EXHIBIT 10.29
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
as Lender
and
SPORT SUPPLY GROUP, INC. and
ATHLETIC TRAINING EQUIPMENT COMPANY, INC.
as Borrower
Dated: March 27, 2001
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1 DEFINITIONS.......................................... 1
SECTION 2 CREDIT FACILITIES.................................... 12
2.1 Revolving Loans...................................... 12
2.2 Letter of Credit Accommodations...................... 14
2.3 [Intentionally Omitted.]............................. 16
2.4 Availability Reserves................................ 16
2.5 Joint and Several Liability; Rights of Contribution.. 16
2.6 Structure of Credit Facility......................... 17
SECTION 3 INTEREST AND FEES.................................... 17
3.1 Interest............................................. 17
3.2 Closing Fee.......................................... 19
3.3 Servicing Fee........................................ 20
3.4 Unused Line Fee...................................... 20
3.5 Changes in Laws and Increased Costs of Loans......... 20
SECTION 4 CONDITIONS PRECEDENT................................. 21
4.1 Conditions Precedent to Initial Loans and Letter of
Credit Accommodations................................ 21
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations................................ 23
SECTION 5 GRANT OF SECURITY INTEREST........................... 23
SECTION 6 COLLECTION AND ADMINISTRATION........................ 24
6.1 Borrower's Loan Account.............................. 24
6.2 Statements........................................... 24
6.3 Collection of Accounts............................... 24
6.4 Payments............................................. 25
6.5 Authorization to Make Loans.......................... 26
6.6 Use of Proceeds...................................... 26
6.7 Reliance on Notices; Appointment of Borrower
Representative ...................................... 26
SECTION 7 COLLATERAL REPORTING AND COVENANTS................... 27
7.1 Collateral Reporting................................. 27
7.2 Accounts Covenants................................... 28
7.3 Government Receivables Covenants..................... 29
7.4 Inventory Covenants.................................. 29
7.5 Equipment Covenants.................................. 30
7.6 Power of Attorney.................................... 31
7.7 Right to Cure........................................ 31
7.8 Access to Premises................................... 32
SECTION 8 REPRESENTATIONS AND WARRANTIES....................... 32
8.1 Corporate Existence, Power and Authority; Subsidiaries 32
8.2 Financial Statements; No Material Adverse Effect..... 33
8.3 Chief Executive Office; Collateral Locations......... 33
8.4 Priority of Liens; Title to Properties............... 33
8.5 Tax Returns.......................................... 33
8.6 Litigation........................................... 34
8.7 Compliance with Other Agreements and Applicable Laws. 34
8.8 Employee Benefits.................................... 34
8.9 Environmental Compliance............................. 35
8.10 Bank Accounts........................................ 36
8.11 Accuracy and Completeness of Information............. 36
8.12 Survival of Warranties; Cumulative................... 36
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS................... 36
9.1 Maintenance of Existence............................. 36
9.2 New Collateral Locations............................. 37
9.3 Compliance with Laws, Regulations, Etc............... 37
9.4 Payment of Taxes and Claims.......................... 37
9.5 Insurance............................................ 37
9.6 Financial Statements and Other Information........... 38
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc. ................................... 39
9.8 Encumbrances......................................... 39
9.9 Indebtedness......................................... 40
9.10 Loans, Investments, Guarantees, Etc.................. 41
9.11 Dividends and Redemptions............................ 41
9.12 Transactions with Affiliates......................... 41
9.13 Additional Bank Accounts............................. 42
9.14 Compliance with ERISA................................ 42
9.15 Adjusted Net Worth................................... 43
9.16 Costs and Expenses................................... 43
9.17 Further Assurances................................... 44
SECTION 10 EVENTS OF DEFAULT AND REMEDIES...................... 44
10.1 Events of Default.................................... 44
10.2 Remedies............................................. 46
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS.................... 47
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.................................... 47
11.2 Waiver of Notices.................................... 48
11.3 Amendments and Waivers............................... 48
11.4 Waiver of Counterclaims.............................. 49
11.5 Indemnification...................................... 49
SECTION 12 TERM OF AGREEMENT; MISCELLANEOUS.................... 49
12.1 Term................................................. 49
12.2 Notices.............................................. 51
12.3 Partial Invalidity................................... 51
12.4 Successors........................................... 51
12.5 Confidentiality Agreement............................ 52
12.6 Entire Agreement..................................... 52
12.7 NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ........ 52
12.8 ORAL AGREEMENTS INEFFECTIVE.......................... 52
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 1.6 Availability Reserves
Schedule 4.1(l) Required Licensor Agreements
Schedule 8.3 Collateral Locations and Business Names
Schedule 8.4 Existing Liens
Schedule 8.7 Defaults
Schedule 8.9 Environmental Disclosures
Schedule 8.10 Bank Accounts
Schedule 8.13 Subsidiaries Stock
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated March 27, 2001 is entered into
by and among CONGRESS FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation
("Lender") and SPORT SUPPLY GROUP, INC., a Delaware corporation ("SSG"),
individually and in its capacity as Borrower Representative, and ATHLETIC
TRAINING EQUIPMENT COMPANY, INC., a Delaware corporation ("ATEC") (SSG and
ATEC, individually and/or collectively, jointly and severally, herein
referred to as "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans
and provide other financial accommodations to Borrower; and
WHEREAS, Borrower has requested that SSG serve as Borrower
Representative to facilitate Lender entering and administering the financing
arrangements contemplated herein;
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations and accept SSG as the Borrower Representative, on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein
shall also mean the singular and to the singular shall also mean the plural
unless the context otherwise requires. All references to Borrower, Borrower
Representative and Lender pursuant to the definitions set forth in the
recitals hereto, or to any other Person herein, shall include their
respective successors and assigns. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in
accordance with Section 11.3 or is cured in a manner satisfactory to Lender,
if such Event of Default is capable of being cured as determined by Lender.
Any accounting term used herein unless otherwise defined in this Agreement
shall have the meanings customarily given to such term in accordance with
GAAP. For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one percent (1%))
determined by dividing (a) the Eurodollar Rate for such Interest Period by
(b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage.
For purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar
Rate Loan or any Eurodollar Rate Loan made with the proceeds of such
deposit, whether or not the Reference Bank actually holds or has made any
such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on
and as of the effective day of any change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on
a consolidated basis for such Person and its subsidiaries (if any), the
amount equal to: (a) the difference between: (i) the aggregate net book
value of all assets of such Person and its subsidiaries, calculating the
book value of inventory for this purpose on a first-in-first-out basis,
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its subsidiaries
(including tax and other proper accruals) plus (b) indebtedness of such
Person and its subsidiaries which is subordinated in right of payment to the
full and final payment of all of the Obligations on terms and conditions
acceptable to Lender; provided, however, that one-time non-cash charges
taken by SSG in its fiscal year ending September 30, 2001 up to an aggregate
amount of $300,000 shall be excluded from the calculation of the Adjusted
Net Worth of SSG.
1.4 "ATEC" shall have the meaning set forth in the preamble hereto.
1.5 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Revolving Loans and Letter of
Credit Accommodations which would otherwise be available to Borrower under
the lending formula(s) provided for herein: (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender in good
faith, do or may affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's
good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is or may
have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice
or passage of time or both, constitute an Event of Default. Without
limiting the foregoing, (i) Lender may establish Availability Reserves with
respect to Borrower's personal property taxes relating to any property
located in the state of Texas immediately upon Borrower's receipt of a
notice from the taxing authority that such taxes are payable and until
Lender receives verification satisfactory to it that such taxes have been
paid in full, and (ii) the Availability Reserves established by Lender as of
the date hereof set forth on Schedule 1.5.
1.6 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.7 "Borrower" shall have the meaning set forth in the preamble
hereto. All references to 'Borrower' or 'Borrowers' herein shall refer to
and include each of SSG and ATEC, separately and all representations
contained herein shall be deemed to be separately made by each of them, and
each of the covenants, agreements and obligations set forth herein shall be
deemed to be the joint and several covenants, agreements and obligations of
them. Any notice, request, consent, report or other information or
agreement delivered to Lender by any Borrower shall be deemed to be ratified
by, consented to and also delivered by the other Borrower. Each Borrower
recognizes and agrees that each covenant and agreement of 'Borrower' or
'Borrowers' under this Agreement and the other loan documents shall create a
joint and several obligation of the Borrowers, which may be enforced against
Borrowers, jointly, or against each Borrower separately. Without limiting
the terms of this Agreement and the other Financing Agreements, security
interests granted under this Agreement and Financing Agreements in
properties, interests, assets and collateral shall extend to the properties,
interests, assets and collateral of each Borrower.
1.8 "Borrower Representative" shall mean SSG as a representative and
agent for Borrower, and its permitted successors and assigns, pursuant to
Section 6.7 hereof, to take such actions on behalf of Borrower, that are
required or permitted in this Agreement, including, without limitation,
Section 6.7 hereof.
1.9 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close
under the laws of the State of New York, the State of North Carolina or the
State of Texas, and a day on which the Reference Bank and Lender are open
for the transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term Business
Day shall also exclude any day on which banks are closed for dealings in
dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all regulations and
interpretations thereunder or related hereto.
1.11 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.12 "Cost" shall mean cost computed on a first-in-first-out basis in
accordance with GAAP.
1.13 "Dated Assets" shall have the meaning set forth in Section 2.5
hereof.
1.14 "Dated Liabilities" shall have the meaning set forth in Section
2.5 hereof.
1.15 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than (i) for the period
from June 1 through October 31 of any year, ninety (90) days after the date
of the original invoice for them; or (ii) for the period from November 1
through May 31 of any year, one hundred twenty (120) days after the date of
the original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under
which payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America or Canada, or,
at Lender's option, if either: (i) the account debtor has delivered to
Borrower an irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender and payable only in the United States of America and
in U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and, if required by Lender, the original of such
letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit insurance
payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and
hold invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if
Lender shall have received an agreement in writing from the account debtor,
in form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay
such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against
such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time disputed or owed by
Borrower to such account debtor or claimed owed by such account debtor may
be deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce
the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any liens
except those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of
family membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, (i) if
the account debtor is the United States of America or any department, agency
or instrumentality thereof, (A) the aggregate amount of the Accounts of all
such account debtors outstanding is less than $1,560,000, or (B) with
respect to Accounts in excess of such amount, such Accounts are assignable
under, and upon Lender's request, have been assigned to Lender in accordance
with, the Federal Assignment of Claims Act of 1940, as amended, in a manner
satisfactory to Lender (for purposes of this clause (k)(i)(B), Accounts in
amounts less than $1,000 (or such other amount as may hereafter be required
under the Federal Assignment of Claims Act of 1940, as amended, or the
regulations promulgated thereunder in order for an Account to be assignable
thereunder) shall be counted first, such that Accounts in amounts greater
than $1,000 (or such other applicable amount) will be included in the excess
(if any) over $1,560,000), and (ii) if the account debtor is any state or
any political subdivision, department, agent or instrumentality thereof,
such Accounts are assignable under, and upon Lender's request, have been
assigned to Lender in accordance with, any applicable state or local law
similar to the Federal Assignment of Claims Act of 1940, in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which may
reasonably be expected to result in any material adverse change in any such
account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do
not constitute more than fifteen percent (15%) of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage
may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid (i) for the period from June 1 through October 31 of any
year, ninety (90) days after the date of the original invoice for them or
(ii) for the period from November 1 through May 31 of any year, one hundred
twenty (120) days after the date of the original invoice for them which, in
each case, unpaid Accounts constitute more than fifty percent (50%) of the
total Accounts of such account debtor; and
(o) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and revised from
time to time by Lender in good faith. Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.
1.16 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
raw materials for such finished goods which are acceptable to Lender based
on the criteria set forth below. In general, Eligible Inventory shall not
include (a) work-in-process; (b) components which are not part of finished
goods; (c) spare parts for equipment; (d) packaging and shipping materials;
(e) supplies used or consumed in Borrower's business; (f) Inventory subject
to a security interest or lien in favor of any Person other than Lender
except those permitted in this Agreement; (g) ▇▇▇▇ and hold goods; (h)
unserviceable, obsolete or slow moving Inventory, unless Lender has already
established an Availability Reserve for such items; (i) Inventory which is
not subject to the first priority, valid and perfected security interest of
Lender; (j) damaged and/or defective Inventory or returned Inventory that
has not been processed; (k) Inventory purchased or sold on consignment; and
(l) in-transit Inventory not constituting In-Transit Inventory. General
criteria for Eligible Inventory may be established and revised from time to
time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.17 "▇▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇ Radio Corp., a Delaware corporation,
and its wholly owned subsidiaries.
1.18 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses,
permits (including any conditions imposed therein), authorizations, judicial
or administrative decisions, injunctions or agreements between Borrower and
any governmental authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource),
or to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to
all laws with regard to recordkeeping, notification, disclosure and
reporting requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act
of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Materials.
1.19 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located.
1.20 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to
time be amended, modified, recodified or supplemented, together with all
rules, regulations and interpretations thereunder or related thereto.
1.21 "ERISA Affiliate" shall mean any Person required to be aggregated
with Borrower or any of its subsidiaries under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
1.22 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the
arithmetic average of the rates of interest per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one percent (1%)) at which
Reference Bank is offered deposits of United States dollars in the London
interbank market (or other Eurodollar Rate market selected by Borrower
Representative and approved by Lender) on or about 9:00 a.m. (New York time)
two (2) Business Days prior to the commencement of such Interest Period in
amounts substantially equal to the principal amount of the Eurodollar Rate
Loans requested by and available to Borrower Representative in accordance
with this Agreement, with a maturity of comparable duration to the Interest
Period selected by Borrower Representative.
1.23 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.24 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.25 "Excess" shall have the meaning set forth in Section 3.1(e).
1.26 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the amount
of the Revolving Loans available to Borrower as of such time pursuant to
Section 2.1(a), and (ii) the Maximum Credit, minus (b) the sum of: (i) the
amount of all then outstanding and unpaid Obligations, plus (ii) the
aggregate amount of all then outstanding and unpaid trade payables of
Borrower which are more than sixty (60) days past due as of such time, plus
(iii) the amount of checks issued by Borrower to pay trade payables, but not
yet sent and the book overdraft of Borrower.
1.27 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, negative pledge agreements,
collateral reports and other agreements, documents, information and
instruments now or at any time hereafter executed and/or delivered by
Borrower, Borrower Representative or any Obligor in connection with this
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.28 "Finished Goods Inventory Advance Rate" shall mean, with respect
to Eligible Inventory constituting finished goods, (a) during the period
from February 1 through August 30 of any year, the lesser of (i) eighty-five
percent (85%) of net orderly liquidation value, as determined by Lender in
good faith by reference to a high-selling-period appraisal, or (ii) sixty-
five percent (65%) of Cost and (b) during the period from September 1
through January 31 of any year, the lesser of (i) eighty-five percent (85%)
of net orderly liquidation value, as determined by Lender in good faith by
reference to a low-selling-period appraisal, or (ii) sixty percent (60%) of
Cost.
1.29 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are
applicable to the circumstances as of the date of determination consistently
applied, except that, for purposes of Section 9.15 hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.30 "Government Receivables" means all monies due and to become due,
whether existing as of the date hereof or arising thereafter, from the
United States of America, together with all rights to receive the same,
under any letter of intent, letter of award, letter of acceptance of bid or
proposal, informal or incomplete contract, order, authorization to commence
performance or other similar instrument or communication made or received by
the Borrower in anticipation of or in connection with said contract and
under any and all amendments thereof and supplements thereto, between the
United States of America acting through any agency, department or other
instrumentality thereof and the Borrower.
1.31 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including
naturally occurring or man-made petroleum and hydrocarbons), flammable
explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants (including
materials which include hazardous constituents), sewage, sludge, industrial
slag, solvents and/or any other similar substances, materials, or wastes and
including any other substances, materials or wastes that are or become
regulated under any Environmental Law (including any that are or become
classified as hazardous or toxic under any Environmental Law).
1.32 "Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material information
with respect to Borrower, its business and assets provided by or on behalf
of Borrower to Lender in connection with the preparation of this Agreement
and the other Financing Agreements and the financing arrangements provided
for herein.
1.33 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as
Borrower Representative may elect, the exact duration to be determined in
accordance with the customary practice in the applicable Eurodollar Rate
market; provided, that, Borrower Representative may not elect an Interest
Period which will end after the last day of the then-current term of this
Agreement.
1.34 "Interest Rate" shall mean, as to Prime Rate Loans, a rate equal
to the Prime Rate and, as to Eurodollar Rate Loans, a rate equal to the sum
of (a) the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by Borrower Representative as in effect
three (3) Business Days after the date of receipt by Lender of the request
of Borrower Representative for such Eurodollar Rate Loans in accordance with
the terms hereof, whether such rate is higher or lower than any rate
previously quoted to Borrower Representative), plus (b) (i) from the date
hereof through the date of delivery to Lender of the audited consolidated
annual financial statements of SSG and its subsidiaries for the fiscal year
ended September 30, 2001, two and one-half percent (2.50%) per annum, and
(ii) for the period from the day after the date of delivery of the audited
consolidated annual financial statements of SSG and its subsidiaries for
each fiscal year through the date of delivery of such financial statements
for the following fiscal year, the applicable Eurodollar Margin as set forth
below:
Applicable
Criteria Eurodollar Margin
------------------------------------------ -----------------
A. Lender shall have received the audited 2.25%
consolidated annual financial statements
for the most recently ended fiscal year of
SSG and its subsidiaries reflecting:
(i) the existence of no Events of Default;
(ii) net profits (after taxes), certified
by Borrower's independent certified
public accountants; and
(iii) Adjusted Net Worth of SSG on a
consolidated basis in excess of
$42,000,000.
B. The criteria set forth in (A)(i) and 2.00%
(A)(ii) above are satisfied and such
financial statements also reflect Adjusted
Net Worth of SSG on a consolidated basis in
excess of $45,000,000.
C. In all other cases, when the criteria set 2.50%
forth in (A) and (B) above have not been
satisfied.
Notwithstanding the above, the Interest Rate shall mean the rate equal
to the sum of the two percent (2.00%) per annum plus the otherwise
applicable Interest Rate, at Lender's option, with notice, (a) for the
period (i) from and after the effective date of termination or non-renewal
hereof until Lender has received full and final payment of all obligations
(notwithstanding entry of a judgment against Borrower) and (ii) from and
after the date of the occurrence of an Event of Default for so long as such
Event of Default is continuing as determined by Lender, and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available
to Borrower under Section 2 (whether or not such excess(es), arise or are
made with or without Lender's knowledge or consent and whether made before
or after an Event of Default), provided, however, that if any such excess
arises as a direct and immediate result of the imposition of additional
Availability Reserves, the reduction of any lending formula or the creation
of additional criteria for Eligible Accounts or Eligible Inventory by
Lender, then the Interest Rate shall not increase as a result of such excess
as provided in this paragraph until and unless such excess continues to
exist thirty (30) days after the commencement of such action by Lender.
1.35 "In-Transit Inventory" shall mean Inventory that (a) Borrower has
paid the full purchase price therefor, (b) is in transit to either the
premises of a customs broker in the United States or premises of a Borrower
in the United States and, as to premises of a customs broker or premises
which are not owned and controlled by a Borrower, only if (i) Lender has
received a collateral access agreement duly authorized, executed and
delivered by such customs broker or the owner, lessor and operator of such
other premises, as the case may be or (ii) Lender has established
Availability Reserves with respect to such Inventory in an amount not less
than five percent (5%) of the value thereof, (c) (i) Lender has a first
priority perfected (subject only to Lender obtaining possession and control
of originals as contemplated by clause (c)(ii) below) security interest in
all documents of title with respect to such Inventory and Borrower has
control and possession of all originals of such documents of title at its
address set forth on the signature page hereto (or such other address as
Borrower may designate by written notice to Lender) and maintains such
possession and control in a manner satisfactory to Lender, or (ii) upon
Lender's request, Lender has a first priority perfected security interest in
and control and possession of all originals of documents of title with
respect to such Inventory, (d) Lender has received (i) a copy of the
certificate of marine cargo insurance in connection therewith in which it
has been named as an additional insured and loss payee in a manner
acceptable to Lender and (ii) a copy of the invoice and manifest with
respect thereto, and (e) such Inventory is not subject to any Letter of
Credit Accommodation.
1.36 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.37 "Knowledge" shall mean the actual knowledge of the senior
officers, other senior management or directors of any Borrower and any
knowledge that any such individuals should reasonably be expected to have
with regards to such matter in his/her capacity as a senior officer, senior
manager or director of Borrower.
1.38 "▇▇▇▇▇ ▇▇▇▇▇ Inventory" shall mean Inventory at locations
currently operated under the "▇▇▇▇▇ ▇▇▇▇▇" name and constituting finished
goods, provided that such Inventory shall not constitute Eligible Inventory
unless: (a) before the first anniversary of the date hereof, if such
Inventory is not reflected on perpetual inventory reports delivered to
Lender in accordance with the terms hereof, then (i) satisfactory testing of
inventory rollforward on or before the date hereof shall have been
completed; and (ii) Borrower shall have caused to be conducted a physical
count of the ▇▇▇▇▇ ▇▇▇▇▇ Inventory on a quarterly basis, and at any time or
times as Lender may request after an Event of Default has occurred and is
continuing, and promptly following such physical count Borrower
Representative shall have supplied Lender with a report thereof in the form
and with such specificity as may be reasonably satisfactory to Lender, and
(b) from and after the first anniversary of the date hereof, such Inventory
is reflected on perpetual inventory reports delivered to Lender in
accordance with the terms hereof.
1.39 "Lender" shall have the meaning set forth in the preamble hereto.
1.40 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer.
1.41 "Loans" shall mean the Revolving Loans.
1.42 "Material Adverse Effect" shall mean a material adverse effect
upon the business, operations, properties, assets, goodwill or condition
(financial or otherwise) of SSG on a consolidated basis. In determining
whether any individual event would have a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would have a
Material Adverse Effect.
1.43 "Maximum Credit" shall mean the amount of $25,000,000.
1.44 "Maximum Legal Rate" shall have the meaning set forth in Section
3.1(e).
1.45 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts, less (a) sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed with respect thereto.
1.46 "Obligations" shall mean any and all Revolving Loans and Letter of
Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise arising under this Agreement and the other
Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to Borrower
under the United States Bankruptcy Code or any similar statute (including
the payment of interest and other amounts which would accrue and become due
but for the commencement of such case, whether or not such amounts are
allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or unsecured. The term
Obligations shall include, without limitation, all obligations, liabilities
and indebtedness of SSG and ATEC, or any one of them, to Lender, whether
such obligations, liabilities and indebtedness shall be joint, several,
joint and several or individual.
1.47 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the
owner of any property which is security for the Obligations, other than
Borrower.
1.48 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.49 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which
elects subchapter S status under the Code), limited liability company,
limited liability partnership, business trust, unincorporated association,
joint stock corporation, trust, joint venture or other entity or any
government or any agency or instrumentality or political subdivision
thereof.
1.50 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank or its successors, at its office in
Charlotte, North Carolina, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.51 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the
terms thereof.
1.52 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located.
1.53 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of
Borrower with respect to the foregoing maintained with or by any other
Person).
1.54 "Reference Bank" shall mean First Union National Bank, or such
other bank as Lender may from time to time designate.
1.55 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.56 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.57 "SSG" shall have the meaning set forth in the preamble hereto.
1.58 "Value" shall mean, as determined by Lender in good faith,
consistent with its credit policies and practices, with respect to
Inventory, the lower of (a) Cost or (b) market value.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time
in amounts requested by Borrower up to the amount equal to the sum of:
(i) eighty percent (80%) of the Net Amount of Eligible Accounts,
plus
(ii) the lesser of:
(A) the sum of:
(1) the Finished Goods Inventory Advance Rate with
respect to Eligible Inventory other than ▇▇▇▇▇
▇▇▇▇▇ Inventory, plus
(2) twenty-five percent (25%) of the Value of
Eligible Inventory consisting of raw materials
for such finished goods, plus
(3) the lesser of:
(x) the Finished Goods Inventory Advance Rate
with respect to ▇▇▇▇▇ ▇▇▇▇▇ Inventory
constituting Eligible Inventory, or
(y) if such ▇▇▇▇▇ ▇▇▇▇▇ Inventory is not
reflected on perpetual inventory reports
delivered to Lender in accordance with the
terms hereof, $1,700,000, or
(B) $15,000,000, less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior written notice to Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith consistent with its credit policies and practices
that: (A) the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate dollar amount of reductions in Accounts
other than as a result of payments in cash to (2) the aggregate dollar
amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels for comparable periods, or (B) the general creditworthiness of
account debtors has declined or (ii) reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Lender determines that:
(A) the number of days of the turnover of the Inventory for any period has
increased in any material respect other than due to seasonal fluctuations
consistent with Borrower's historical seasonal fluctuations, or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated.
In determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing
Availability Reserves. Notwithstanding the foregoing, Lender agrees not to
reduce any lending formula to account for any matter which also serves as
the basis for an Availability Reserve established by Lender or has been
applied by Lender as criteria to cause Accounts or Inventory to not
constitute Eligible Accounts or Eligible Inventory, as the case may be.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall
not exceed the Maximum Credit. In the event that the outstanding amount of
any component of the Loans, or the aggregate amount of the outstanding Loans
and Letter of Credit Accommodations, exceed the amounts available under the
lending formulas, the sublimits for Letter of Credit Accommodations set
forth in Section 2.2(d) or the Maximum Credit, as applicable, such event
shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrower shall, upon demand by
Lender, which may be made at any time or from time to time, immediately
repay to Lender the entire amount of any such excess(es) for which payment
is demanded.
(d) For purposes only of applying the sublimit on Revolving Loans
based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may
treat the then undrawn amounts of outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory as Revolving
Loans to the extent Lender is in effect basing the issuance of the Letter of
Credit Accommodations on the Value of the Eligible Inventory being purchased
with such Letter of Credit Accommodations. In determining the actual
amounts of such Letter of Credit Accommodations to be so treated for
purposes of the sublimit, the outstanding Revolving Loans and Availability
Reserves shall be attributed first to any components of the lending formulas
in Section 2.1(a) that are not subject to such sublimit, before being
attributed to the components of the lending formulas subject to such
sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower Representative, Lender agrees to provide
or arrange for Letter of Credit Accommodations for the account of Borrower
containing terms and conditions acceptable to Lender and the issuer thereof.
Any payments made by Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations shall constitute
additional Revolving Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to one
and one-half percent (1.5%) per annum on the daily outstanding balance of
the Letter of Credit Accommodations for the immediately preceding month (or
part thereof), payable in arrears as of the first day of each succeeding
month, except that Borrower shall pay to Lender such letter of credit fee,
at Lender's option, with notice, at a rate equal to three and one-half
percent (3.50%) per annum on such daily outstanding balance for: (i) the
period from and after the effective date of termination or non-renewal
hereof until Lender has received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrower) and (ii) the period
from and after the date of the occurrence of an Event of Default for so long
as such Event of Default is continuing as determined by Lender. Such letter
of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations,
the Revolving Loans available to Borrower (subject to the Maximum Credit and
any Availability Reserves) are equal to or greater than: (i) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) the percentage equal to one hundred
percent (100%) minus the then applicable percentage set forth in Section
2.1(a)(ii)(A) above of the Value of such Eligible Inventory, plus (B)
freight, taxes, duty and other amounts which Lender estimates must be paid
in connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of
America and (ii) if the proposed Letter of Credit Accommodation is for any
other purpose, an amount equal to one hundred percent (100%) of the face
amount thereof and all other commitments and obligations made or incurred by
Lender with respect thereto. Effective on the issuance of each Letter of
Credit Accommodation, an Availability Reserve shall be established in the
applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations
made or incurred by Lender in connection therewith shall not at any time
exceed $5,000,000. At any time an Event of Default exists or has occurred
and is continuing, upon Lender's request in writing, Borrower will either
furnish cash collateral to secure the reimbursement obligations to the
issuer in connection with any Letter of Credit Accommodations or furnish
cash collateral to Lender for the Letter of Credit Accommodations, and in
either case, the Revolving Loans otherwise available to Borrower shall not
be reduced as provided in Section 2.2(c) to the extent of such cash
collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due
to any action taken by any issuer or correspondent with respect to any
Letter of Credit Accommodation. Borrower assumes all risks with respect to
the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall
be deemed Borrower's agent. Borrower assumes all risks for, and agrees to
pay, all foreign, Federal, State and local taxes, duties and levies relating
to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. BORROWER HEREBY RELEASES AND
HOLDS LENDER HARMLESS FROM AND AGAINST ANY ACTS, WAIVERS, ERRORS, DELAYS OR
OMISSIONS, WHETHER CAUSED BY BORROWER, BY ANY ISSUER OR CORRESPONDENT OR
OTHERWISE WITH RESPECT TO OR RELATING TO ANY LETTER OF CREDIT ACCOMMODATION,
INCLUDING ANY OF THE FOREGOING RESULTING FROM THE ORDINARY OR CONTRIBUTORY
NEGLIGENCE OF LENDER OR ITS EMPLOYEES, AGENTS OR REPRESENTATIVES, BUT
EXCLUDING ANY OF THE FOREGOING RESULTING SOLELY AND DIRECTLY FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER OR ITS EMPLOYEES, AGENTS OR
REPRESENTATIVES, AS DETERMINED BY A FINAL NON-APPEALABLE ORDER OF A COURT OF
COMPETENT JURISDICTION. The provisions of this Section 2.2(e) shall survive
the payment of Obligations and the termination or non-renewal of this
Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower or Borrower Representative any right or authority to pledge
the credit of Lender in any manner. Lender shall have no liability of any
kind with respect to any Letter of Credit Accommodation provided by an
issuer other than Lender unless Lender has duly executed and delivered to
such issuer the application or a guarantee or indemnification in writing
with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other
issuer or correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower or Borrower Representative. Lender shall have the
sole and exclusive right and authority to, and Borrower shall not: (i) at
any time an Event of Default exists or has occurred and is continuing, (A)
approve or resolve any questions of non-compliance of documents, (B) give
any instructions as to acceptance or rejection of any documents or goods or
(C) execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, and (ii) at all times after prior notice to
Borrower Representative, (A) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (B) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letter of Credit Accommodations, or documents,
drafts or acceptances thereunder or any letters of credit included in the
Collateral. Lender may take such actions either in its own name or in
Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation,
shall be deemed to have been granted or undertaken by Borrower to Lender.
Any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or
any other agreement by Lender in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to have been
undertaken by Borrower to Lender and to apply in all respects to Borrower.
2.3 [Intentionally Omitted.]
2.4 Availability Reserves. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit
and other applicable limits hereunder shall be subject to Lender's
continuing right to establish and revise Availability Reserves.
Notwithstanding the foregoing, Lender agrees not to establish an
Availability Reserve with respect to any matter, if such matter has also
been applied as criteria to cause Accounts or Inventory to not constitute
Eligible Accounts or Eligible Inventory, respectively. Lender agrees to
notify Borrower Representative after establishing any new Availability
Reserves.
2.5 Joint and Several Liability; Rights of Contribution.
(a) Each Borrower states and acknowledges that: (i) pursuant to
this Agreement, Borrowers desire to utilize their borrowing potential on a
consolidated basis to the same extent possible if they were merged into a
single corporate entity and that this Agreement reflects the establishment
of credit facilities which would not otherwise be available to such Borrower
if each Borrower were not jointly and severally liable for payment of all of
the Obligations; (ii) it has determined that it will benefit specifically
and materially from the advances of credit contemplated by this Agreement;
(iii) it is both a condition precedent to the obligations of Lender
hereunder and a desire of the Borrowers that each Borrower execute and
deliver to Lender this Agreement; and (iv) Borrowers have requested and
bargained for the structure and terms of and security for the advances
contemplated by this Agreement.
(b) Each Borrower hereby irrevocably and unconditionally:
(i) agrees that it is jointly and severally liable to Lender for the full
and prompt payment of the Obligations and the performance by each Borrower
of its obligations hereunder in accordance with the terms hereof;
(ii) agrees to fully and promptly perform all of its obligations hereunder
with respect to each advance of credit hereunder as if such advance had been
made directly to it; and (iii) agrees as a primary obligation to indemnify
Lender on demand for and against any loss incurred by Lender as a result of
any of the Obligations of any one or more of the Borrowers being or becoming
void, voidable, unenforceable or ineffective for any reason whatsoever,
whether or not known to Lender or any Person, the amount of such loss being
the amount which Lender would otherwise have been entitled to recover from
any one or more of the Borrowers.
(c) It is the intent of each Borrower that the indebtedness,
obligations and liability hereunder of no one of them be subject to
challenge on any basis, including, without limitation, pursuant to any
applicable fraudulent conveyance or fraudulent transfer laws. Accordingly,
as of the date hereof, the liability of each Borrower under this Section
2.5, together with all of its other liabilities to all Persons as of the
date hereof and as of any other date on which a transfer or conveyance is
deemed to occur by virtue of this Agreement, calculated in amount sufficient
to pay its probable net liabilities on its existing Indebtedness as the same
become absolute and matured ("Dated Liabilities") is, and is to be, less
than the amount of the aggregate of a fair valuation of its property as of
such corresponding date ("Dated Assets"). To this end, each Borrower under
this Section 2.5, (i) grants to and recognizes in each other Borrower,
ratably, rights of subrogation and contribution in the amount, if any, by
which the Dated Assets of such Borrower, but for the aggregate of
subrogation and contribution in its favor recognized herein, would exceed
the Dated Liabilities of such Borrower or, as the case may be,
(ii) acknowledges receipt of and recognizes its right to subrogation and
contribution ratably from each of the other Borrowers in the amount, if any,
by which the Dated Liabilities of such Borrower, but for the aggregate of
subrogation and contribution in its favor recognized herein, would exceed
the Dated Assets of such Borrower under this Section 2.5. In recognizing
the value of the Dated Assets and the Dated Liabilities, it is understood
that Borrowers will recognize, to at least the same extent of their
aggregate recognition of liabilities hereunder, their rights to subrogation
and contribution hereunder. It is a material objective of this Section 2.5
that each Borrower recognizes rights to subrogation and contribution rather
than be deemed to be insolvent (or in contemplation thereof) by reason of an
arbitrary interpretation of its joint and several obligations hereunder. In
addition to and not in limitation of the foregoing provisions of this
Section 2.5, the Borrowers and Lender hereby agree and acknowledge that it
is the intent of each Borrower and of Lender that the obligations of each
Borrower hereunder be in all respects in compliance with, and not be
voidable pursuant to, applicable fraudulent conveyance and fraudulent
transfer laws.
(d) Notwithstanding the foregoing, and the Borrowers' agreement
to be jointly and severally liable for payment of all the Obligations, each
of the Borrowers is a separate and distinct corporation. Lender
acknowledges and agrees that each Borrower is a separate and distinct entity
and further agrees not to challenge or dispute the separate existence of
each Borrower.
2.6 Structure of Credit Facility. Each Borrower agrees and
acknowledges that the present structure of the credit facilities detailed in
this Agreement is based in part upon the financial and other information
presently known to Lender regarding each Borrower, the corporate structure
of Borrowers, and the present financial condition of each Borrower. Each
Borrower hereby agrees that Lender shall have the right, in its sole credit
judgment, to require that any or all of the following changes be made to
these Loans: (i) advance Revolving Loans to a specific Borrower,
(ii) restrict loans and advances between Borrowers, (iii) require that each
Borrower execute a guaranty of the indebtedness of each other Borrower to
Lender and (iv) require that any advances made by a Borrower to another
Borrower be collateralized in a manner acceptable to Lender.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate.
All interest accruing hereunder on and after the occurrence and continuance
of an Event of Default or effective date of termination or non-renewal
hereof shall be payable upon demand.
(b) Borrower Representative may from time to time request that
Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such
request from Borrower Representative shall specify the amount of the Prime
Rate Loans which will constitute Eurodollar Rate Loans (subject to the
limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained
herein, three (3) Business Days after receipt by Lender of such a request
from Borrower Representative, such Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, provided, that, (i) no Event of Default, or event which with
notice or passage of time or both would constitute an Event of Default
exists or has occurred and is continuing, (ii) no party hereto shall have
sent any notice of termination or non-renewal of this Agreement, the
effective date of which is prior to the end of the Interest Period specified
for such Eurodollar Rate Loan, (iii) Borrower Representative shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower in writing from time to time for requests by
Borrower Representative for Eurodollar Rate Loans, (iv) no more than five
(5) Interest Periods may be in effect at any one time, (v) the aggregate
amount of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by
Borrower Representative shall not exceed the amount equal to eighty percent
(80%) of the lowest principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in
each case as determined by Lender (but with no obligation of Lender to make
such Revolving Loans) and (vii) Lender shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to Lender through
the Reference Bank and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by Borrower Representative. Any
request by Borrower Representative to convert Prime Rate Loans to Eurodollar
Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein,
Lender and Reference Bank shall not be required to purchase United States
Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference Bank had
purchased such deposits to fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate
Loan at least three (3) Business Days prior to such last day in accordance
with the terms hereof. Any Eurodollar Rate Loans shall, at Lender's option,
upon notice by Lender to Borrower Representative, convert to Prime Rate
Loans in the event that (i) an Event of Default or event which, with notice
or passage of time, or both, would constitute an Event of Default, shall
exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously
been converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans
continued, as the case may be, at the beginning of an Interest Period shall
at any time during such Interest Period exceed either (A) the aggregate
principal amount of the Loans then outstanding, or (B) the Revolving Loans
then available to Borrower under Section 2 hereof. Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss
of anticipated profits), cost or expense incurred by such Person, as a
result of the conversion of Eurodollar Rate Loans to Prime Rate Loans
pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the Prime
Rate in effect on the last day of the month in which any such change occurs.
In no event shall charges constituting interest payable by Borrower to
Lender exceed the maximum amount or the rate permitted under any applicable
law or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
(e) No agreements, conditions, provisions or stipulations
contained in this Agreement or any other instrument, document or agreement
between Borrower and Lender or default of Borrower, or the exercise by
Lender of the right to accelerate the payment of the maturity of principal
and interest, or to exercise any option whatsoever contained in this
Agreement or any other Financing Agreement, or the arising of any
contingency whatsoever, shall entitle Lender to contract for, charge, or
receive, in any event, consideration for the use, forbearance or detention
of money ("interest") at a rate exceeding the maximum rate of interest
permitted by applicable state or federal law in effect from time to time
(hereinafter "Maximum Legal Rate"). In no event shall Borrower be obligated
to pay interest at any rate exceeding such Maximum Legal Rate and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrower to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest determined at a rate over such Maximum Legal Rate. In the event
any interest is contracted for, charged or received at any rate in excess of
the Maximum Legal Rate ("Excess"), Borrower acknowledges and stipulates that
any such contract, charge, or receipt shall be the result of an accident and
bona fide error, and that any Excess received by Lender shall be applied,
first, to reduce the principal then unpaid hereunder; second, to reduce the
other Obligations; and third, returned to Borrower, it being the intention
of the parties hereto not to enter at any time into a usurious or otherwise
illegal relationship. Borrower recognizes that, with fluctuations in the
Prime Rate, the Eurodollar Rate and the Maximum Legal Rate, such a result
could inadvertently occur. By the execution of this Agreement, Borrower
covenants that (i) the credit or return of any Excess shall constitute the
acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or
pursue any other remedy, legal or equitable, against Lender, based in whole
or in part upon contracting for, charging or receiving of any interest in
excess of the maximum authorized or receiving of any interest in excess of
the maximum authorized by applicable law. For the purpose of determining
whether or not any Excess has been contracted for, charged or received by
Lender, all interest at any time contracted for, charged or received by
Lender in connection with this Agreement shall be amortized, prorated,
allocated and spread in equal parts during the full stated term of this
Agreement and otherwise as provided in Tex. Fin Code section 306.004 (or the
successor(s) thereof). If, as a result of any circumstances whatsoever,
fulfillment of any provision hereof or of any related agreement, at the time
performance of such provision shall be due, shall involve transcending the
limit of validity prescribed by applicable usury law, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the
amount of $125,000, all of which shall be fully earned and non-refundable as
of the date hereof and which shall be payable in two installments of $62,500
each on (i) the date hereof, and (ii) the first anniversary of the date
hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to $3,000 in respect of Lender's services for each
month (or part thereof) while this Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall
be fully earned as of and payable in advance on the date hereof (pro-rated
for the portion of the month remaining) and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-quarter of one percent (.25%) per annum
calculated upon the amount by which $20,000,000 exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof)
while this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, which fee shall be payable on the first day of
each month in arrears.
3.5 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert
to Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either
(A) make it unlawful for Lender, Reference Bank or any participant to make
or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the
increase in the costs to Lender, Reference Bank or any participant of making
or maintaining any Eurodollar Rate Loans by an amount deemed by Lender to be
material, or (C) reduce the amounts received or receivable by Lender in
respect thereof, by an amount deemed by Lender to be material or (ii) the
cost to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by
Lender to be material. Borrower shall pay to Lender, upon demand by Lender
(or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), cost or
expense incurred by such Person as a result of the foregoing, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Person to make or maintain the Eurodollar Rate Loans or any portion thereof.
A certificate of Lender setting forth the basis for the determination of
such amount necessary to compensate Lender as aforesaid shall be delivered
to Borrower Representative and shall be conclusive, absent manifest error.
Notwithstanding the foregoing, Lender agrees not to take any of the actions
contemplated by this Section 3.5(a) unless it also takes such action with
respect to its other borrowers.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity
or otherwise), including any payments pursuant to the application of
collections under Section 6.3 or any other payments made with the proceeds
of Collateral, Borrower shall pay to Lender upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrower) any amounts
required to compensate Lender, the Reference Bank or any participant with
Lender for any additional loss (including loss of anticipated profits), cost
or expense incurred by such Person as a result of such prepayment or
payment, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds
acquired by such Person to make or maintain such Eurodollar Rate Loans or
any portion thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property
which is intended to be security for the Obligations or the liability of any
Obligor in respect thereof, subject only to the security interests and liens
permitted herein or in the other Financing Agreements;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory
in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or its
counsel to be certified by appropriate corporate officers or governmental
authorities;
(c) no change which has had or could be reasonably expected to
have a Material Adverse Effect shall have occurred since the date of
Lender's latest field examination and no change or event shall have occurred
which would impair the ability of the Borrower or any Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral;
(d) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require
to determine the amount of Revolving Loans available to Borrower, the
results of which shall be satisfactory to Lender, not more than five (5)
Business Days prior to the date hereof;
(e) Lender shall have received evidence of insurance and loss
payee or additional insured, as applicable, endorsements required hereunder
and under the other Financing Agreements, in form and substance reasonably
satisfactory to Lender, and certificates of insurance policies and/or
endorsements naming Lender as loss payee or additional insured as
applicable;
(f) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with
respect to the Financing Agreements, the security interests and liens of
Lender and such other matters as Lender may request;
(g) Lender shall have received a certificate regarding the
solvency of Borrower, in form and substance satisfactory to Lender, executed
by the chief executive officer and the chief financial officer of Borrower;
(h) Lender shall have received, in form and substance
satisfactory to Lender, a pledge of one hundred percent (100%) of the common
stock, or other equity interests, in any Person owned by SSG (other than
Sport Supply Group Asia, Ltd., a Hong Kong corporation, with respect to
which Lender shall have received a pledge of sixty-five percent (65%) of
such stock);
(i) Lender shall have received a certificate executed by the
chief executive officer and the chief financial officer of Borrower, setting
forth in reasonable detail the sources and uses of funds in the transactions
contemplated herein;
(j) Lender shall have received, in form and substance
satisfactory to Lender, written instructions from Borrower Representative
directing the application of the initial Revolving Credit Loans or Letter of
Credit Accommodations, if any, on the date hereof pursuant to this
Agreement;
(k) the Excess Availability, as determined by Lender, as of the
date hereof shall be not less than $2,000,000 after giving effect to the
initial Loans made or to be made and the Letter of Credit Accommodations
issued or to be issued in connection with the initial transactions
hereunder;
(l) Lender shall have received a licensor agreement, in form and
substance satisfactory to Lender, for each trademark or any other
intellectual property which Borrower licenses set forth on Schedule 4.1(l),
executed by Borrower and the licensor;
(m) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents
as Lender may request to evidence and effectuate the termination by the
existing lender or lenders to Borrower of their respective financing
arrangements with Borrower and the termination and release by it or them, as
the case may be, of any interest in and to any assets and properties of
Borrower and each Obligor (or payoff letters in form and substance
satisfactory to Lender including the agreement of such existing lender or
lenders to effectuate such terminations and releases promptly upon receipt
of the payoff amount set forth therein), duly authorized, executed and
delivered by it or each of them, including, but not limited to, (i) UCC
termination statements for all UCC financing statements previously filed by
it or any of them or their predecessors, as secured party and Borrower or
any Obligor, as debtor and (ii) satisfactions and discharges of any
mortgages, deeds of trust or deeds to secure debt by Borrower or any Obligor
in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;
(n) Lender shall have received from Borrower a report of
Borrower's slow-moving Inventory, based upon Inventory on-hand versus
quantity sold for the twelve month period ending February 23, 2001, and
Lender shall be satisfied with the result thereof; and
(o) Lender shall have received the other Financing Agreements
(including, without limitation, a negative pledge agreement for each
location where Borrower owns Real Property) and all instruments and
documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance reasonably satisfactory to
Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent
to Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations
and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties
had been made on and as of the date of the making of each such Loan or
providing each such Letter of Credit Accommodation and after giving effect
thereto except for any representations and warranties given as of a specific
date, which shall have been true and correct in all material respects on and
as of such date; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default,
shall exist or have occurred and be continuing on and as of the date of the
making of such Loan or providing each such Letter of Credit Accommodation
and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right
of set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
5.1 Accounts;
5.2 all present and future contract rights (including rights under
service agreements (except to the extent prohibited by the applicable
service agreement)), general intangibles (including tax and duty refunds,
registered and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets, good will,
processes, drawings, blueprints, customer lists, licenses (except to the
extent prohibited by the applicable license agreement), whether as licensor
or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, securities and other investment property, letters of
credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or at any
other depository or other institution from or for the account of Borrower,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Accounts and other
Collateral, including (a) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property
of account debtors or other Persons securing the obligations of account
debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage
to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be
made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrower Representative each
month a statement setting forth the balance in the Borrower's loan
account(s) maintained by Lender for Borrower pursuant to the provisions of
this Agreement, including principal, interest, fees, costs and expenses.
Each such statement shall be subject to subsequent adjustment by Lender but
shall, absent manifest errors or omissions, be considered correct and deemed
accepted by Borrower Representative and conclusively binding upon Borrower
as an account stated except to the extent that Lender receives a written
notice from Borrower Representative of any specific exceptions of Borrower
Representative thereto within thirty (30) days after the date such statement
has been mailed by Lender. Until such time as Lender shall have rendered to
Borrower Representative a written statement as provided above, the balance
in Borrower's loan account(s) shall be presumptive evidence of the amounts
due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts ("Blocked Accounts"), with such banks as are reasonably
acceptable to Lender into which Borrower shall promptly deposit all payments
on Accounts and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, check or other manner. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in
the Blocked Accounts are the property of Lender, that the depository bank
has no lien upon, or right to setoff against, the Blocked Accounts, the
items received for deposit therein, or the funds from time to time on
deposit therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of
Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Borrower agrees that all payments made to such Blocked Accounts
or other funds received and collected by Lender, whether on the Accounts or
as proceeds of Inventory or other Collateral or otherwise shall be the
property of Lender.
(b) For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
payments or other funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to
credit Borrower's loan account on such day, and if not, then on the next
Business Day. For the purposes of calculating interest on the Obligations,
such payments or other funds received will be applied (conditional upon
final collection) to the Obligations one (1) Business Day following the date
of receipt of immediately available funds by Lender in the Payment Account
provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from
time to time and within sufficient time to credit Borrower's loan account on
such day, and if not, then on the next Business Day.
(c) Borrower and all of its subsidiaries, employees or agents
shall, acting as trustee for Lender, receive, as the property of Lender, any
monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral which come into their possession or
under their control and promptly upon receipt thereof, shall (or, if
Borrower has Knowledge that any of the foregoing has come into the
possession or under the control of any of Borrower's affiliates,
shareholders or directors, Borrower shall use its best efforts to cause such
Person to) deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender promptly after request for any amounts
owed or paid to any bank at which a Blocked Account is established or any
other bank or Person involved in the transfer of funds to or from the
Blocked Accounts arising out of Lender's payments to or indemnification of
such bank or Person. The obligation of Borrower to reimburse Lender for
such amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from
time to time. Lender may apply payments received or collected from Borrower
or for the account of Borrower (including the monetary proceeds of
collections or of realization upon any Collateral) to such of the
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations
free and clear of, and without deduction or withholding for or on account
of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment
of, any of the Obligations, Lender is required to surrender or return such
payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if
such payment or proceeds had not been received by Lender. Borrower shall be
liable to pay to Lender, and does hereby indemnify and hold Lender harmless
for the amount of any payments or proceeds surrendered or returned. This
Section 6.4 shall remain effective notwithstanding any contrary action which
may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination
or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic
or other instructions received from anyone purporting to be an officer of
Borrower Representative or employee authorized by Borrower Representative
or, at the discretion of Lender, if such Loans are necessary to satisfy any
Obligations. All requests for Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be
made or Letter of Credit Accommodations established (which day shall be a
Business Day) and the amount of the requested Loan. Requests received after
12:00 p.m. Central Standard Time on any day shall be deemed to have been
made as of the opening of business on the immediately following Business
Day. All Loans and Letter of Credit Accommodations under this Agreement
shall be conclusively presumed to have been made to, and at the request of
and for the benefit of, Borrower when (a) deposited to the credit of
Borrower, (b) deposited to the credit of Borrower Representative on account
of Borrower (without liability or responsibility of Lender for the
application of funds by Borrower Representative), or (c) otherwise disbursed
or established in accordance with the instructions of Borrower acceptable to
Lender or in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to
each of the Persons listed in the disbursement direction letter furnished by
Borrower Representative to Lender on or about the date hereof and (b) costs,
expenses and fees in connection with the preparation, negotiation, execution
and delivery of this Agreement and the other Financing Agreements. All
other Loans made or Letter of Credit Accommodations provided by Lender to
Borrower pursuant to the provisions hereof shall be used by Borrower only
for general operating, working capital and other proper corporate purposes
of Borrower not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing
or carrying any margin security or for the purposes of reducing or retiring
any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans
to be considered a "purpose credit" within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System, as amended.
6.7 Reliance on Notices; Appointment of Borrower Representative.
(a) Lender shall be entitled to rely upon, and shall be fully
protected in relying upon, any instruction, request, notice or other
communication with respect to Revolving Loan or Letter of Credit
Accommodations or similar notice believed by Lender to be genuine. Lender
may assume that each Person executing and delivering such a instruction,
request or notice was duly authorized.
(b) Borrower hereby designates SSG as its representative and
agent on its behalf for the purposes of (i) giving, receiving and/or issuing
such instructions, requests or notices with respect to the disbursement of
the proceeds of the Loans, (ii) selecting interest rate options, (b)
requesting Letter of Credit Accommodations, (iii) receiving and distributing
funds hereunder, (iv) providing financial information and all other notices
and consents hereunder or under any of the other Financing Agreements, and
(v) taking all other actions (including in respect of compliance with
covenants) on behalf of Borrower under the Financing Agreements as may be
requested by Lender, together with actions incidental thereto. Borrower
Representative hereby accepts such appointment.
(c) Borrower Representative shall not resign from such capacity
without Lender's prior written consent to such resignation and, in any
event, until and unless the existing Borrower Representative shall have
identified and Lender shall have approved, any replacement for such
representative.
(d) Lender may regard any instruction, request, notice or other
communication pursuant to any Financing Agreement from Borrower
Representative as an instruction, request, notice or communication from
Borrower and may give any notice or communication required or permitted to
be given to Borrower hereunder to Borrower Representative on behalf of
Borrower. Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by
Borrower and shall be binding upon and enforceable against Borrower to the
same extent as if the same had been made directly by Borrower. Borrower
waives and releases Lender from compliance with the terms hereof, including
for the application of funds disbursed or directed to Borrower
Representative on behalf of Borrower.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower Representative shall provide
Lender with the following documents in a form regularly prepared by Borrower
or otherwise reasonably satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and
cash received; (b) on a monthly basis or more frequently as Lender may
request, (i) perpetual inventory reports, (ii) inventory reports by
category, (iii) agings of accounts payable, and (iv) agings of accounts
receivable, (c) on a quarterly basis or more frequently as Lender may
request, slow-moving inventory reports; (d) upon Lender's request, (i)
copies of customer statements and credit memos, remittance advices and
reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, and (iii) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrower; and (e) such other reports as to the Collateral as Lender shall
reasonably request from time to time. If any of Borrower's records or
reports of the Collateral are prepared or maintained by an accounting
service, contractor, shipper or other agent, Borrower hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower Representative shall notify Lender promptly of: (i)
any material delay in Borrower's performance of any of its obligations to
any account debtor or the assertion of any material claims, offsets,
defenses or counterclaims by any account debtor, or any material disputes
with account debtors, or any settlement, adjustment or compromise thereof,
(ii) all material adverse information relating to the financial condition of
any material account debtor and (iii) any event or circumstance which, to
Borrower's Knowledge would cause Lender to consider any then existing
Accounts as no longer constituting Eligible Accounts. No material credit,
discount, allowance or extension or agreement for any of the foregoing shall
be granted to any account debtor without Lender's consent, except in the
ordinary course of Borrower's business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle,
adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred
and is continuing, Lender shall, at its option with notice to Borrower, have
the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts
or allowances.
(b) Without limiting the obligation of Borrower Representative to
deliver any other information to Lender, Borrower shall promptly report to
Lender any return of Inventory by any one account debtor if the Inventory so
returned in such case has a value in excess of $100,000. At any time that
Inventory is returned, reclaimed or repossessed, the Account (or portion
thereof) which arose from the sale of such returned, reclaimed or
repossessed Inventory shall not be deemed an Eligible Account. In the event
any account debtor returns Inventory when an Event of Default exists or has
occurred and is continuing, Borrower Representative shall, upon Lender's
request, (i) hold the returned Inventory in trust for Lender, (ii) segregate
all returned Inventory from all of its other property, (iii) dispose of the
returned Inventory solely according to Lender's instructions, and (iv) not
issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
promptly delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to
Lender in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except
as reported to Lender in accordance with the terms of this Agreement, and
(v) none of the transactions giving rise thereto will violate any applicable
State or Federal laws or regulations, all documentation relating thereto
will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount
or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower Representative shall deliver or cause to be
delivered to Lender, with appropriate endorsement and assignment, with full
recourse to Borrower, all chattel paper and instruments which Borrower now
owns or may at any time acquire immediately upon Borrower's receipt thereof,
except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to Lender and that Lender has a
security interest therein and Lender may direct any or all accounts debtors
to make payment of Accounts directly to Lender, (ii) with notice to
Borrower, extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without any such
discharge, release or other action being deemed to have reduced any of the
Obligations (but any amounts received pursuant thereto shall be deemed to
have reduced the Obligations when applied thereto in accordance with the
terms hereof), (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Lender shall not
be liable for its failure to collect or enforce the payment thereof nor for
the negligence (except for gross negligence or willful misconduct as
determined by a final non-appealable order of a court of competent
jurisdiction) of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to Lender and are payable directly and
only to Lender and Borrower shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Government Receivables Covenants. Upon Lender's request with
respect to each order or sale that creates a new Government Receivable in an
amount greater than or equal to $1,000 (or such other amount as may
hereafter be required under the Federal Assignment of Claims Act of 1940, as
amended, or the regulations promulgated thereunder in order for such
Government Receivable to be assignable thereunder), Borrower shall
(i) comply with the Federal Assignment of Claims Act of 1940, as amended,
(ii) send proper notices of the assignment to Lender of the proceeds of such
Government Receivable to the appropriate contracting and disbursing officers
in accordance with such Act, (iii) make such diligent efforts as the Lender
may request to obtain proper acknowledgments of each such notice and (iv)
promptly provide to Lender fully executed originals of each such notice and
the acknowledgments relating thereto within five (5) Business Days of
receipt of such acknowledgments.
7.4 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, Borrower's cost therefor and
daily withdrawals therefrom and additions thereto; (b) Borrower shall
conduct a physical count of the Inventory at least once each year, but at
any time or times as Lender may request after an Event of Default has
occurred and is continuing, and promptly following such physical inventory
shall supply Lender with a report in the form and with such specificity as
may be reasonably satisfactory to Lender concerning such physical count; (c)
Borrower shall not remove any Inventory from the locations set forth or
permitted herein, without thirty (30) days prior written notice to Lender
(such notice to include a description of the Inventory being moved, the
location to which it is being moved and the date of such relocation), except
for sales of Inventory in the ordinary course of Borrower's business and
except to move Inventory directly from one location set forth or permitted
herein to another such location; (d) Borrower Representative shall, at its
expense, deliver or cause to be delivered to Lender on an annual basis, but
at any time or times as Lender may request after an Event of Default has
occurred and is continuing, written reports or appraisals as to the
Inventory in form, scope and methodology reasonably acceptable to Lender and
by an appraiser reasonably acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) without limiting the
foregoing clause (d), Borrower Representative shall, at its expense, deliver
or cause to be delivered to Lender on a semi-annual basis, a desktop
appraisal as to the Inventory in form, scope and methodology reasonably
acceptable to Lender and by an appraiser reasonably acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely; (f)
Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of
any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (g) Borrower assumes all
responsibility and liability arising from or relating to the production,
use, sale or other disposition of the Inventory; (h) Borrower shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate Borrower to repurchase such Inventory
other than for warranties in the ordinary course of business; (i) Borrower
shall keep the Inventory in good and marketable condition; and (j) Borrower
shall not, without prior written notice to Lender, acquire or accept any
Inventory on consignment or approval.
7.5 Equipment Covenants. With respect to the Equipment: (a) Borrower
Representative shall, at its expense, at any time or times as Lender may
request after an Event of Default has occurred and is continuing, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Equipment in form, scope and methodology reasonably acceptable to Lender and
by an appraiser acceptable to Lender; (b) Borrower shall keep the Equipment
repaired and in running condition; (c) Borrower shall use the Equipment with
care and caution in all material respects and in accordance in all material
respects with applicable standards of any insurance and in conformity in all
material respects with all applicable material laws; (d) the Equipment is
and shall be used in Borrower's business and not for personal, family,
household or farming use; (e) Borrower shall not remove any Equipment from
the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrower or to move Equipment directly from one location set
forth or permitted herein to another such location and except for the
movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain
personal property and Borrower shall not permit any of the Equipment to be
or become a part of or affixed to real property (unless Lender shall have
received a satisfactory agreement from the owner of such property including
an acknowledgement that such Equipment shall remain personal property); and
(g) Borrower assumes all responsibility and liability arising from the use
of the Equipment.
7.6 Power of Attorney. Borrower and Borrower Representative hereby
irrevocably designates and appoints Lender (and all persons designated by
Lender) as Borrower's and Borrowers Representative's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's, Borrower
Representative's or Lender's name, to: (a) at any time an Event of Default
or event which with notice or passage of time or both would constitute an
Event of Default exists or has occurred and is continuing (i) demand payment
on Accounts or other proceeds of Inventory or other Collateral, (ii) enforce
payment of Accounts by legal proceedings or otherwise, (iii) exercise all of
Borrower's rights and remedies to collect any Account or other Collateral,
(iv) sell or assign any Account upon such terms, for such amount and at such
time or times as the Lender deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Account, (vii)
prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor, (viii) notify the post
office authorities to change the address for delivery of Borrower's mail to
an address designated by Lender, and open mail addressed to Borrower, and
(ix) do all acts and things which are necessary, in Lender's reasonable
credit judgment, to fulfill Borrower's and/or Borrower Representative's
obligations under this Agreement and the other Financing Agreements and (b)
at any time to (i) take control in any manner of any item of payment or
proceeds of Collateral, (ii) have access to any lockbox or postal box into
which Borrower's mail is deposited, (iii) endorse Borrower's name upon any
items of payment or proceeds of Collateral and deposit the same in the
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar
document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, (v) sign Borrower's name on any
verification of Accounts and notices thereof to account debtors and (vi)
execute in Borrower's name and file any UCC financing statements or
amendments thereto consistent with the terms of this Agreement. BORROWER
AND BORROWER REPRESENTATIVE HEREBY RELEASE LENDER AND ITS OFFICERS,
EMPLOYEES AND DESIGNEES FROM ANY LIABILITIES ARISING FROM ANY ACT OR ACTS
UNDER THIS POWER OF ATTORNEY AND IN FURTHERANCE THEREOF, WHETHER OF OMISSION
OR COMMISSION, INCLUDING ANY OF THE FOREGOING ARISING AS A RESULT OF
LENDER'S OR ITS OFFICERS', EMPLOYEES' OR DESIGNEES' ORDINARY OR CONTRIBUTORY
NEGLIGENCE, BUT EXCLUDING THAT ARISING SOLELY AND DIRECTLY AS A RESULT OF
LENDER'S OR ITS OFFICERS', EMPLOYEES' OR DESIGNEES' GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT AS DETERMINED PURSUANT TO A FINAL NON-APPEALABLE ORDER OF
A COURT OF COMPETENT JURISDICTION.
7.7 Right to Cure. Lender may, at its option, with prior written
notice to Borrower (unless an Event of Default shall have occurred and be
continuing or would result if Lender did not take such action, in which case
Lender shall give such notice upon taking such action) (a) cure any default
by Borrower under any material agreement with a third party or pay or bond
on appeal any judgment entered against Borrower, if an Event of Default has
occurred and is continuing or would otherwise arise from such default or if
such default results in the impairment of the ability of Borrower to perform
its obligations under this Agreement or any of the Financing Agreements to
which it is a party or the ability of Lender to enforce or collect any of
the Obligations, (b) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the
Collateral not otherwise permitted by this Agreement and (c) pay any amount,
incur any expense or perform any act which, in Lender's reasonable credit
judgment, is necessary or appropriate to preserve, protect, insure or
maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on
demand. Lender shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation
or liability of Borrower. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have
complete access to all of Borrower's premises during normal business hours
and after notice to Borrower Representative, or at any time and without
notice to Borrower or Borrower Representative if an Event of Default exists
or has occurred and is continuing, for the purposes of inspecting, verifying
and auditing the Collateral and all of Borrower's books and records,
including the Records, and (b) Borrower Representative shall promptly
furnish to Lender such copies of such books and records or extracts ther-
efrom as Lender may request, and (c) use during normal business hours such
of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of Accounts and
realization of other Collateral, provided, however, that if disclosure of
any of the information located at Borrower's premises would, in the
reasonable judgment of outside counsel to Borrower (as expressed in a legal
opinion delivered to Lender), result in a waiver of the attorney-client or
work product privilege that would otherwise apply to such information, then
Borrower shall not be required to disclose such information pursuant to this
Section 7.8.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes
such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on Borrower's
financial condition, results of operation or business or the rights of
Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements to which
Borrower is a party and the transactions contemplated hereunder and
thereunder are all within Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of Borrower's
certificate of incorporation, by-laws, or other organizational
documentation, or any material indenture, agreement or undertaking to which
Borrower is a party or by which Borrower or its property are bound.
Assuming the due execution and delivery by Lender, this Agreement and the
other Financing Agreements to which Borrower is a party, when executed and
delivered, constitute legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms. Borrower does not
have any subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Effect All financial
statements relating to SSG and its subsidiaries which have been or may
hereafter be delivered by Borrower to Lender have been prepared in
accordance with GAAP (except for unaudited financial statements which may
not contain footnotes and are subject to year-end audit) and fairly present,
in all material respects, the financial condition and the results of
operation of Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by
Borrower to Lender prior to the date of this Agreement, there has been no
change which would result in a material increase in the liabilities of
Borrower or otherwise have a Material Adverse Effect since the date of the
most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located
only at the address set forth below and its only other places of business
and the only other locations of Collateral, if any, are the addresses set
forth in the Information Certificate, subject to the right of Borrower to
establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are
not owned by Borrower and sets forth the owners and/or operators thereof.
No Collateral is located in any jurisdiction other than the jurisdictions
identified on Schedule 8.3, and Borrower does not conduct business in any
jurisdiction identified on Schedule 8.3 hereto under any name other than the
names set forth for such jurisdiction on Schedule 8.3.
8.4 Priority of Liens; Title to Properties. The security interests
and liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 8.4 hereto and the other liens permitted under Section 9.8 hereof.
Borrower has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a
timely manner (after giving effect to any properly requested extensions) all
tax returns, reports and declarations which are required to be filed by it.
All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be
paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to
Borrower and with respect to which adequate reserves have been set aside on
its books. Adequate provision has been made for the payment of all accrued
and unpaid Federal, State, county, local, foreign and other taxes whether or
not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to
Borrower's Knowledge threatened, against or affecting Borrower, its assets
or business and there is no action, suit, proceeding or claim by any Person
pending, or to the Borrower's Knowledge threatened, against Borrower or its
assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which, in either case, if adversely determined against
Borrower would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce any Obligations or realize upon any Collateral
or otherwise have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is
not in default under, or in violation of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound and Borrower is in compliance with
all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority, except as described on Schedule 8.7 hereto and except for such
other defaults, violations or instances of noncompliance which would not
impair the ability of Borrower to perform its obligations under this
Agreement or any of the Financing Agreements to which it is a party or would
not otherwise have a Material Adverse Effect.
8.8 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any of its ERISA Affiliates could be subject to
either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code, including any accumulated funding
deficiency described in Section 8.8(c) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.8(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrower to be incurred with respect to any employee
benefit plan of Borrower or any of its ERISA Affiliates. There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any
other event or condition with respect to any employee pension benefit plan
of Borrower or any of its ERISA Affiliates which presents a risk of
termination of any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or
any of its ERISA Affiliates is required under Section 302 of ERISA and
Section 412 of the Code to have paid under the terms of each employee
benefit plan as contributions to such plan as of the last day of the most
recent fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
employee benefit plan, including any penalty or tax described in Section
8.8(a) hereof and any deficiency with respect to vested accrued benefits
described in Section 8.8(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrower that are subject to Title IV
of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits, including any penalty or tax
described in Section 8.8(a) hereof and any accumulated funding deficiency
described in Section 8.8(c) hereof. The terms "current value" and "accrued
benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term
is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
8.9 Environmental Compliance.
(a) Except as set forth on Schedule 8.9 hereto, Borrower has not
generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates any
applicable Environmental Law or any license, permit, certificate, approval
or similar authorization thereunder, and the operations of Borrower comply
in all material respects with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder,
except, in each of the foregoing, to the extent that the result of such
violation or non-compliance could not reasonably be expected to have a
materially adverse affect on Borrower's ability to perform its obligations
under this Agreement or the other Financing Agreements.
(b) Except as set forth on Schedule 8.9 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person nor is any pending
or to Borrower's Knowledge threatened, with respect to (i) any
non-compliance with, or violation of the requirements of any Environmental
Law by, Borrower or (ii) to Borrower's Knowledge, the release, spill or
discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials, except, in
either case, to the extent that the result of such non-compliance,
violation, or action could not reasonably be expected to have a materially
adverse effect on Borrower's ability to perform its obligations under this
Agreement or the other Financing Agreements.
(c) Borrower has no material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of
any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection
with the operations of Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect, except to the extent that the failure to
obtain or maintain such licenses, permits, certificates, approvals, or
similar authorizations could not reasonably be expected to have a materially
adverse effect on Borrower's ability to perform its obligations under this
Agreement or the other Financing Agreements.
8.10 Bank Accounts. All of the deposit accounts, investment
accounts or other accounts in the name of or used by Borrower maintained at
any bank or other financial institution are set forth on Schedule 8.10
hereto, subject to the right of Borrower to establish new accounts in
accordance with Section 9.13 below.
8.11 Accuracy and Completeness of Information All information
furnished by or on behalf of Borrower in writing to Lender in connection
with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the
date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Effect, which has not been
fully and accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder (except for
representations and warranties given as of a specific date) and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter
give, or cause to be given, to Lender.
8.13 Subsidiaries Stock. Except as set forth on Schedule 8.13 hereto,
all of the issued and outstanding shares of capital stock of each subsidiary
of SSG are directly and beneficially owned by SSG and all such shares have
been duly authorized and are fully paid and nonassessable, free and clear of
all claims, liens, pledges and encumbrances of any kind other than liens and
encumbrances in favor of Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights
and franchises with respect thereto and maintain in full force and effect
all permits, licenses, trademarks, tradenames, approvals, authorizations,
leases and contracts necessary to carry on the business as presently or
proposed to be conducted. Borrower Representative shall give Lender no less
than thirty (30) days prior written notice of any proposed change in
Borrower's corporate name, which notice shall set forth the new name and
Borrower Representative shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided (a) Borrower Representative
gives Lender no less than thirty (30) days prior written notice of the
intended opening of any such new location and (b) Borrower executes and
delivers, or causes to be executed and delivered, to Lender such agreements,
documents, and instruments as Lender may deem reasonably necessary or
desirable to protect its interests in the Collateral at such location,
including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc. Borrower shall, at all
times, comply in all material respects with all material laws, rules,
regulations, licenses, permits, approvals and orders of any Federal, State
or local governmental authority applicable to it.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges
upon or against it or its properties or assets, except for taxes the
validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books. Borrower shall be
liable for any tax or penalties imposed on Lender as a result of the
financing arrangements provided for herein and Borrower agrees to indemnify
and hold Lender harmless with respect to the foregoing, and to repay to
Lender on demand the amount thereof, and until paid by Borrower such amount
shall be added and deemed part of the Loans, provided, that, nothing
contained herein shall be construed to require Borrower to pay any income or
franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and
in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably
satisfactory to Lender as to form, amount and insurer. Borrower
Representative shall furnish certificates, policies or endorsements to
Lender as Lender shall require as proof of such insurance, and, if Borrower
Representative fails to do so, Lender is authorized, but not required, to
obtain such insurance at the expense of Borrower. All policies shall
provide for at least thirty (30) days prior written notice to Lender of any
cancellation or reduction of coverage and that Lender may act as attorney
for Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Lender as
its interests may appear and further specify that Lender shall be paid
regardless of any act or omission by Borrower or any of its affiliates.
Lender shall apply any insurance proceeds received by Lender at any time to
payment of the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries
(if any) in accordance with GAAP (except for unaudited financial statements
which may not contain footnotes and are subject to year-end audit) and
Borrower Representative shall furnish or cause to be furnished to Lender:
(i) within forty-five (45) days after the end of each fiscal month, monthly
unaudited consolidated and consolidating financial statements of SSG and its
subsidiaries (including in each case balance sheets and statements of income
and loss), all in reasonable detail, fairly presenting in all material
respects the financial position and the results of the operations of SSG and
its subsidiaries as of the end of and through such fiscal month and (ii)
within ninety (90) days after the end of each fiscal year, audited
consolidated statements of SSG and its subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all
in reasonable detail, fairly presenting the financial position and the
results of the operations of SSG and its subsidiaries as of the end of and
for such fiscal year, together with the unqualified (except for a
qualification for a change in accounting principles with which the
accountants concur) opinion of its independent certified public accountants,
which accountants shall be an independent accounting firm selected by SSG
and reasonably acceptable to Lender, that such financial statements have
been prepared in accordance with GAAP, and present fairly in all material
respects the results of operations and financial condition of SSG and its
subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower Representative shall promptly notify Lender in
writing of the details of (i) any material loss, damage, investigation,
action, suit, proceeding or claim relating to the Collateral or any other
property which is security for the Obligations or which would have a
Material Adverse Effect (ii) the receipt of any official notice that its
property taxes for property located in the state of Texas are payable and
(iii) the occurrence of any Event of Default or event which, with the
passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Borrower Representative shall promptly after the sending or
filing thereof furnish or cause to be furnished to Lender copies of all
reports which Borrower sends to its stockholders generally and copies of all
material reports and registration statements which Borrower files with the
Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.
(d) Subject to Section 12.5, Borrower Representative shall
furnish or cause to be furnished to Lender such budgets, forecasts,
projections and other information respecting the Collateral and the business
of Borrower, as Lender may, from time to time, reasonably request. Subject
to Section 12.5, Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrower's expense, copies of the financial statements of
Borrower and any reports or management letters prepared by such accountants
or auditors on behalf of Borrower and to disclose to Lender such information
as they may have regarding the business of Borrower. Notwithstanding the
foregoing, if disclosure of any of the information required to be delivered
to Lender pursuant to this Section 9.6(d) would, in the reasonable judgment
of outside counsel to Borrower (as expressed in a legal opinion to Lender),
result in a waiver of the attorney-client or work product privilege that
would otherwise apply to such information, then neither Borrower nor its
accountants or auditors shall be required to disclose such information
pursuant to this Section 9.6(d). Any documents, schedules, invoices or
other papers delivered to Lender may be destroyed or otherwise disposed of
by Lender one (1) year after the same are delivered to Lender, except as
otherwise designated by Borrower Representative to Lender in writing.
(e) Simultaneous with the delivery of the monthly financial
statements pursuant to Section 9.6(a)(i), Borrower will deliver a
certificate of an authorized senior officer identifying all defaults under
its real property leases and license agreements.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate
with any other Person or permit any other Person to merge into or with or
consolidate with it, except (i) a subsidiary of Borrower may merge with and
into SSG, if SSG is the surviving corporation, and (ii) with Lender's prior
written consent (which shall not be unreasonably withheld and which shall
not be conditioned upon the payment to Lender of a consent or similar fee)
SSG may merge with and/or into ▇▇▇▇▇▇▇, or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any indebtedness to any other
Person or any of its assets to any other Person, except for (i) sales of
Inventory in the ordinary course of business, (ii) the disposition of worn-
out or obsolete Equipment or Equipment no longer used in the business of
Borrower so long as (A) if an Event of Default exists or has occurred and is
continuing, any proceeds are paid to Lender and (B) such sales do not
involve Equipment having an aggregate fair market value in excess of
$300,000 for all such Equipment disposed of in any fiscal year of Borrower
or (iii) the sale of Borrower's real property in Anniston, Alabama for no
less than fair market value and on terms no less favorable to Borrower than
Borrower would reasonably be expected to obtain in an arm's-length
transaction for such sale, provided that Lender receives prior written
notice of the terms of such sale and that the proceeds thereof are
immediately and directly applied to payment of the Obligations, or (c) form
or acquire any subsidiaries, or (d) wind up, liquidate or dissolve or (e)
agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, the Collateral, except: (a) liens and security interests of
Lender; (b) liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books; (c) non-consensual
statutory liens (other than liens securing the payment of taxes) arising in
the ordinary course of Borrower's business to the extent: (i) such liens
secure indebtedness which is not overdue or (ii) such liens secure
indebtedness relating to claims or liabilities which are fully insured
(subject to deductible or self-insured retention consistent with Borrower's
current business practices) and being defended at the sole cost and expense
and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in
each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside
on its books; (d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of real property which do not interfere
in any material respect with the use of such real property or ordinary
conduct of the business of Borrower as presently conducted thereon or
materially impair the value of the real property which may be subject
thereto; (e) purchase money security interests in Equipment (including
capital leases) and purchase money mortgages on real estate not to exceed
$500,000 in the aggregate at any time outstanding so long as such security
interests and mortgages do not apply to any property of Borrower other than
the Equipment or real estate so acquired, and the indebtedness secured
thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; and (f) the security interests and liens set
forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except: (a) the Obligations; (b) trade obligations and
normal accruals in the ordinary course of business more than sixty (60) days
past due, or with respect to which the Borrower is contesting in good faith
the amount or validity thereof by appropriate proceedings diligently pursued
and available to Borrower, and with respect to which adequate reserves have
been set aside on its books; (c) purchase money indebtedness (including
capital leases) to the extent not incurred or secured by liens (including
capital leases) in violation of any other provision of this Agreement; (d)
the indebtedness set forth on Schedule 9.9 hereto and (e) indebtedness that
is subordinated to the Obligations in a manner satisfactory to Lender, and
any extensions, renewals or refinancings (each a "refinancing") of any of
the foregoing on terms and conditions that are not materially more onerous
to Borrower than the terms and conditions of such indebtedness on the date
hereof or, if later, the date of the original issuance thereof (including
that the principal amount of such refinancing indebtedness does not exceed
the principal amount of, plus the amount of accrued and unpaid interest on,
the indebtedness so refinanced); provided, that, (i) Borrower may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date
hereof or, if later, the date of the original issuance thereof, (ii)
Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or
instrument related thereto unless such amendment, modification, alteration
or change would not (i) result in an Event of Default or otherwise have a
Material Adverse Effect, (ii) cause the terms of such indebtedness,
agreement, document or instrument to be materially more onerous to Borrower
than the terms thereof in effect on the date hereof, or (iii) otherwise
adversely effect the Collateral or any of Lender's rights under the
Financing Agreements, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, and (iii) Borrower shall furnish to Lender all
material notices or demands in connection with such indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof,
or sent by Borrower or on its behalf, concurrently with the sending thereof,
as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any Person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the
assets or property of any Person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of
the foregoing, except: (a) the endorsement of instruments for collection or
deposit in the ordinary course of business; (b) investments in: (i) short-
term direct obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable
to the order of the Borrower or to bearer and delivered to Lender, and (iii)
commercial paper rated A1 or P1; provided, that, as to any of the foregoing,
unless waived in writing by Lender, Borrower shall take such actions as are
deemed necessary by Lender to perfect the security interest of Lender in
such investments, (c) loans to employees of Borrower not to exceed $100,000
in the aggregate outstanding at any time and (d) the loans, advances and
guarantees set forth on Schedule 9.10 and all renewals, extensions and
refinances thereof (subject to the same conditions imposed on "refinancings"
under Section 9.9) hereto; provided, that, as to such loans, advances and
guarantees, (i) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such loans, advances or guarantees or
any agreement, document or instrument related thereto, or (B) as to such
guarantees, redeem, retire, defease, purchase or otherwise acquire the
obligations arising pursuant to such guarantees, or set aside or otherwise
deposit or invest any sums for such purpose, and (ii) Borrower shall furnish
to Lender all material notices or demands in connection with such loans,
advances or guarantees or other indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any cash dividends on account of any shares of
class of capital stock of Borrower now or hereafter outstanding, or set
aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
capital stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than common stock or apply or set apart
any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the
foregoing.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director, agent or other
Person affiliated with Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair
and reasonable terms no less favorable to the Borrower than Borrower would
obtain in a comparable arm's length transaction with an unaffiliated Person
or (b) make any payments of management, consulting or other fees for
management or similar services, or of any indebtedness owing to any officer,
employee, shareholder, director or other Person affiliated with Borrower
except (i) reasonable compensation to officers, employees and directors for
services rendered to Borrower in the ordinary course of business, (ii)
payments made to ▇▇▇▇▇▇▇, pursuant to a management services agreement
entered into pursuant to and in accordance with that certain Securities
Purchase Agreement between SSG and ▇▇▇▇▇▇▇ dated as of November 27, 1996,
provided that such fees are for bona fide management services rendered to
Borrower on terms no less favorable to Borrower than Borrower would obtain
in a comparable arm's length transaction with an unaffiliated Person, and
(iii) reasonable consulting fees pursuant to a bona fide consulting
arrangement on terms no less favorable to Borrower than Borrower would
obtain in a comparable arm's length transaction with an unaffiliated Person
and, if the fees payable to any Person pursuant to any such arrangement
exceed $100,000, approved by Borrower's board of directors.
9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment
account or any other account with any bank or other financial institution,
other than the Blocked Accounts and the accounts set forth in Schedule 8.10
hereto, except: (a) as to any new or additional Blocked Accounts and other
such new or additional accounts which contain any Collateral or proceeds
thereof, with the prior written consent of Lender and subject to such
conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.14 Compliance with ERISA.
(a) Borrower shall not with respect to any "employee benefit
plans" maintained by Borrower or any of its ERISA Affiliates: (i) terminate
any of such employee benefit plans so as to incur any liability to the
Pension Benefit Guaranty Corporation established pursuant to ERISA, (ii)
allow or suffer to exist any prohibited transaction involving any of such
employee benefit plans or any trust created thereunder which would subject
Borrower or such ERISA Affiliate to a tax or penalty or other liability on
prohibited transactions imposed under Section 4975 of the Code or ERISA,
(iii) fail to pay to any such employee benefit plan any contribution which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code
or the terms of such plan, (iv) allow or suffer to exist any accumulated
funding deficiency, whether or not waived, with respect to any such employee
benefit plan, (v) allow or suffer to exist any occurrence of a reportable
event or any other event or condition which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any such employee
benefit plan that is a single employer plan, which termination could result
in any liability to the Pension Benefit Guaranty Corporation or (vi) incur
any withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.14, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have
the respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the
Code and ERISA.
9.15 Adjusted Net Worth. SSG and its subsidiaries, on a consolidated
basis, shall, at all times during the periods set forth below, maintain
Adjusted Net Worth of not less than the amount set forth below for each such
period:
Minimum Adjusted
Period Net Worth
---------------------------- ----------------
From the date hereof through $34,000,000
September 30, 2001
From October 1, 2001 through $32,000,000
March 31, 2002
From April 1, 2002 through $35,000,000
September 30, 2002
Each fiscal year of SSG thereafter The sum of:
(a) the minimum Adjusted Net
Worth required hereunder for
the immediately preceding
period, plus
(b) the greater of:
(i) fifty percent (50%) of
the actual profits of SSG
on a consolidated basis
for the immediately
preceding fiscal year; or
(ii) $1,000,000
9.16 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with
the preparation, negotiation, execution, delivery, recording, administr-
ation, collection, liquidation, enforcement and defense of the Obligations,
Lender's rights in the Collateral, this Agreement, the other Financing
Agreements and all other documents related hereto or thereto, including any
amendments, supplements or consents which may hereafter be contemplated
(whether or not executed) or entered into in respect hereof and thereof,
including: (c) all costs and expenses of filing or recording as Lender
deems necessary or appropriate (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (d) all insurance
premiums, appraisal fees and search fees; (e) costs and expenses of
remitting loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Blocked Accounts, together with Lender's
customary charges and fees with respect thereto; (f) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of
Credit Accommodations; (g) costs and expenses of preserving and protecting
the Collateral; (h) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising
out of the transactions contemplated hereby and thereby (including
preparations for and consultations concerning any such matters); (i) all
out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower's operations, plus a per diem charge at the rate of
$650.00 per person per day for Lender's examiners in the field and office;
and (j) the reasonable fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
Notwithstanding the foregoing, the legal fees (exclusive of disbursements)
payable by Borrower in connection with preparation, negotiation and
execution of this Agreement and the other Financing Agreements delivered in
connection with the transaction being consummated on the date hereof shall
not exceed $40,000.
9.17 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Without limiting the foregoing, Borrower agrees, upon
Lenders' request, to cause an appropriate financing statement covering
fixtures and other Collateral in ▇▇▇▇▇▇▇ County, Alabama, and to pay all
taxes and post all bonds required in connection therewith. Lender may at
any time and from time to time request a certificate from an officer of
Borrower Representative representing that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained
herein are satisfied. In the event of such request by Lender, Lender may,
at its option, cease to make any further Loans or provide any further Letter
of Credit Accommodations until Lender has received such certificate and, in
addition, Lender has determined that such conditions are satisfied or has
waived such conditions in writing. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements,
as Lender deems necessary or appropriate and consistent with the terms of
this Agreement, signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower (i) fails to pay when due any of the Obligations,
(ii) fails to perform any of the terms, covenants, conditions or provisions
contained in Sections 9.1, 9.2, 9.3, 9.4 or 9.14 and such failure is not
cured within fifteen (15) days (iii) fails to perform any of the other
terms, covenants, or agreements contained in this Agreement;
(b) any representation, warranty or statement of fact made by
Borrower or Borrowers Representative to Lender in this Agreement or the
other Financing Agreements shall when made or deemed made be false or
misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform within
any applicable grace or cure period any of the terms, covenants, conditions
or provisions of any guarantee, endorsement or other agreement of such party
in favor of Lender;
(d) any final, non-appealable judgment for the payment of money
is rendered against Borrower or any Obligor the uninsured amount of which
(including any amounts with respect to which the insurance coverage is being
disputed) is in excess of $400,000 in any one case or in excess of $600,000
in the aggregate and shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not be effectively
stayed, or any judgment other than for the payment of money, or injunction,
attachment, garnishment or execution is rendered against Borrower or any
Obligor or any of their assets which has or may reasonably be expected to
have a Material Adverse Effect;
(e) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or Borrower or any Obligor, which is
a partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business other than
as otherwise permitted hereunder;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Borrower or any Obligor or
all or any part of its properties and such petition or application is not
dismissed within sixty (60) days after the date of its filing or Borrower or
any Obligor shall file any answer admitting or not contesting such petition
or application or indicates its consent to, acquiescence in or approval of,
any such action or proceeding or the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by Borrower or any Obligor or for all
or any part of its property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing
to any Person other than Lender, or any capitalized lease obligations,
contingent indebtedness in connection with any guarantee, letter of credit,
indemnity or similar type of instrument in favor of any Person other than
Lender, in any case in an amount in excess of $500,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any contract,
lease, license or other obligation to any Person other than Lender, which
default continues for more than the applicable cure period, if any, with
respect thereto and the default has or may reasonably be expected to have a
Material Adverse Effect;
(j) SSG shall cease to own and have voting control over 100% of
the issued and outstanding stock of ATEC, except pursuant to a merger
permitted hereunder;
(k) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of any of the property of Borrower or
such Obligor;
(l) there shall be a change in the business or assets of Borrower
or any Obligor after the date hereof which has or may reasonably be expected
to have a Material Adverse Effect; or
(m) an event of default shall occur and be continuing beyond any
applicable grace or cure period under any of the other Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and
other applicable law, all of which rights and remedies may be exercised
without notice to or consent by Borrower, Borrower Representative or any
Obligor, except as such notice or consent is expressly provided for
hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements,
the Uniform Commercial Code or other applicable law, are cumulative, not
exclusive and enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall
include, without limitation, the right to apply to a court of equity for an
injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time
or times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its
discretion and without limitation, (i) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender (provided, that,
upon the occurrence of any Event of Default described in Sections 10.1(g)
and 10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii)
require Borrower, at Borrower's expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral, (v) remove any or all of the Collateral from
any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any
other purpose, (vi) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at
any office of Lender or elsewhere) at such prices or terms as Lender may
deem reasonable, for cash, upon credit or for future delivery, with the
Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is
hereby expressly waived and released by Borrower and/or (vii) terminate this
Agreement. If any of the Collateral is sold or leased by Lender upon credit
terms or for future delivery, the Obligations shall not be reduced as a
result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, ten (10) days prior
notice by Lender to Borrower designating the time and place of any public
sale or the time after which any private sale or other intended disposition
of Collateral is to be made, shall be deemed to be reasonable notice thereof
and Borrower waives any other notice. In the event Lender institutes an
action to recover any Collateral or seeks recovery of any Collateral by way
of prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in
such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency with interest at
the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both
would constitute an Event of Default, Lender may, at its option, without
notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving Loans
and Letter of Credit Accommodations available to Borrower and/or (ii)
terminate any provision of this Agreement providing for any future Loans or
Letter of Credit Accommodations to be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of
the relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the State of
Texas (without giving effect to principles of conflicts of law).
(b) Borrower, Borrower Representative and Lender irrevocably
consent and submit to the non-exclusive jurisdiction of the State of Texas
and the United States District Court for the Northern District of Texas and
waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Agreement or any of the
other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this
Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that
any dispute with respect to any such matters shall be heard only in the
courts described above (except that Lender shall have the right to bring any
action or proceeding against Borrower Representative, Borrower or its
property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower Representative, Borrower or
its property).
(c) Each of Borrower and Borrower Representative hereby waives
personal service of any and all process upon it and consents that all such
service of process may be made by certified mail (return receipt requested)
directed to its address set forth on the signature pages hereof or such
other address specified by Borrower pursuant to Section 12.2 and service so
made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Lender's option, by service upon
Borrower or Borrower Representative, as the case may be, in any other manner
provided under the rules of any such courts. Within thirty (30) days after
such service, Borrower or Borrower Representative, as the case may be, shall
appear in answer to such process, failing which Borrower or Borrower
Representative, as the case may be, shall be deemed in default and judgment
may be entered by Lender against Borrower or Borrower Representative, as the
case may be, for the amount of the claim and other relief requested.
(d) BORROWER, BORROWER REPRESENTATIVE AND LENDER EACH HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, BORROWER REPRESENTATIVE AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower or Borrower
Representative (whether in tort, contract, equity or otherwise) for losses
suffered by Borrower or Borrower Representative in connection with, arising
out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result
of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, Lender shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of intent to accelerate, notice of
acceleration, notice of protest and notice of dishonor with respect to any
and all instruments and commercial paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower or Borrower Representative which
Lender may elect to give shall entitle Borrower or Borrower Representative
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement (including,
without limitation, the Information Certificate and any Schedule thereto)
nor any provision hereof shall be amended, modified, waived or discharged
orally or by course of conduct, but only by a written agreement signed by an
authorized officer of Lender, and as to amendments, as also signed by an
authorized officer of Borrower. Lender shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of
its rights, powers and/or remedies unless such waiver shall be in writing
and signed by an authorized officer of Lender. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by
Lender of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Lender would otherwise have on any future occasion, whether similar in kind
or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom
or relating hereto or thereto.
11.5 Indemnification. BORROWER SHALL INDEMNIFY AND HOLD LENDER, AND
ITS DIRECTORS, AGENTS, EMPLOYEES AND COUNSEL, HARMLESS FROM AND AGAINST ANY
AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, COSTS OR EXPENSES IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST ANY OF THEM IN CONNECTION WITH ANY
LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING COMMENCED OR THREATENED
RELATED TO THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY OTHER FINANCING
AGREEMENTS, OR ANY UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION, EVENT OR TRANSACTION
RELATED OR ATTENDANT THERETO, INCLUDING AMOUNTS PAID IN SETTLEMENT, COURT
COSTS, AND THE FEES AND EXPENSES OF COUNSEL AND INCLUDING LOSSES, CLAIMS,
DAMAGES, LIABILITIES, COSTS AND EXPENSES ARISING FROM THE ORDINARY OR
CONTRIBUTORY NEGLIGENCE OF ANY PARTY INDEMNIFIED HEREBY, BUT EXCLUDING THOSE
ARISING SOLELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH AN INDEMNIFIED PARTY, AS DETERMINED PURSUANT TO A FINAL
NON-APPEALABLE ORDER OF A COURT OF COMPETENT JURISDICTION. TO THE EXTENT
THAT THE UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN THIS
SECTION MAY BE UNENFORCEABLE BECAUSE IT VIOLATES ANY LAW OR PUBLIC POLICY,
BORROWER SHALL PAY THE MAXIMUM PORTION WHICH IT IS PERMITTED TO PAY UNDER
APPLICABLE LAW TO LENDER IN SATISFACTION OF INDEMNIFIED MATTERS UNDER THIS
SECTION. THE FOREGOING INDEMNITY SHALL SURVIVE THE PAYMENT OF THE
OBLIGATIONS AND THE TERMINATION OR NON-RENEWAL OF THIS AGREEMENT.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the earlier of (i)
the date three (3) years from the date hereof (the "Renewal Date"), and from
year to year thereafter, unless sooner terminated pursuant to the terms
hereof or (ii) at Lender's option, the date on which any Person or group of
Persons (as used within the context of the definition of beneficial
ownership described below), other than ▇▇▇▇▇▇▇ and its shareholders,
officers and directors, shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities Exchange Commission
under the Securities Exchange Act of 1934, as amended) of and having voting
control over shares of capital stock of SSG in amount sufficient to allow
them to elect a majority of the board of directors of SSG (in which case, no
renewals or extensions shall apply). Lender or Borrower Representative may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving
to the other party at least ninety (90) days prior written notice; provided,
that, this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of
the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to
Lender in such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including reasonable
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower Representative for such purpose. Interest shall be due until and
including the next Business Day, if the amounts so paid by Borrower to the
bank account designated by Lender are received in such bank account later
than 12:00 noon, Central Standard Time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated pursuant to
Section 12.1(a)(ii) prior to the Renewal Date or is otherwise terminated
prior to the end of the then current term or renewal term of this Agreement,
in view of the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits as a result thereof, Borrower agrees to
pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is
effective in the period indicated:
Amount Period
---------------------- ---------------------------
(i) 2.0% of Maximum Credit From the date hereof to and
including ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇) 1.0% of Maximum Credit From March 27, 2002 to and
including ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇▇▇) .25% of Maximum Credit From March 27, 2003 to and
including March 26, 2004
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower
agrees that it is reasonable under the circumstances currently existing. In
addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h)
hereof, even if Lender does not exercise its right to terminate this
Agreement, but elects, at its option, to provide financing to Borrower or
permit the use of cash collateral under the United States Bankruptcy Code.
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations. Notwithstanding anything contained herein to
the contrary, the early termination fee shall not apply to any early
termination as the result of (i) a complete refinancing of the Loans by an
affiliate of Lender, or (ii) a complete refinancing pursuant to the sale in
the capital markets of debt obligations of, or equity interests in,
Borrower, (iii) a complete refinancing of the Loans by an affiliate of
Borrower, or (iv) if Borrower merges with ▇▇▇▇▇▇▇.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to
Borrower and Borrower Representative at Borrower Representative's chief
executive office set forth below, or to such other address as either party
may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if
by nationally recognized overnight courier service with instructions to
deliver the next Business Day, one (1) Business Day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed
as though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and
inure to the benefit of and be enforceable by Lender, Borrower and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent
of Lender. Lender may, after notice to Borrower Representative and, if
no Event of Default has occurred and is continuing, with Borrower
Representative's consent (which shall not be unreasonably withheld or
delayed beyond one week after request therefor), assign its rights and
delegate its obligations under this Agreement and the other Financing
Agreements and further may assign, or sell participations in, all or any
part of the Loans, the Letter of Credit Accommodations or any other interest
herein to another financial institution or other Person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such
assignment or participation. Notwithstanding the foregoing, in the case of
any such assignment or participation, (i) Borrower shall not be required to
deliver financial statements or other reports due hereunder to Persons in
addition to Lender, (ii) representatives of such assignee or participant may
accompany representatives of Lender on inspections permitted hereunder, but
shall not be entitled to separate inspections, and (iii) Borrower shall not
be obligated to pay any costs or expenses paid or payable by such assignee
or participant in connection with such transaction or this Agreement.
12.5 Confidentiality Agreement. For the purposes of this Section 12.5,
"Confidential Information" means information delivered (whether in writing
or orally, visually, electronically or by other means) to Lender or its
representatives or agents by or on behalf of Borrower in connection with the
transactions contemplated by or otherwise pursuant to this Agreement that
is proprietary in nature and that was clearly marked or labeled or otherwise
adequately identified when received by Lender as being confidential
information of Borrower provided that such term does not include information
that (a) is or becomes publicly known or available through no act or
omission by Lender or any Person acting on Lender's behalf, or (b) otherwise
becomes known to Lender on a nonconfidential basis other than through
disclosure by Borrower. Lender will keep the information confidential and
will not disclose any information in any manner whatsoever, provided that
Lender may deliver or disclose Confidential Information to (i) Lender's
directors, trustees, officers, employees, agents, attorneys and affiliates,
financial advisors and other professional advisors as Lender reasonably
deems necessary or appropriate, who agree to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 12.5, (iii) any Person to which Lender sells or offers to sell its
rights under this Agreement or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 12.5,
(iv) any federal or state regulatory authority having jurisdiction over
Lender, or (v) any other Person to which such delivery or disclosure may be
necessary or appropriate, as reasonably determined by Lender, (A) to effect
compliance with any law, rule, regulation or order applicable to Lender, (B)
in response to any subpoena or other legal process, (C) in connection with
any litigation to which Lender is a party, or (D) if any Event of Default
has occurred and is continuing to the extent Lender may reasonably determine
such delivery and disclosure to be necessary or appropriate in the
enforcement of, or for the protection of its rights and remedies under, this
Agreement.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents
the entire agreement and understanding concerning the subject matter hereof
and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the
subject matter hereof, whether oral or written. In the event of any
inconsistency between the terms of this Agreement and any schedule or
exhibit hereto, the terms of this Agreement shall govern.
12.7 NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ BORROWER AND LENDER
HEREBY AGREE THAT, EXCEPT FOR SECTION 15.10(B) THEREOF, THE PROVISIONS OF
TEX. REV. CIV. STAT. ▇▇▇. ART. 5069-15.01 ET SEQ. (▇▇▇▇▇▇ 1987) (REGULATING
CERTAIN REVOLVING CREDIT LOANS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT
APPLY TO THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS.
12.8 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE OTHER
FINANCING AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EACH BORROWER AND LENDER EACH
READ AND UNDERSTAND THIS
SECTION 12.8:
________________ (INITIALS OF AUTHORIZED OFFICER OF SSG)
________________ (INITIALS OF AUTHORIZED OFFICER OF ATEC)
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Lender, Borrower and Borrower Representative have
caused these presents to be duly executed as of the day and year first above
written.
CONGRESS FINANCIAL CORPORATION SPORT SUPPLY GROUP, INC., as
(SOUTHWEST), as Lender Borrower and as Borrower Representative
By: _______________________ By: _______________________
Name: _______________________ Name: _______________________
Title: _______________________ Title: _______________________
Address: Chief Executive Office:
------- ----------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
---------
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
---------
ATHLETIC TRAINING EQUIPMENT
COMPANY, INC., as Borrower
By: _______________________
Name: _______________________
Title: _______________________
Chief Executive Office:
----------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: President
---------
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
---------