
if specifically requested by Lender, copies of all invoices prepared in
connection with such Accounts and all credit memoranda issued by Borrowers
(Borrowers shall issue such credit memoranda in accordance with their current
practice and without delay, but in any event within three (3) Business Days of
receipt of notice of a dispute with respect to an Account).
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(n) From time to time, such other information concerning any
Borrower, any Subsidiary of any Borrower or Parent as Lender may reasonably
request.
SECTION 11.2 Corporate Existence; Foreign Qualification. Do
and cause to be done at all times all things necessary to (i) maintain and
preserve the corporate existence of each Borrower and each Subsidiary of any
Borrower, (ii) be duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where the nature of its business makes
such qualification necessary, except any such jurisdiction where failure to so
qualify could not have a Material Adverse Effect (which jurisdictions shall
include, without limitation, those jurisdictions listed in Schedule 10.1) and
(iii) comply with all Contractual Obligations and Requirements of Law binding
upon such Person, except to the extent that failures to so comply therewith
singly or in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
SECTION 11.3 Books, Records and Inspections. Maintain complete
and accurate books and records. In addition, Lender, or any Person designated by
Lender in writing, shall have the right, from time to time hereafter, to call at
each place or places of business of each Borrower and each Subsidiary of any
Borrower (or any other place where the Collateral or any information relating
thereto is kept or located) during normal business hours upon reasonable prior
written or telephonic notice by Lender or such other Person; provided that no
prior notice shall be required upon the occurrence and during the continuance of
an Event of Default or Unmatured Event of Default, and, without hindrance or
delay (i) to inspect, audit, check and make copies of and extracts from such
Person's books, records, journals, orders, receipts and any correspondence and
other data relating to such Person's business or to any transactions between the
parties hereto, (ii) to make such verification concerning the Collateral as
Lender may consider reasonable under the circumstances, and (iii) to discuss the
affairs, finances and business of such Person with any officers, employees or
directors of such Person.
SECTION 11.4 Insurance. (i) If any Borrower or any Subsidiary
of any Borrower maintains "key man" insurance with respect to any officer or
director of such Person, such Person shall assign the proceeds of such insurance
to Lender pursuant to an assignment in form and substance reasonably
satisfactory to Lender, (ii) maintain such insurance (X) as may be required by
law, or by the Collateral Documents or otherwise by Lender, and (Y) in any event
to such extent and against such hazards and liabilities, as is customarily
maintained by prudent companies similarly situated, (iii) maintain a sufficient
amount of insurance so that no Borrower nor any Subsidiary of any Borrower nor
Lender will be considered a co-insurer or co-insurers, (iv) with respect to each
liability insurance policy, (A) cause such policy to provide, pursuant to
endorsements in form and substance satisfactory to Lender, that Lender is named
as an additional insured and that the insurer will give Lender 30 days' prior
written notice of the termination or other material modification of such policy
and (B) notify Lender within 5 days after obtaining any new policy, or
increasing coverage under any existing policy, describing in detail in such
notice any such new policy or increase, and (v) with respect to each physical
damage or casualty
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policy, and each life insurance policy referred to in subclause (i), (A) cause
such policy to provide, pursuant to endorsements in form and substance
satisfactory to Lender, that Lender is named as a loss payee as to personal
property, mortgagee as to real property (subordinate to Permitted Liens as
appropriate) and an assignee with respect to life insurance and that the insurer
will give 30 days' prior written notice of the termination or other material
modification of such policy, (B) cause such policy to provide, pursuant to
endorsements in form and substance satisfactory to Lender, that the insurance
shall not be invalidated as against Lender by any action or inaction of any
Person other than Lender, regardless of any breach or violation of any warranty,
declaration or condition contained in such policy, (C) as against Lender, the
insurers shall waive any rights of subrogation to the extent that the named
insured has waived such rights (and each Borrower hereby irrevocably and
unconditionally waives any right of subrogation against Lender, except for
claims arising out of the gross negligence or willful misconduct of Lender), and
(D) notify Lender within 5 days of obtaining any new policy or increasing
coverage under any existing policy, describing in detail in such notice any such
new policy or increase.
SECTION 11.5 Taxes and Liabilities. Pay when due all taxes,
assessments and other material liabilities except as contested in good faith and
by appropriate proceedings with respect to which adequate reserves have been
established, and are being maintained, in accordance with GAAP if and so long as
forfeiture of any part of the Collateral will not result from the failure to pay
any such taxes, assessments or other material liabilities during the period of
any such contest.
SECTION 11.6 Employee Benefit Plans. (i) Maintain, and cause
each current or past member of the Controlled Group to maintain, each Pension
Plan as to which it may have any liability, in compliance in all material
respects with all applicable Requirements of Law or as required pursuant to a
collective bargaining agreement, or if intended to qualify under Section 401(a)
or 501(a) of the Code, in form and administered in a manner so as not to result
in any liability to any Borrower, or any current or past member of the
Controlled Group for failure to comply with the applicable provisions thereof,
and (ii) not institute any actions which could give rise to any of the
following, unless the liability to any Borrower or any current or past member of
the Controlled Group arising from the same will not exceed $50,000 or is
adequately reserved on the balance sheet of the Consolidated Entity: (a) a
Reportable Event, (b) the complete or partial withdrawal from any Multiemployer
Plan as defined in Section 4210 of ERISA, (c) an amendment, modification or
termination or withdrawal from of a Pension Plan or the entering into of any new
Pension Plan, (whether or not resulting in the posting of a security under
Section 401(a)(29) of the Code or Section 307 of ERISA), (d) an obligation to
file a notice of intent to terminate a Pension Plan under Section 4041 of ERISA,
(e) a lien under Section 412 of the Code or Section 302 of ERISA, (f) the
institution of proceedings to terminate a Pension Plan by the Pension Benefit
Guaranty Corporation under Section 4043 of ERISA, or (g) other than in the
ordinary course, the incurrence of any increase in the contingent liability of
any Borrower or any Subsidiary of any Borrower or any other conditions, events
or transactions with respect to any present (or future) Employee Benefit Plan.
No Borrower nor any
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Subsidiary of any Borrower will become a party or otherwise become obligated to
contribute to any Multiemployer Plan.
SECTION 11.7 Collateral Documents. Cause the Collateral
Documents, as security for the payment and performance of Notes and all other
Liabilities, to be and remain valid, perfected Liens on and security interests
in all assets of each Borrower and each Subsidiary of any Borrower now or
hereafter existing or acquired (free of all other Liens whatsoever other than
Permitted Liens).
SECTION 11.8 Compliance with Laws. Comply with all Federal,
state and local laws, rules and regulations related to its business except to
the extent that failures to so comply singly or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
SECTION 11.9 Maintenance of Permits. Maintain all permits,
licenses and consents as are required for the conduct of its business by any
state, Federal or local government agency or instrumentality (including, without
limitation, any such license, consent or permit relating to Hazardous Materials
or the disposal thereof) if the failure to maintain such licenses, permits and
consents could not reasonably be expected to have a Material Adverse Effect.
SECTION 11.10 Purchase, Redemption, Distribution, Interest and
Payment Restrictions. Not, directly or indirectly, purchase, redeem or otherwise
acquire any of its Equity Interests or declare or make any dividend,
distribution or payment to any holder of any of its Equity Interests, or
purchase, redeem or otherwise acquire all or any portion of the Subordinated
Debt or make any payment of principal of, interest on, or any other payment with
respect to, any Subordinated Debt, or set aside any funds for any such purpose,
or make any other payment of any nature whatsoever to any holder of any shares
of the capital stock or the Subordinated Debt or any of their or Borrowers'
Affiliates or members, partners or shareholders (in their capacity as such),
provided, however, that Borrowers may do the following: (a) pay taxes which are
then due and payable and make dividends or distributions to Parent to allow
Parent to pay taxes which are then due and payable; and (b) provided that no
Event of Default exists immediately prior or after giving effect thereto, (i)
make payments of principal of and interest on the Subordinated Debt in
accordance with the terms of the Subordinated Debt Documents as in effect on the
Closing Date and permitted by the Subordination Agreement; (ii) make payments
permitted pursuant to Section 11.19 hereof; and (iii) make dividends or
distributions to Parent to (1) allow Parent to make payments which are required,
due and payable under the Preferred Stock Documents as described on Schedule
11.10 hereto and (2) reimburse parent for such Borrower's fair share of expenses
and corporate overhead of Parent incurred in the ordinary course of business.
SECTION 11.11 Guaranties, Loans, Advances or Investments.
Except as set forth on Schedule 11.11 hereto, not become or be a guarantor or
surety of, or otherwise incur any Contingent Obligation or become or be
responsible in any manner
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(whether by agreement to purchase any obligations, stock, assets, goods or
services, or to supply or advance any funds, assets, goods or services, or
otherwise) with respect to, any undertaking of any other Person, or make or
permit to exist any loans or advances to, investments in, or contributions to
the capital of, any other Person, except for (i) guaranties in favor of Lender,
(ii) the endorsement, in the ordinary course of collection, of instruments
payable to it or to its order (iii) investments in Cash Equivalents (iv) a loan
from Parent to ▇▇▇ ▇▇▇▇▇▇ and a corresponding loan from ▇▇▇ ▇▇▇▇▇▇ to Brownstone
made with proceeds of and in each case not to exceed the outstanding principal
of Subordinated Debt and (v) other intercompany loans and advances among the
Borrowers provided that (a) the aggregate amount of loans and advances from any
one Borrower shall not exceed $500,000 or $1,000,000 with respect to all
Borrowers, in the aggregate at any one time outstanding in each case and (b) the
Borrower making such loan or advance shall be and remain Solvent both prior and
after giving effect to any such Loan.
SECTION 11.12 Mergers, Consolidations, Sales. Not (a) be a
party to any merger or consolidation or purchase or otherwise acquire all or
substantially all of the assets or stock of any class of, or any partnership or
joint venture interest or other interest in, any other Person; or (b) sell,
transfer, convey or lease all or any substantial part of its assets or sell or
assign with or without recourse any Account, other than any sale of inventory in
the ordinary course of business, and provided that the sale, transfer,
conveyance or lease of assets shall be in addition subject to the limitations
set forth in the Security Agreement.
SECTION 11.13 Unconditional Purchase Obligations. Not enter
into or be a party to any contract for the purchase of materials, supplies or
other property or services, if such contract requires that payment be made by it
regardless of whether delivery is ever made of such materials, supplies or other
property or services.
SECTION 11.14 Regulations T, U and X. Not use or permit any
proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of "purchasing or carrying
margin stock" within the meaning of Regulations T, U and X of the Board of
Governors of the Federal Reserve System, as amended from time to time.
SECTION 11.15 Subsidiaries. Notwithstanding any provision of
this Agreement to the contrary, not create or permit to exist any Subsidiary of
any Borrower.
SECTION 11.16 No Amendment of Certain Documents. Not enter
into or permit to exist any amendment or modification of the Certificate of
Incorporation of each Borrower and each Subsidiary of any Borrower or any
Subordinated Debt Document.
SECTION 11.17 Other Agreements. Not enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder, any of the Related Documents or under any other
instrument or document delivered or to be delivered by it hereunder or in
connection herewith.
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SECTION 11.18 Business Activities; Name. Not engage in any
type of business except the businesses described in Schedule 11.18 and the
activities incidental and related thereto. Each Borrower and each Subsidiary of
any Borrower shall transact business only in their respective corporate name and
such trade names as are set forth in Schedule 10.30. Following the Closing Date
no Borrower will, nor will it permit any of its Subsidiaries to, conduct its
business under any trade or fictitious name other than the duly registered names
disclosed on Schedule 10.30. Notwithstanding the foregoing, Diplomat shall not
conduct any business except to hold, sell, assign or enforce that certain
Promissory Note from Genesis Direct Thirty-Four, LLC, a Delaware limited
liability company dated April 17, 1998 and made payable to Diplomat in the
original principal amount of $1,170,000.
SECTION 11.19 Transactions with Affiliates. Not enter into, or
cause, suffer or permit to exist any transaction, arrangement or contract with
any Affiliate, including without limitation the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate, except
transactions referred to on Schedule 11.19.
SECTION 11.20 Environmental Liabilities. Not violate any
Requirement of Law regarding Hazardous Material; and, without limiting the
foregoing, not, and not permit any Person to, dispose of any Hazardous Material
into or onto (except in accordance with Requirements of Law), or (except in
accordance with Requirements of Law) from, any real property owned or operated
by it nor allow any lien imposed pursuant to any law, regulation or order
relating to Hazardous Materials or the disposal thereof to be imposed or to
remain on such real property.
SECTION 11.21 Indebtedness. Not incur or permit to exist any
Indebtedness or accounts payable except (i) the Loans and Subordinated Debt,
(ii) intercompany loans and advances among the Borrowers provided that (a) such
Indebtedness shall not exceed $500,000 with respect to any Borrower or
$1,000,000 with respect to all Borrowers, in the aggregate at any one time
outstanding in each case and (b) the Borrower receiving such loan or advance
shall be and remain Solvent both prior and after giving effect to any such loan
or advance, (iii) deferred taxes, (iv) current accounts payable arising in the
ordinary course of business and not overdue, (v) non-current accounts payable
which any Borrower or any Subsidiary of any Borrower is contesting in good faith
and by appropriate proceedings diligently conducted, and with respect to which
adequate reserves have been established, and are being maintained, in accordance
with GAAP, and (vi) Indebtedness of a type referenced in clauses (b) and (c) of
the definition of Permitted Liens provided that the aggregate outstanding amount
thereof does not at any time exceed $1,000,000 as to the Indebtedness referenced
in either such clause ("Permitted Purchase Money Debt"), (vi) the Congress LC
Liabilities so long as such Indebtedness is satisfied prior to December 31, 1999
and (vii) other Indebtedness shown on Schedule 11.21.
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SECTION 11.22 Liens. Not create or permit to exist any Lien
with respect to any assets of any Borrower or any Subsidiary of any Borrower now
or hereafter existing or acquired, except Permitted Liens.
SECTION 11.23 Fiscal Year. Not change its Fiscal Year from a
Fiscal Year ending on the dates designated in Schedule 11.23 hereto.
SECTION 11.24 Landlord and Warehouseman Agreements. Provide
Lender with copies of all agreements between any Borrower and any Subsidiary of
any Borrower and any landlord, bailee, warehouseman or processor which owns any
premises at which Inventory or any other Collateral may, from time to time, be
located. Each Borrower shall deliver to Lender on or before the Closing Date a
landlord's waiver in form and substance acceptable to Lender from the lessor of
each leased property currently being used by such Borrower or any Subsidiary of
any Borrower where Collateral is located. Each Borrower shall deliver to Lender
a bailee letter in form and substance acceptable to Lender with respect to any
warehouse or other location where Collateral is located. With respect to leased
locations or warehouse space or processing locations leased on the Closing Date,
if any Borrower is unable to deliver such a landlord waiver or bailee letter the
Inventory at that location shall automatically be deemed ineligible without
further action by Lender. In the event any Borrower delivers to Lender such
landlord waiver or bailee letter, as applicable, after the Closing Date, subject
to the terms and conditions of this Agreement (including Section 9.4), Inventory
located at such leased location or other location, as applicable, may be
considered Eligible Inventory. Each Borrower and each Subsidiary of any Borrower
shall timely and fully pay and perform its obligations under all leases and
other agreements with respect to each leased location or warehouse or processing
location where any Collateral is or may be located. Each Borrower shall promptly
deliver to Lender copies of (i) any and all default notices received by it under
or with respect to any such leased location or other location, and (ii) such
other notices or documents as Lender may request in its reasonable discretion.
SECTION 11.25 Maintenance of Real Estate. Keep and maintain
the Real Estate and all improvements thereon in good condition and repair
(ordinary wear and tear excepted) and shall maintain the value and utility
thereof and shall maintain such Real Estate in conformity with all applicable
building and zoning codes and other applicable laws, statutes, rules and
regulations. Each Borrower and each Subsidiary of any Borrower shall maintain
its leased real property in the same manner as its owned Real Estate, and comply
with the terms of its leases of Real Estate, in accordance with the applicable
leases.
SECTION 11.26 Account Records. At all times hereafter maintain
a record of their Accounts, keeping correct and accurate records itemizing and
describing the names and addresses of Account Debtors, relevant invoice numbers,
shipping dates and due dates, collection histories, and Accounts agings, all of
which records shall be available during Borrowers' usual business hours at the
request of any of Lender's officers, employees or agents. Each Borrower and each
Subsidiary of any Borrower shall
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cooperate fully with Lender and their agents who shall have the right at any
time or times to inspect its Accounts and the records with respect thereto. Each
Borrower and each Subsidiary of any Borrower shall conduct a review of their bad
debt reserves and collection histories at least once each year and promptly
following such review shall supply Lender with a report in a form and with such
specificity as may be reasonably satisfactory to Lender concerning such review
of the Accounts.
SECTION 11.27 Instruments and Chattel Paper. All Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of First Source
Financial LLP, as Lender." Upon the request of Lender and at all times upon the
occurrence and during the continuance of an Event of Default or Unmatured Event
of Default, immediately upon any Borrower's or any Borrower's Subsidiary's
receipt thereof, Borrowers shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment to vest title, with full recourse to
Borrowers, and possession in Lender, all Instruments and Chattel Paper which any
Borrower or any Subsidiary of any Borrower now owns or may at any time or times
hereafter acquire.
SECTION 11.28 Inventory Records. At all times hereafter
maintain a perpetual inventory, keeping correct and accurate records itemizing
and describing the kind, type, quality and quantity of Inventory and of Eligible
Inventory, Borrowers' cost therefor and daily withdrawals therefrom and
additions thereto, and the locations of all Inventory in the possession of
bailees, all of which records shall be available during Borrowers' usual
business hours at the request of any of Lender's officers, employees or agents.
Borrowers shall, and shall cause each Subsidiary to, cooperate fully with Lender
and its agents who shall have the right at any time or times to inspect the
Inventory and the records with respect thereto. Borrowers shall, and shall cause
each Subsidiary to, conduct a physical count of its Inventory at least once each
year and promptly following such physical inventory shall supply Lender with a
report in form and substance satisfactory to Lender concerning such physical
count of their Inventory, and shall furnish to Lender, at Lender's request, such
other documents and reports with respect to the Inventory.
SECTION 11.29 Collateral Locations. Not, and shall not permit
any Subsidiary to, sell any of the Inventory on a guaranteed sale,
sale-and-return (not including the rights of Consumers to return merchandise
sold in the ordinary course of business), sale on approval or consignment basis
or any other basis subject to a repurchase obligation or return right. Neither
the location of the principal place of business and chief executive office of
any Borrower or any Subsidiary of any Borrower as set forth on Schedule 10.29,
the locations of Collateral as set forth on Schedule 10.29 nor the corporate
name or mailing address of any Borrower or any Subsidiary of any Borrower shall
be changed, nor shall there be established additional places of business or
additional locations at which Collateral is stored, kept or processed unless (i)
Borrowers shall have given Lender not less than thirty (30) days prior written
notice thereof, (ii) Lender shall have determined that, after giving effect to
any such change of name, address or location, Lender shall have a first
perfected Lien in the Collateral except for Permitted Liens, (iii) in
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the case of Collateral locations, Borrowers shall have delivered a landlord
waiver or bailee letter, as applicable, in form and substance satisfactory to
Lender with respect to such location, and (iv) all negotiable documents and
receipts in respect of any Collateral maintained at such premises are promptly
delivered to Lender. Prior to making any such change or establishing such new
location, Borrowers shall execute or cause to the executed any additional
financing statements or other documents or notices required by Lender. All
Collateral located at any such new location shall automatically without further
action by Lender be deemed ineligible to constitute Eligible Accounts or
Eligible Inventory, as the case may be, until Borrowers shall have complied with
the requirements of this Section 11.29 and Section 11.24.
SECTION 11.30 Disposal of Property. Not, and shall not permit
any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of any of
its Property or rights to any Person except for (i) bona fide sales of Inventory
to customers for fair value in the ordinary course of business and (ii) sales of
Equipment which is obsolete, worn-out or otherwise not useable in Borrowers'
business in an aggregate amount in any Fiscal Year not to exceed $100,000. In
the event any Equipment of any Borrower or any Subsidiary of any Borrower is
sold, transferred or otherwise disposed of as permitted by this Section 11.30 or
with Lender's consent, and (i) such sale, transfer or disposition is effected
without replacement of the Equipment so sold, transferred or disposed of or such
Equipment is replaced by Equipment leased by any Borrower or any Subsidiary of
any Borrower, Borrowers shall promptly (but in any event within three (3)
Business Days of the receipt thereof) deliver all of the cash proceeds of any
such sale, transfer or disposition to Lender, or (ii) such sale, transfer or
disposition is made in connection with the purchase by a Borrower of replacement
Equipment, such Borrower shall use the proceeds of such sale, transfer or
disposition to finance the purchase by such Borrower of replacement Equipment
and shall deliver to Lender written evidence of the use of the proceeds for such
purchase. Except as permitted by Section 11.22, all replacement Equipment
purchased by each Borrower and each Subsidiary of any Borrower shall be free and
clear of all Liens, except for Liens in favor of Lender. All proceeds delivered
to Lender under this Section 11.30 shall be applied to the remaining scheduled
payments on the Term Loan in accordance with Section 2.5 hereof or, if the Term
Loan has been paid in full, to the outstanding Revolving Loans (without
permanent reduction of the Revolving Commitment).
SECTION 11.31 Impairment Agreements. Not, and shall not permit
any Subsidiary to, enter into or assume any agreement, instrument, indenture or
other obligation (other than the Related Documents) which (i) contains a
negative pledge provision which would require a sharing of any interest in the
Collateral, (ii) prohibits or limits the creation or assumption of any Lien in
favor of Lender for the benefit of itself upon its Property, whether now owned
or hereafter acquired, or (iii) restricts, prohibits or requires the consent of
any Person with respect to the payment of Restricted Payments.
SECTION 11.32 Management Fees. Not, and shall not permit any
Subsidiary to, enter into any management or consulting agreements or other
similar
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arrangements with any Person or retain any management consultants resulting in
any payment in connection therewith.
SECTION 11.33 Corporate Accounts. Not maintain corporate
deposit accounts jointly with any Affiliate or commingle any of its funds with
funds of any Affiliate.
SECTION 11.34 Financial Covenants.
(a) Minimum Net Worth. Not permit Net Worth of the
Consolidated Entity on the last day of any Fiscal quarter ending during any
period set forth below to be less than the amount set forth below opposite such
period:
Minimum
Periods Ending Net Worth
-------------- ---------
Closing thru 06/30/99 $14,000,000
07/01/99 thru 09/30/99 $14,000,000
10/01/99 thru 09/30/00 $15,100,000
10/01/00 thru 09/30/01 $15,700,000
10/01/01 and thereafter $16,500,000
(b) Minimum Interest Coverage Ratio. Not permit the Interest
Coverage Ratio of the Consolidated Entity on the last day of any Fiscal quarter
to be less than 2.0 to 1.0.
(c) Minimum Fixed Charge Coverage Ratio. Not permit the Fixed
Charge Coverage Ratio of the Consolidated Entity on the last day of any fiscal
quarter to be less than 1.10 to 1.0.
SECTION 11.35 Gross Capital Expenditures. Not, and not permit any of
its Subsidiaries to, directly or indirectly (by way of the acquisition of the
securities of a Person or otherwise), make Gross Capital Expenditures, except
that the Borrowers may, so long as no Event of Default or Unmatured Event of
Default shall exist or would result therefrom, make Gross Capital Expenditures
in the ordinary course of business in an aggregate amount not to exceed $500,000
in any one Fiscal Year.
SECTION 11.36 Leases. Not, and not permit any of its Subsidiaries to,
incur or permit to exist any Lease Obligations (other than leases which are
cancelable at the option of such Borrower or such Subsidiary without penalty and
on no more than 90 days' notice)
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which require the payment of amounts of rental in excess of $1,500,000 in the
aggregate for all Borrowers and their respective Subsidiaries combined in any
one Fiscal Year.
SECTION 11.37 Appointment of Chief Financial Officer. Within ninety
(90) days of the Closing Date, Borrowers shall select a chief financial officer
to serve in such position for each Borrower, which chief financial officer shall
be approved by the Board of Directors of Parent.
SECTION 12 CONDITIONS.
The obligation of Lender to make the Loans is subject to the
following conditions precedent or concurrent:
SECTION 12.1 Term Loans and Initial Revolving Loans. The
obligation of Lender to make the Term Loans and the initial Revolving Loans
shall be subject to the prior or concurrent satisfaction (in form and substance
satisfactory to Lender) of each of the conditions precedent set forth below:
(a) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing or will result from the making of such Loan.
(b) All warranties and representations contained in this
Agreement and the Related Documents shall be true and correct as of the date of
such Loan, with the same effect as though made on the date of such Loan.
(c) In the opinion of Lender, in its sole and absolute
discretion, (i) no litigation (including, without limitation, derivative
actions), arbitration, governmental investigation or proceeding or inquiry
shall, on the date of the initial Loan, be pending, or to the knowledge of any
Borrower, threatened which seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or to obtain relief as a result of, the Related
Transactions, or would be materially adverse to, or be detrimental to the
interests of, any of the parties to this Agreement or the Related Documents or
any of the Related Transactions, and (ii) no material adverse development shall
have occurred in any litigation (including, without limitation, derivative
actions), arbitration, government investigation or proceeding or inquiry
disclosed in Schedule 10.4).
(d) The terms and provisions of the Subordinated Debt
Documents and the Preferred Stock Documents shall be satisfactory in form and
substance to Lender in its discretion.
(e) The fees referred to in Section 5 which are due and
payable on or prior to the date of the initial Loan shall have been paid to
Lender.
(f) The Lockbox, the Master Accounts and the other Bank
Accounts shall have been established pursuant to Section 6.2 and the financial
institutions at which any
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Borrower has established the payroll and ▇▇▇▇▇ cash accounts described in
Section 6.2(c) shall have furnished Lender with the acknowledgment referred to
in such Section.
(g) Lender shall have received all of the following, each duly
executed and dated the date of the initial Loan (or such earlier date as shall
be satisfactory to Lender), in form and substance satisfactory to Lender: the
Notes, the Bank Agency Agreement, the Collateral Documents (from each Borrower
and Parent as applicable) and such other agreements, documents, instruments,
certificates and opinions as Lender may reasonably request.
(h) Borrowing Availability after giving effect to all
Revolving Loans made on the Closing Date and L/C Exposure existing on the
Closing Date shall be not less than $700,000.
(i) Since December 31, 1998, Parent shall have received an
equity infusion of not less than $2,100,000 in the form of Series F Preferred
Stock issued by Parent on terms satisfactory to Lender.
(j) The obligations of Borrowers and Parent identified on
Schedule 12.1 (herein called "Indebtedness to be Refinanced"), together with all
interest accrued thereon and all prepayment premiums and other amounts payable
in connection therewith, shall have been refinanced in full from the proceeds of
the Loans and Lender shall have received (i) the certificate of the President or
a Vice President of each Borrower, dated the date of the initial Revolving Loan
to such effect, (ii) a letter from each of the holders of the Indebtedness to be
Refinanced setting forth in each case (x) the amount of principal and accrued
interest thereon due such holder as of the date of such letter, (y) the per diem
interest rate on unpaid principal thereunder as of such date, and (z) payment
instructions relative to the payment of such Indebtedness to be Refinanced, and,
unless waived by Lender, enclosing in escrow any and all Uniform Commercial Code
termination statements, mortgage releases and releases of security interests in
patents, trademarks and copyrights, in form and substance satisfactory to
Lender, sufficient to terminate all Liens securing any of the Indebtedness to be
Refinanced.
(j) The Funds Administrator shall have delivered to Lender the
certificate required by Section 2.14 hereof showing the calculation of the
Allocation Account with respect to the Term Loans and the initial Revolving
Loans.
SECTION 12.2 All Loans; LC Guaranties. The obligation of
Lender to make the initial Loan and each subsequent Loan or to issue an LC
Guaranty is subject to the following further conditions precedent (except as set
forth in Section 12.2(c)):
(a) (i) No Event of Default or Unmatured Event of Default
shall have occurred and be continuing or will result from the making of such
Loan or issuing such LC Guaranty, (ii) the warranties and representations
contained in this Agreement and the Related Documents shall be true and correct
in all material respects as of the date of such
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requested Loan or provision of such LC Guaranty, with the same effect as though
made on the date of such Loan or provision of such LC Guaranty, and (iii) there
shall have been no material adverse change or notice to any Borrower of
prospective material adverse change with respect to insurance maintained by any
Borrower.
(b) (i) No claims, litigation (including, without limitation,
derivative actions), arbitration, governmental proceeding, investigation or
inquiry not disclosed in writing by Borrowers to Lender prior to the date of the
last previous Loan or issuance of an LC Guaranty, whichever shall be pending or
known to be threatened against any Borrower any Subsidiary of any Borrower or
Parent, (ii) no material development not so disclosed shall have occurred in any
claim, litigation (including, without limitation, derivative actions),
arbitration, governmental proceeding, investigation or inquiry which was so
disclosed, and (iii) no event, condition or development shall have occurred or
developed at any time (whether before or after the making of the last previous
Loan), which (in the case of each of the foregoing clauses (i) through (iii)) in
the opinion of Lender could have a Material Adverse Effect.
(c) Lender shall have received: (i) a Monthly Report from each
Borrower dated no more than thirty-one (31) days prior to the date of such Loan
(provided such period shall be two (2) days prior in the case of the Initial
Loans), (ii) a Borrowing Base Certificate delivered in accordance with Section
11.1(n), (iii) not later than the fifteenth Business Day of the first calendar
month following the making of each Loan, a certificate, substantially in the
form of Exhibit H or in such other form as Lender shall from time to time
designate to the Funds Administrator (the "Borrowing Certificate") dated the
last Business Day of the month in which such Loan was requested, signed by the
President or a Vice President of each Borrower, (iv) not less than three (3)
days prior to the making of an LC Guaranty, a certificate substantially in the
form of Exhibit I (the "LC Guaranty Request") relating to all Permitted LCs to
be covered by an LC Guaranty since the most recent prior LC Guaranty Request,
signed by the President or a Vice President or other appropriate officer of each
Borrower, and (v) such other documents as Lender may reasonably request in
support of such requested Loan or LC Guaranty, provided, that unless otherwise
requested by Lender, each Borrower may deliver one Borrowing Certificate each
calendar month for all Loans for which such Borrowing Certificate is required.
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 13.1 Events of Default. Each of the following shall
constitute an Event of Default under this Agreement:
(a) Default in the payment when due, whether by acceleration
or otherwise, of any principal of or interest or premium on any Loan.
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(b) Default, and continuance thereof for five days, in the
payment when due, whether by acceleration or otherwise, of any amount payable
hereunder or under the Related Documents (other than any amount described in
Section 13.1(a)).
(c) (i) Default in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any other
Indebtedness of, or guaranteed by, any Borrower, any Subsidiary of any Borrower
or Parent, or (ii) default in the performance or observance of any obligation or
condition with respect to any such other Indebtedness of, or guaranteed by, any
Borrower, any Subsidiary of any Borrower or Parent, if the effect of such
default is to accelerate the maturity of (or there is matured and unpaid) such
other Indebtedness aggregating $50,000 or more, or to cause such other
Indebtedness aggregating $50,000 or more to become due and payable, or to permit
the holder or holders of such other Indebtedness of $50,000 or more, or any
trustee or agent for such holders, to cause such other Indebtedness to become
due and payable prior to its expressed maturity.
(d) Default in the payment when due, or in the performance or
observance of any material obligation of, or material condition agreed to by any
Borrower, any Subsidiary of any Borrower or Parent (subject to applicable cure
periods) with respect to any Material Contract or any Material Intellectual
Property Right (except only to the extent that the existence of any such default
is being contested by such Person in good faith and by appropriate proceedings
diligently conducted and with respect to which such Person has established, and
is maintaining, adequate reserves therefor in accordance with GAAP).
(e) (i) Any Borrower, any Subsidiary of any Borrower or Parent
becomes insolvent or generally fails to pay, or admits in writing its inability
to pay, debts as they become due; or (ii) any Borrower, any Subsidiary of any
Borrower or Parent applies for, consents to, or acquiesces in the appointment
of, a trustee, receiver or other custodian or similar Person for any such Person
or for any of such Person's Property, or makes a general assignment for the
benefit of creditors; or (iii) in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian or similar Person is
appointed for any such or for a substantial part of such Person's Property,
unless (A) such Person institutes appropriate proceedings to contest or
discharge such appointment within 30 days and thereafter continuously and
diligently prosecutes such proceedings and (B) such appointment is in fact
discharged within 60 days of such appointment; or (iv) any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding is
commenced in respect of any Borrower, any Subsidiary of any Borrower or Parent,
unless (X) such case or proceeding is not commenced by such Person, (Y) such
case or proceeding is not consented to or acquiesced in by such Person, and (Z)
such Person institutes appropriate proceedings to dismiss such case or
proceeding within 30 days and thereafter continuously and diligently prosecutes
such proceedings and such case or proceeding is in fact dismissed within 60 days
after the commencement thereof; or (v) any Borrower, any Subsidiary of any
Borrower or Parent takes any action to authorize, or in furtherance of, any of
the foregoing.
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(f) Any guarantor of the Liabilities shall take any action for
the purpose of terminating, repudiating, revoking, or disavowing its guaranty or
any part thereof, or any of its obligations thereunder, or any event specified
in Section 13.1(e) hereof shall occur with respect to such guarantor.
(g) Failure by any Borrower to comply with or to perform any
provision of this Agreement other than Sections 11.2, 11.5, 11.24, or 11.25.
(h) Failure by any Borrower to comply with or to perform, for
a period of 30 days, the provisions of Sections 11.2, 11.5, 11.24, or 11.25 of
this Agreement.
(i) Any warranty or representation made by or on behalf of any
Borrower, Parent or, as long as the ▇▇▇▇▇ Guaranty is effective, ▇▇▇▇▇▇ ▇▇▇▇▇
herein or in any of the Related Documents, or otherwise in connection herewith
or therewith is inaccurate or incorrect in any material respect, or is breached
or false or misleading in any material respect, in each case as of the date such
warranty or representation is made; or any schedule, certificate, financial
statement, report, notice, or other writing furnished by or on behalf of any
Borrower to Lender is false or misleading in any material respect on the date as
of which the facts therein set forth are stated or certified.
(j) Except to the extent that any of the following is
expressly permitted hereunder or does not give rise to the incurrence by any
Borrower or any current or past member of the Controlled Group of any liability
in excess of $50,000, or except to the extent any of the following is adequately
reserved on the balance sheet of the Consolidated Entity or any Borrower or one
of its current members of the Controlled Group, the institution of any steps by
any Borrower, Parent or any government agency, including the Pension Benefit
Guaranty Corporation, (a) to amend, modify or terminate a Pension Plan or to
enter into any new Pension Plan, (b) to cause a complete or partial withdrawal
from any Multiemployer Plan, or (c) other than in the ordinary course, to
directly or indirectly cause to exist any other conditions, events or
transaction which could give rise to any liability of any Borrower or any
current member of the Controlled Group with respect to any Employee Benefit
Plan.
(k) Any party (including but not limited to any Borrower, any
Subsidiary of any Borrower or Parent) to any Related Document (other than
Lender) shall fail to comply with or to perform in any material respect (subject
to any applicable grace period) any provision of such Related Document
applicable to it; or any of the Related Documents shall fail to remain in full
force and effect in any material respect; or any action shall be taken by any
Person (other than Lender or the Master Account Bank) to discontinue or
terminate any of the Related Documents or any Borrower or any guarantor takes
any action to contest the validity, binding nature or enforceability of any
Related Document.
(l) Any of the Collateral or the Property of any Borrower or
any Subsidiary of any Borrower having a fair market value of more than $50,000
in the aggregate is attached, seized, subjected to a writ or distress warrant,
or levied upon, or come within the
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possession or control of any judgment creditor, receiver, trustee, custodian or
assignee for the benefit of creditors of such Person and on or before the
thirtieth (30th) day thereafter such Collateral or Property is not returned to
such Person or such writ, distress warrant or levy is not dismissed, vacated,
stayed or lifted.
(m) A Change of Control occurs or exists.
(n) There shall be entered against any Borrower, any
Subsidiary of any Borrower or Parent one or more judgments, awards or decrees,
or orders of attachment, garnishment or any other writ, which exceed $50,000 in
the aggregate at any one time outstanding, excluding judgments, awards, decrees,
orders or writs (i) for which there is full insurance and with respect to which
the insurer has assumed responsibility in writing, (ii) for which there is full
indemnification (upon terms and by creditworthy indemnitors which are
satisfactory to Lender) or (iii) which have been in force for less than the
applicable period for filing an appeal so long as execution is not levied
thereunder (or in respect of which such Person shall at the time in good faith
be prosecuting an appeal or proceeding for review and in respect of which a stay
of execution or appropriate appeal bond shall have been obtained pending such
appeal or review).
(o) Any default exists under any Subordinated Debt Document.
(p) The receipt by any Borrower or any Subsidiary of any
Borrower of any notice, claim or assessment from any Federal, state or local
governmental authority, or any other Person, asserting liability against any of
them under any Environmental Law that could have a Material Adverse Effect.
(q) Any material damage to, or loss, theft, or destruction of,
any of the Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other casualty
which results in or causes cessation or substantial curtailment of production or
other revenue producing activities of more than fifteen percent (15%) of the
Consolidated Entity's gross revenues for more than fifteen (15) consecutive
days.
(r) Any Lien created under any Related Document shall cease to
be a valid and perfected first priority Lien (subject to Permitted Liens) in any
of the Collateral purported to be covered thereby for any reason other than the
failure of Lender to take any action within its control.
SECTION 13.2 Effect of Event of Default. If an Unmatured Event
of Default or an Event of Default shall have occurred and be continuing, Lender
may elect to do one or more of the following at any time or times and in any
order: (i) reduce or terminate the amount of the Revolving Commitment, (ii)
restrict the amount of, or suspend its obligations to make, Revolving Loans,
(iii) restrict or suspend the issuance of Letters of Credit or LC Guaranties or
(iv) demand that Borrowers immediately deposit with Lender an amount equal to
one hundred ten percent (110%) of the L/C Exposure to enable Lender
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to make payments under the LC Guaranties when required, and such amount shall
become immediately due and payable. If any Event of Default described in Section
13.1(e) shall occur, the Commitments (if not theretofore terminated) shall
immediately terminate and the Notes and all other Liabilities shall become
immediately due and payable, all without notice of any kind; and, in the case of
any other Event of Default, Lender may declare the Commitments (if not
theretofore terminated) to be terminated and the Notes and all other Liabilities
to be due and payable, whereupon the Commitments (if not theretofore terminated)
shall immediately terminate and the Notes and all other Liabilities shall become
immediately due and payable, all without further notice of any kind. Lender
shall promptly provide the Funds Administrator on behalf of Borrowers written
notice of any such declaration but failure to do so shall not impair the effect
of such declaration. Notwithstanding the foregoing, the effect as an Event of
Default of any event described in Section 13 may be waived by Lender in writing.
SECTION 13.3 Rights and Remedies Generally. Upon acceleration
of the Liabilities, Lender shall have, in addition to any other rights and
remedies contained in this Agreement or in any of the other Related Documents,
all of the rights and remedies of a secured party under the UCC or other
applicable laws, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by law. In addition to all such rights
and remedies, Lender shall have the right to sell, lease or otherwise dispose of
all or any part of the Collateral and the sale, lease or other disposition of
the Collateral, or any part thereof, by Lender after an Event of Default may be
for cash, credit or any combination thereof, and Lender may purchase all or any
part of the Collateral at public or, if permitted by law, private sale, and in
lieu of actual payment of such purchase price, may set-off the amount of such
purchase price against the Liabilities then owing. Any sales of the Collateral
may be adjourned from time to time with or without notice. Lender shall have the
right to conduct such sales on any Borrower's premises, at Borrowers' expense,
or elsewhere, on such occasion or occasions as Lender may see fit.
SECTION 13.4 Entry Upon Premises and Access to Information.
Upon acceleration of the Liabilities, Lender shall have the right (i) to cause
the Collateral to remain on any Borrower's premises, without any obligation to
pay rent, (ii) to enter upon the premises of any Borrower where the Collateral
is located or any other place or places where the Collateral is believed to be
located and kept, without any obligation to pay rent, to render the Collateral
useable or saleable, or to remove the Collateral therefrom to the premises of
Lender or any agent of Lender, at Borrowers' expense, for such time as Lender
may desire in order effectively to collect or liquidate the Collateral, and
(iii) to require Borrowers to assemble the Collateral and make it available to
Lender at a place or places to be designated by Lender. Upon acceleration of the
Liabilities, Lender shall have the right to take possession of Borrowers'
original books and records, to obtain access to each Borrower's data processing
equipment, computer hardware and software relating to the Collateral and to use
all of the foregoing and the information contained therein in any manner Lender
deems appropriate; and Lender shall have the right to notify postal authorities
to change the address for delivery of each Borrower's mail to an address
designated by Lender and to receive, open and dispose of all mail addressed to
the
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respective Borrowers and to take possession of all checks or other original
remittances contained in such mail.
SECTION 13.5 Sale or Other Disposition of Collateral by
Lender. Any notice required to be given by Lender of a sale, lease or other
disposition or other intended action by Lender with respect to any of the
Collateral which is given to a Borrower as specified in Section 14.3, at least
ten (10) days prior to such proposed action, shall constitute fair and
reasonable notice to such Borrower of any such action. The net proceeds realized
by Lender upon any such sale or other disposition, after deduction for the
expenses of retaking, holding, storing, transporting, preparing for sale,
selling or otherwise disposing of the Collateral incurred by Lender in
connection therewith, shall be applied as provided herein toward satisfaction of
the Liabilities. Lender shall account to Borrowers for any surplus realized upon
such sale or other disposition, and Borrowers shall remain liable for any
deficiency. The commencement of any action, legal or equitable, or the rendering
of any judgment or decree for any deficiency, shall not affect Lender's Liens on
the Collateral until the Liabilities are fully paid.
SECTION 13.6 Notice to Account Debtors. Lender may, in its
sole discretion, at any time or times, upon the occurrence and during the
continuance of an Event of Default and without prior notice to Borrowers, notify
any or all Account Debtors that Borrower's Accounts have been assigned to Lender
and that Lender has a Lien thereon. Upon the occurrence and during the
continuance of an Event of Default, Lender may direct or, at the request of
Lender, Borrowers shall direct, any or all Account Debtors to make all payments
upon Borrower's Accounts directly to Lender. Lender shall furnish the Funds
Administrator with a copy of any such notice.
SECTION 13.7 Waiver of Demand. DEMAND, PRESENTMENT, PROTEST
AND NOTICE OF DEMAND, PRESENTMENT, PROTEST, NONPAYMENT, INTENT TO ACCELERATE AND
ACCELERATION ARE HEREBY WAIVED BY BORROWERS. BORROWERS ALSO WAIVE THE BENEFIT OF
ALL VALUATION, APPRAISAL AND EXEMPTION LAWS.
SECTION 13.8 Waiver of Notice. EXCEPT AS PROVIDED IN SECTION
13.5, UPON THE OCCURRENCE OF A DEFAULT OR AN EVENT OF DEFAULT, BORROWERS HEREBY
WAIVE ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR TO THE EXERCISE BY
LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO
REPLEVY, ATTACH OR LEVY UPON THE COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
BORROWERS ACKNOWLEDGE THAT THEY HAVE BEEN ADVISED BY COUNSEL OF THEIR CHOICE
WITH RESPECT TO THIS TRANSACTION AND THIS AGREEMENT.
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SECTION 14 GENERAL.
SECTION 14.1 Waiver; Amendments. No delay on the part of
Lender or any holder of a Note or other Liability in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any single or
partial exercise by any of them of any right, power or remedy preclude other or
further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Agreement or a Note or any Related Document shall in any event
be effective unless the same shall be in writing and signed and delivered by
Lender, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 14.2 Confirmations. Each of the Borrowers and Lender
(or any holder of a Note) agree from time to time, upon written request received
by it from the other, to confirm to the other in writing the aggregate unpaid
principal amount of the Loans then outstanding under such Note.
SECTION 14.3 Notices. Except with respect to Section 2.3: (a)
notices forwarded by mail shall be deemed to have been given on the earlier to
occur of (i) receipt or (ii) three days after the date sent if sent by
registered or certified mail, postage paid, and:
(i) if to any Borrower or the Funds Administrator, addressed
to the Funds Administrator at its address shown below its signature
hereto, with a copy addressed to any other Person indicated; or
(ii) if to Lender, addressed to Lender at the address shown
below its signature hereto, with a copy addressed to any other Person
indicated; or
in the case of any party, at such other address as such party may, by written
notice received by the other parties to this Agreement, have designated as its
address for notices; and (b) notices given by telegram or facsimile transmission
shall be deemed to have been given when sent if addressed to the party to whom
sent, at its address as aforesaid. Notices of borrowing pursuant to Section 2.3
shall be effective upon receipt by Lender and shall be in writing (or by
telephone to be confirmed in writing by the Funds Administrator). Lender shall
be entitled to rely upon all telephonic notices (whether voice or facsimile) and
Electronic Notices and Borrowers shall jointly and severally indemnify and hold
Lender harmless from any loss, cost or expense ensuing from any such reliance,
which indemnification shall survive any termination of this Agreement.
SECTION 14.4 Costs, Expenses and Taxes. Borrowers jointly and
severally agree to pay on demand all reasonable out-of-pocket costs and expenses
of Lender (including the fees and out-of-pocket expenses of counsel for Lender
and of local counsel, if any, who may be retained by said counsel and all costs
of appraisals, surveys, environmental reviews and the like required to be made
or completed) in connection with
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the preparation, execution and delivery of this Agreement, the Related Documents
and all other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. Borrowers further jointly and
severally agree to pay (subject to the limitations in Section 5.5 hereof) all
out-of-pocket costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by Lender in connection with the administration, enforcement,
waiver or amendment of this Agreement, the Related Documents and any such other
instruments or documents. In addition, Borrowers further jointly and severally
agree to pay, and to save Lender harmless from all liability for, any document,
stamp, filing, recording, mortgage or other taxes which may be payable in
connection with the borrowings hereunder or the execution, delivery, recording
or filing of this Agreement, any of the Related Documents or of any other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 14.4 shall survive any termination of this Agreement.
SECTION 14.5 Indemnification. In consideration of the
execution and delivery of this Agreement by Lender and Lender's extension of the
Commitments, Borrowers jointly and severally hereby agree to indemnify,
exonerate and hold Lender and Manager and each of their respective officers,
directors, employees and agents (including, without limitation, Master Account
Bank, and herein collectively called "Lender Parties" and individually called a
"Lender Party") free and harmless from and against any and all claims, demands,
actions, causes of action, suits, losses, costs (including, without limitation,
all documentary, recording, filing, mortgage or other stamp taxes or duties),
charges, liabilities and damages, and expenses in connection therewith
(irrespective of whether such Lender Party is a party to the action for which
indemnification hereunder is sought), and including, without limitation,
reasonable attorneys' fees and disbursements (called in this Section 14.5 the
"Indemnified Liabilities"), of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, any Lender Party for, with respect to, arising
out of or as a direct or indirect result of:
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or involving any
Loan or the execution, delivery, performance or enforcement of this Agreement,
the Related Documents and any instrument, document or agreement executed
pursuant hereto by any of Lender Parties;
(b) (i) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, any real property
legally or beneficially owned (or any estate or interest which is owned) or
operated by any Borrower (including, without limitation, any property owned by a
land trust the beneficial interest in which is owned, in whole or in part, by
any Borrower) of any Hazardous Material (including, without limitation, any
claims, demands, actions, causes of action, suits, losses, costs, charges,
liabilities and damages, asserted or arising under the Comprehensive
Environmental Response, Compensation and Liability Act, any so-called
"Superfund" or "Superlien" law, or any other Federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to
or imposing liability or standards of conduct concerning, any
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Hazardous Material), and (ii) any of the conditions disclosed in any of the
documents listed on Schedule 10.19 regardless, in the case of either of clause
(i) or clause (ii), of whether caused by, or within the control of, any
Borrower;
(c) (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement, prospectus or offering
memorandum or in any preliminary prospectus or preliminary offering memorandum
or any amendment or supplement to any thereof or in any other writing prepared
in connection with the offer, sale or resale of any securities of any Borrower
or Parent, or (ii) any omission or alleged omission to state therein a material
fact required to be stated or necessary to make the statements therein not
misleading; and
(d) (i) any injury to person or damage to property, known or
unknown, reported or unreported, which results from the use of the products of
any Borrower, or (ii) any obligation or liability arising out of or with respect
to the business or operations of any Borrower, in each case whether any of such
matters arise before or after the foreclosure of or other taking of title to all
or any portion of the Collateral by Lender;
except for any such Indemnified Liabilities arising on account of the relevant
Lender Party's gross negligence or willful misconduct and, to the extent that
the foregoing undertaking may be unenforceable for any reason, Borrowers jointly
and severally agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. All obligations provided for in this Section 14.5 shall survive
any termination of this Agreement and shall not be reduced or impaired by any
investigation made by or on behalf of any Lender Party.
SECTION 14.6 Submission To Jurisdiction. LENDER MAY ENFORCE
ANY CLAIM ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS IN ANY STATE OR
FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION AND LOCATED IN CHICAGO,
ILLINOIS. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH RESPECT TO
ANY SUCH CLAIM, EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS. EACH BORROWER HEREBY IRREVOCABLY DESIGNATES CORPORATION SERVICE
COMPANY, WITH OFFICES ON THE DATE HEREOF AT ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, TO RECEIVE FOR AND ON BEHALF OF EACH BORROWER SERVICE OF
PROCESS IN ILLINOIS. EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OUT OF SAID COURTS BY MAILING A COPY THEREOF, BY REGISTERED MAIL,
POSTAGE PREPAID, TO SUCH BORROWER AND AGREES THAT SUCH SERVICE, TO THE FULLEST
EXTENT PERMITTED BY LAW, (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE
OF PROCESS UPON IT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND (II) SHALL BE
TAKEN AND HELD TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT.
NOTHING HEREIN CONTAINED SHALL AFFECT THE RIGHT OF LENDER TO SERVE PROCESS IN
ANY OTHER
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MANNER PERMITTED BY LAW OR PRECLUDE LENDER FROM BRINGING AN ACTION OR PROCEEDING
IN RESPECT HEREOF IN ANY OTHER COUNTRY, STATE OR PLACE HAVING JURISDICTION OVER
SUCH ACTION. EACH BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT LOCATED IN CHICAGO, ILLINOIS AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 14.7 Governing Law; Severability; Remedies Cumulative.
This Agreement and the Notes shall be a contract made under and governed by the
internal laws of the State of Illinois without regard to conflict of laws
principles. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. All obligations of Borrowers and
any of their respective Subsidiaries and rights of Lender and any other holder
of a Note or Liability expressed herein or in the Related Documents shall be in
addition to and not in limitation of those provided by applicable law or in any
other written instrument or agreement relating to any of the Liabilities.
SECTION 14.8 Sale of Notes; Participations. Lender may assign
to one or more banks or other Persons all or any part of or rights in, or may
grant participations to one or more banks or other Persons in or to, this
Agreement, any Loan or Loans or the Notes or either of them or Lender's rights
and remedies hereunder and thereunder, and to the extent of any such assignment
or participation (unless otherwise stated therein) the assignee or participant
of such assignment or participation shall have the same rights and benefits
hereunder and thereunder as it would have if it were Lender hereunder.
SECTION 14.9 Entry Into Agreement. Each Borrower represents,
warrants and acknowledges that (i) the relationship between each Borrower and
Lender is solely that of a borrower and a lender, and (ii) each Borrower is in
sole control of its business and has entered into this Agreement as its own free
act and voluntary deed, based upon its independent judgment as to its best
interests.
SECTION 14.10 Legal Opinions. Borrowers expressly consent to
the rendering of opinions by its counsel and of each other counsel required by
Lender to be rendered in connection with the initial closing of the matters
contemplated hereby, and thereafter to be rendered from time to time in
connection with this Agreement or any Related Document, and acknowledges that
such opinions, when so rendered, shall be deemed to be rendered at the request
and upon the instruction of Borrowers, which have,
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and will have (prior to the rendering of each opinion), consulted with and been
advised by such counsel as to the consequences of such consent, request and
instructions.
SECTION 14.11 Jury Trial; Damage Waiver. EACH PARTY HERETO
HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATED TO OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED DOCUMENT TO WHICH IT IS A PARTY, OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED DOCUMENT,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY. EACH BORROWER WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY LITIGATION REFERRED TO ABOVE ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES.
SECTION 14.12 Successors and Assigns. This Agreement shall be
binding upon each Borrower, Lender and their respective successors and assigns,
and shall inure to the benefit of each Borrower, Lender and their respective
successors and assigns; provided, that Borrowers shall have no right to assign
their rights or delegate their duties under this Agreement. Lender may assign
any of its rights under this Agreement and the Related Documents to its lenders
for collateral security purposes.
SECTION 14.13 Marshalling. Lender shall be under no obligation
to ▇▇▇▇▇▇▇▇ any assets in favor of Borrowers or any other Person or against or
in payment of any or all of the Liabilities.
SECTION 14.14 Waivers With Respect to Other Instruments.
Borrowers waive presentment, demand and protest and notice of presentment,
demand protest, default, nonpayment, maturity, release, compromise, settlement,
extension, or renewal of any or all of any Person's commercial paper, Accounts,
contract rights, documents, Instruments, Chattel Paper and guaranties at any
time held by Lender on which Borrowers may in any way be liable and hereby
ratifies and confirms whatever Lender may do regarding the enforcement,
collection, compromise, or release thereof.
SECTION 14.15 Retention of Borrower' Documents. Lender may
destroy or otherwise dispose of all documents, schedules, invoices or other
papers delivered to Lender in accordance with its customary practices unless the
Funds Administrator requests in writing that same be returned. Upon Fund
Administrator's request and at Borrowers' expense, Lender shall return such
papers when Lender's actual or anticipated need for same has terminated.
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SECTION 14.16 Survival of Warranties. All representations and
warranties of Borrowers contained in this Agreement or any of the other Related
Documents shall survive the execution and delivery of this Agreement and the
other Related Documents and the making of the Loans. Notwithstanding anything
contained in this Agreement to the contrary, the provisions of, and the
undertakings, indemnifications and agreements of Borrowers set forth in Sections
8, 14.3, 14.4, 14.5 and 14.6 shall survive payment of the Liabilities and
termination of this Agreement.
SECTION 14.17 Counterparts. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same agreement. Delivery
of an executed counterpart of this Agreement by facsimile or similar electronic
medium shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any Person delivering an executed counterpart of
this Agreement by facsimile or similar electronic medium shall also deliver a
manually executed counterpart of this Agreement; provided that the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability or binding effect of this Agreement.
SECTION 14.18 Exceptions to Covenants. No Borrower shall be
deemed to be permitted to take any action or omit to take any action which is
permitted as an exception to any of the terms, provisions or covenants contained
in any of the Related Documents if such action or omission would result in an
Event of Default or Unmatured Event of Default or the breach of any term,
provision or covenant contained in any Related Document.
SECTION 14.19 Construction. Borrowers acknowledge that they
and their counsel have approved the Related Documents and that the usual rule of
construction to the effect that any ambiguities or inconsistencies are to be
resolved against the drafting Person shall not be applicable in the
interpretation of any of the Related Documents.
SECTION 14.20 Reinstatement. This Agreement shall remain in
full force and effect and continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Liabilities, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Liabilities,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Liabilities shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
SECTION 14.21 Entire Agreement. This Agreement, including all
Exhibits, Schedules, the Related Documents, and other documents attached hereto
or incorporated by reference herein, constitute the entire agreement of the
parties with
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respect to the subject matter hereof and supersede all other negotiations,
understandings and representations, oral or written, with respect to the subject
matter hereof, including that certain Commitment Letter dated as of April 20,
1999 between Lender and Parent.
SECTION 14.22 Acknowledgment. BORROWERS ACKNOWLEDGE THAT THEY
HAVE BEEN ADVISED BY COUNSEL OF THEIR CHOICE WITH RESPECT TO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED HEREBY, AND BORROWERS ACKNOWLEDGE AND AGREE THAT
(I) EACH OF THE WAIVERS SET FORTH HEREIN WERE KNOWINGLY AND VOLUNTARILY MADE,
(II) THE OBLIGATIONS OF LENDER HEREUNDER, INCLUDING THE OBLIGATION TO ADVANCE
AND LEND FUNDS TO BORROWERS IN ACCORDANCE HEREWITH, SHALL BE STRICTLY CONSTRUED
AND SHALL BE EXPRESSLY SUBJECT TO BORROWERS' COMPLIANCE IN ALL RESPECTS WITH THE
TERMS AND CONDITIONS HEREIN SET FORTH, AND (III) NO REPRESENTATIVE OF LENDER HAS
WAIVED OR MODIFIED ANY OF THE PROVISIONS OF THIS AGREEMENT AS OF THE DATE HEREOF
AND NO SUCH WAIVER OR MODIFICATION FOLLOWING THE DATE HEREOF SHALL BE EFFECTIVE
UNLESS MADE IN ACCORDANCE WITH SECTION 14.1.
SECTION 14.23 Confidentiality. Lender agrees to use its best
efforts to keep confidential non-public information provided by Parent and
Borrowers, and Borrowers agree that Lender may disclose information relating to
Borrowers to each of the Master Lenders and the Master Agents which have agreed
to use procedures substantially comparable to those used by them in respect of
non-public information as supplied to them by or on behalf of Lender to the
extent that such information is not and does not become publicly available and
which Lender indicates at the time is to be treated confidentially; provided,
that each of the Master Lenders, and the Master Agents, as the case may be, is
hereby authorized to deliver a copy of each or any financial statement of any
one or more of the Borrowers or any other information relating to the Loans, or
the Collateral, which may be furnished to it hereunder or otherwise to (a) its
legal counsel and auditors and other professional advisors, (b) governmental or
regulatory authorities having jurisdiction over it, (c) independent financial
rating agencies (including, without limitation the Rating Agencies), (d) any
person providing general liquidity or credit enhancement to the Master Lenders,
and (e) (subject to obtaining a confidentiality agreement containing the
foregoing confidentiality restrictions) any Person to whom a Master Lender
proposes to assign all or any part of its interest or grant a participation in
its interest. As used herein: "Master Agents" shall mean Citicorp North America,
Inc. ("CNAI"), Bank of New York and any successor thereto or assignee thereof;
"Master Lender" shall mean any person becoming a party "Lender" to that certain
Second Amended and Restated Credit Agreement dated as of May 24, 1996 (as
amended from time to time, the "Master Credit Agreement") among First Source
Financial, Inc., Lender, Master Agents and such Lenders; and "Rating Agencies"
shall mean Standard and Poor's and Moody's Ratings Group, a division of
▇▇▇▇▇▇-▇▇▇▇, Inc., and ▇▇▇▇▇'▇ Investors Services, Inc.
-92-
SECTION 14.24 Joint and Several Liability of Borrowers.
Borrowers shall be jointly and severally liable hereunder and under
each of the other Related Documents with respect to all Liabilities, regardless
of which Borrower actually receives the proceeds of the Loans or the benefit of
any other extensions of credit hereunder, or the manner in which the Funds
Administrator, Borrowers or Lender account therefor in their respective books
and records. Notwithstanding the foregoing, (i) each Borrower's obligations and
liabilities with respect to proceeds of Loans which it receives or Letters of
Credit issued for its account, and related fees, costs and expenses, and (ii)
each Borrower's obligations and liabilities arising as a result of the joint and
several liability of Borrowers hereunder with respect to proceeds of Loans
received by, or Letters of Credit issued for the account of, any other Borrower,
together with the related fees, costs and expenses, shall be separate and
distinct obligations, both of which are primary obligations of such Borrower.
Neither the joint and several liability of, nor the Liens granted to Lender
under the Collateral Documents by, any of the Borrowers shall be impaired or
released by (A) the failure of Lender, any successors or assigns thereof, or any
holder of any Note or any of the Liabilities to assert any claim or demand or to
exercise or enforce any right, power or remedy against the Funds Administrator,
any Borrower, any Subsidiary of any Borrower, Parent, any other Person, the
Collateral or otherwise; (B) any extension or renewal for any period (whether or
not longer than the original period) or exchange of any of the Liabilities or
the release or compromise of any obligation of any nature of any Person with
respect thereto; (C) the surrender, release or exchange of all or any part of
any property (including without limitation the Collateral) securing payment,
performance and/or observance of any of the Liabilities or the compromise or
extension or renewal for any period (whether or not longer than the original
period) of any obligations of any nature of any Person with respect to any such
property; (D) any action or inaction on the part of Lender, or any other event
or condition with respect to any other Borrower, including any such action or
inaction or other event or condition, which might otherwise constitute a defense
available to, or a discharge of, such other Borrower, or a guarantor or surety
of or for any or all of the Liabilities, including, without limitation, Parent;
and (E) any other act, matter or thing (other than payment or performance of the
Liabilities) which would or might, in the absence of this provision, operate to
release, discharge or otherwise prejudicially affect the obligations of such or
any other Borrower.
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BLANK; SIGNATURE PAGES FOLLOW]
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, as of the day and year first above written.
DIPLOMAT DIRECT MARKETING CORPORATION, in
its capacity as Funds Administrator
By:_________________________________
Name Printed:_______________________
Its:________________________________
BROWNSTONE HOLDINGS, INC.
By:_________________________________
Name Printed:_______________________
Its:________________________________
ECOLOGY KIDS, INC.
By:_________________________________
Name Printed:_______________________
Its:________________________________
DIPLOMAT HOLDINGS, INC.
By:_________________________________
Name Printed:_______________________
Its:________________________________
Secured Credit Agreement
▇▇▇ ▇▇▇▇▇▇ LTD.
By:_________________________________
Name Printed:_______________________
Its:________________________________
Address for Borrowers:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
with a
copy to: ▇▇▇▇▇▇▇, Savage & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile: 212-980-5192
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.
Its: Manager
By:_________________________________
Name Printed:_______________________
Its:________________________________
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Contract Administration
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, 7911
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Secured Credit Agreement
with a
copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Burn, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Secured Credit Agreement