Exhibit 10.114
FINANCING AGREEMENT
HILCO CAPITAL LP
(AS LENDER)
AND
AIRCRAFT INTERIOR DESIGN, INC., ▇▇▇▇▇ MANUFACTURING COMPANY, INC.
TIMCO AVIATION SERVICES, INC.,
TIMCO ENGINE CENTER, INC., TIMCO ENGINEERED SYSTEMS, INC. AND
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
(AS BORROWERS)
DATED: AS OF APRIL 5, 2004
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS..................................................................................... 2
SECTION 2 CONDITIONS PRECEDENT............................................................................ 18
SECTION 3 REVOLVING LOAN MATTERS.......................................................................... 23
SECTION 4 TERM LOAN....................................................................................... 25
SECTION 5 INTENTIONALLY OMITTED........................................................................... 26
SECTION 6 COLLATERAL...................................................................................... 26
SECTION 7 REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................... 30
SECTION 8 INTEREST, FEES AND EXPENSES..................................................................... 46
SECTION 9 POWERS.......................................................................................... 50
SECTION 10 EVENTS OF DEFAULT............................................................................... 50
SECTION 11 TERMINATION..................................................................................... 54
SECTION 12 JOINT AND SEVERAL LIABILITY; CROSS-GUARANTY; RIGHT OF SUBROGATION; WAIVER OF SURETYSHIP DEFENSES;
SUBORDINATION; APPOINTMENT...................................................................... 54
SECTION 13 MISCELLANEOUS................................................................................... 56
(ii)
EXHIBIT
Exhibit A Form of Term Note
Exhibit B CIT Intercreditor Agreement
SCHEDULES
Schedule 1 - Specific Permitted Encumbrances
Schedule 2 - Specific Permitted Indebtedness
Schedule 3 - Consignment Agreements
Schedule 4 - General Intangibles
Schedule 5 - Chief Executive Offices, Locations of Collateral, Formation
Locations, Qualification to Do Business Jurisdictions, Etc.
Schedule 6 - Real Estate; Leases
Schedule 7 - Litigation
Schedule 8 - Benefit Plans
Schedule 9 - Investments
Schedule 10 - Subordinated Debt
(iii)
HILCO CAPITAL LP, a Delaware limited partnership, with offices located
at One Northbrook Place, ▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter, the "LENDER"), is pleased to confirm the terms and conditions
under which the Lender shall make the Term Loan (hereinafter defined) to
AIRCRAFT INTERIOR DESIGN, INC., a Florida corporation ("AID"), ▇▇▇▇▇
MANUFACTURING COMPANY, INC., a California corporation ("▇▇▇▇▇"), TIMCO AVIATION
SERVICES, INC., a Delaware corporation ("PARENT"), TIMCO ENGINE CENTER, INC., a
Delaware corporation ("ENGINE"), TIMCO ENGINEERED SYSTEMS, INC., a Delaware
corporation ("ENGINEERED SYSTEMS"), and TRIAD INTERNATIONAL MAINTENANCE
CORPORATION, a Delaware corporation ("TIMCO"; AID, ▇▇▇▇▇, Parent, Engine,
Engineered Systems and TIMCO being collectively called the "BORROWERS" and
individually, a "BORROWER"), the payment and performance of which Term Loan is
guaranteed by AVIATION SALES DISTRIBUTION SERVICES COMPANY, a Delaware
corporation ("DISTRIBUTION SERVICES"), AVIATION SALES LEASING COMPANY, a
Delaware corporation ("LEASING"), AVIATION SALES PROPERTY MANAGEMENT CORP., a
Delaware corporation ("PROPERTY MANAGEMENT"), AVS/CAI, INC., a Florida
corporation ("AVS/CAI"), AVS/M-1, INC., a Delaware corporation ("AVS/M-1"),
AVS/M-2, INC., a Delaware corporation ("AVS/M-2"), AVS/M-3, INC., a Delaware
corporation ("AVS/M-3"), AVSRE, L.P., a Delaware limited partnership ("AVSRE"),
HYDROSCIENCE, INC., a Texas corporation ("HYDROSCIENCE"), TMAS/ASI, INC., an
Arkansas corporation ("TMAS/ASI"), and WHITEHALL CORPORATION, a Delaware
corporation ("WHITEHALL"; Distribution Services, Leasing, Property Management,
AVS/CAI, AVS/M-1, AVS/M-2, AVS/M-3, AVSRE, Hydroscience, TMAS/ASI and Whitehall
being collectively called the "GUARANTORS" and, individually, a "GUARANTOR"; and
the Borrowers and the Guarantors being collectively called the "COMPANIES" and,
individually, a "COMPANY") .
BACKGROUND STATEMENT
The Companies have requested that the Lender make available the Term
Loan to the Borrowers. The proceeds of the Term Loan shall be used by the
Borrowers to refinance and replace the Existing Credit Facility. The Companies
intend that the Term Loan and all other Obligations constitute "Designated
Senior Debt" as such term is defined in each of the Indentures.
In order to utilize the financial powers of Parent and each Borrower in
the most efficient and economical manner, and in order to facilitate the
financing of the Parent's and each Borrower's needs, the Lender will make the
Term Loan to the Borrowers on a combined basis in accordance with the provisions
set forth in this Financing Agreement. The Parent's and the Borrowers' business
is a mutual and collective enterprise, and Parent and the Borrowers believe that
the consolidation of all loans and other financial accommodations under this
Financing Agreement will enhance the aggregate borrowing powers of the Parent
and each Borrower and ease the administration of their loan relationship with
the Lender, all to the mutual advantage of the Companies. The Lender's
willingness to extend credit to the Borrowers and to administer each Borrower's
collateral security therefor on a combined basis as more fully set forth in this
Financing Agreement is done solely as an
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accommodation to the Companies and at the Companies' request in furtherance of
the Companies' mutual and collective enterprise.
STATEMENT OF AGREEMENT
SECTION 1 DEFINITIONS
ACCOUNTS shall mean all of each Company's now existing and future: (a) accounts
(as defined in the UCC), and any and all other receivables (whether or not
specifically listed on schedules furnished to Lender), including, without
limitation, all accounts created by, or arising from, all of such Company's
sales, leases, rentals of goods or renditions of services to its customers,
including but not limited to, those accounts arising under any of such Company's
trade names or styles, or through any of such Company's divisions; (b) any and
all instruments, documents, chattel paper (including electronic chattel paper)
(all as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to such Company; and (j) cash and non-cash proceeds (as defined
in the UCC) of any and all of the foregoing.
AFFILIATE shall mean a person, firm, entity or corporation (other than a
subsidiary of Parent): (i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with, a
person, firm, entity or corporation; (ii) which beneficially owns or holds ten
percent (10%) or more of any class of the capital stock of a person, firm,
entity or corporation; or (iii) ten percent (10%) or more of the capital stock
(or in the case of a person, firm or entity which is not a corporation, ten
percent (10%) or more of the equity interest) of which is beneficially owned or
held by a person, firm, entity or corporation or a subsidiary of a person, firm,
entity or corporation.
AGENT shall mean "Agent" as defined in the CIT Financing Agreement.
ANNIVERSARY DATE shall mean April 5, 2005 and April 5 of each year thereafter.
AVAILABILITY shall mean "Availability" as defined in the CIT Financing
Agreement.
AVAILABILITY RESERVE shall mean "Availability Reserve" as defined in the CIT
Financing Agreement.
BENEFIT PLAN shall mean a defined benefit plan as defined in Section 3(35) of
ERISA (other than a "multiemployer plan", as such term is defined in ERISA) in
respect of which a Company or any
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ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
BOND LETTER OF CREDIT shall mean "Bond Letter of Credit" as defined in the CIT
Financing Agreement.
BOND ORDER shall mean that certain Bond Order, adopted October 31, 1989,
Authorizing and Securing Piedmont Triad Airport Authority Special Facility
Revenue Bonds (Triad International Maintenance Corporation Project).
BOND GUARANTY shall mean that certain Guaranty Agreement, dated November 1,
1989, between the Piedmont Triad Airport Authority and Primark Storage Leasing
Corporation, as guarantor, pursuant to which the guarantor has unconditionally
guaranteed the obligations of TIMCO pursuant to the Lease (as defined in the
Bond Order) of the Project (as defined in the Bond Order).
BONDS shall mean those certain Piedmont Triad Airport Authority Special Facility
Revenue Bonds (Triad International Maintenance Corporation Project), Series
1989, dated November 1, 1989, in the original aggregate principal amount of
$13,800,000.
BORROWING BASE shall mean "Borrowing Base" as defined in the CIT Financing
Agreement.
BORROWING BASE CERTIFICATE shall mean "Borrowing Base Certificate" as defined in
the CIT Financing Agreement.
BUSINESS DAY shall mean any day on which the Lender and JPMorgan Chase Bank are
open for business.
CAPITAL EXPENDITURES shall mean, for any period, the aggregate expenditures of
the Companies during such period on account of property, plant, equipment or
similar fixed assets that, in conformity with GAAP, are required to be reflected
as property, plant, equipment or similar fixed assets in the balance sheet of
the Companies.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease in the
balance sheet of the Companies.
CAPITALIZED LEASE OBLIGATIONS shall mean all Indebtedness represented by
obligations under a Capital Lease.
CASH EQUIVALENTS shall mean (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States of America or any state thereof
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having combined capital and surplus of not less than $500,000,000; (c)
commercial paper of an issuer rated at least A-2 by Standard & Poor's Ratings
Services ("S&P") or P-2 by ▇▇▇▇▇'▇ Investors Service, Inc. ("MOODY'S"), or
carrying an equivalent rating by a nationally recognized rating agency, if both
of the two named rating agencies cease publishing ratings of commercial paper
issuers generally, and maturing within six months from the date of acquisition;
(d) repurchase obligations of any commercial bank satisfying the requirements of
clause (b) of this definition, having a term of not more than thirty (30) days
with respect to securities issued or fully guaranteed or insured by the United
States government; (e) securities with maturities of one (1) year or less from
the date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States, by any political subdivision or taxing authority
of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition;
and (g) shares of money market mutual or similar funds which invest exclusively
in assets satisfying the requirements of clauses (a) through (f) of this
definition.
CASH INTEREST shall have the meaning provided for in Paragraph 8.1(a) Section 8
of this Financing Agreement.
CHANGE OF CONTROL shall mean at any time:
(a) during any period of twelve (12) months, individuals who at
the beginning of such period constituted the board of directors of the Parent
(together with any new directors whose election or appointment by such board of
directors, or whose nomination for election by shareholders of the Parent, as
the case may be, was approved by a vote of a majority of the directors still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the board of directors then in office;
(b) the acquisition by any group of Persons (within the meaning of
the Securities Exchange Act of 1934, as amended) or any Person, of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission), directly or indirectly, of more of the issued and outstanding
Voting Stock of the Parent than that owned and Controlled by the ▇▇▇▇▇▇ Group
(on a fully-diluted basis);
(c) as a result of the sale of other disposition of Voting Stock
of the Parent, the ▇▇▇▇▇▇ Group shall cease to have beneficial ownership and
Control of more than twenty percent (20%) of the issued and outstanding Voting
Stock of the Parent (on a fully-diluted basis); or
(d) the Parent fails at any time to own, directly or indirectly,
100% of the capital stock or other equity interests of each other Company free
and clear of all Liens (other than the Liens in favor of the Lender and the
Agent).
CIT shall mean The CIT Group/Business Credit, Inc., a New York corporation.
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CIT LENDERS shall mean the "Lenders" as defined in the CIT Financing Agreement.
CIT DOCUMENTS shall mean the CIT Financing Agreement and all other documents,
instruments and agreements executed or delivered in connection therewith.
CIT FINANCING AGREEMENT shall mean the Financing Agreement dated as of the date
hereof entered into by and between the Companies, the Agent and the CIT Lenders.
CIT INTERCREDITOR AGREEMENT shall mean the Intercreditor Agreement between the
Lender and the Agent described in Section 2(k) below.
CIT LOANS shall mean the loans made to the Borrowers pursuant to the CIT
Documents.
CIT REVOLVING LINE OF CREDIT shall mean the "Revolving Line of Credit" in the
aggregate amount of $35,000,000 as defined in the CIT Financing Agreement.
CIT REVOLVING LOANS shall mean the "Revolving Loans" as defined in the CIT
Financing Agreement
CIT TERM LOAN shall mean the "Term Loan" in the original principal amount of
$6,400,000 as defined in the CIT Financing Agreement.
CLOSING DATE shall mean the date on or after the date hereof on which (i) all
conditions precedent set forth in Section 2 of this Agreement have either been
met to the Lender's satisfaction or waived by it and (ii) the Lender is
obligated hereunder.
CLOSING FEE shall have the meaning provided for in Paragraph 8.1(f) Section 8 of
this Financing Agreement.
COLLATERAL shall mean all present and future assets of each Company, including,
without limitation, all Accounts, Equipment, Inventory, Documents of Title,
General Intangibles, Real Estate, Pledged Stock of each Company's Subsidiaries
and Other Collateral.
COLLATERAL MANAGEMENT FEE shall have the meaning provided in Paragraph 8.1(h) of
Section 8 of this Financing Agreement.
COMMITMENT FEE shall have the meaning provided for in Paragraph 8.1(e) Section 8
of this Financing Agreement.
COMMITMENT LETTER shall mean the commitment letter, dated March 2, 2004, issued
by the Lender to, and accepted by, Parent, for itself and each of its
subsidiaries.
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CONSOLIDATED BALANCE SHEET shall mean a consolidated or compiled, as applicable,
balance sheet for the Parent, each of the other Companies and the consolidated
subsidiaries of each, eliminating all intercompany transactions and prepared in
accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Parent, each of the other Companies and the
subsidiaries of each, showing all eliminations of intercompany transactions, all
prepared in accordance with GAAP.
CONTROL shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. The
terms "Controlling" and "Controlled" have meanings correlative thereto.
COPYRIGHT SECURITY AGREEMENT shall mean that certain Copyright Security
Agreement, dated the Closing Date, pursuant to which the Parent shall grant to
the Lender liens and security interests in all its Copyrights.
COPYRIGHTS shall mean all present and hereafter acquired copyrights, copyright
registrations, recordings, applications, designs, styles, licenses, marks,
prints and labels bearing any of the foregoing, goodwill, any and all general
intangibles, intellectual property and rights pertaining thereto, and all cash
and non-cash proceeds thereof.
DEFAULT shall mean any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of Default.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum on any
Obligations hereunder, equal to the sum of four percent (4%) and the then
existing Interest Rate being charged by the Lender on the Obligations (as set
forth in Paragraph 8.1 of Section 8 of this Financing Agreement), which the
Lender shall be entitled to charge the Companies on all Obligations due the
Lender by the Companies, as further set forth in Paragraph 10.2 of Section 10 of
this Financing Agreement.
DEPOSITORY ACCOUNTS shall mean the collection accounts, which are subject to the
Lender's instructions, as specified in Paragraph 3.4 of Section 3 of this
Financing Agreement.
DOCUMENTATION FEE shall mean subsequent to the Closing Date, the Lender's
standard fees relating to any and all modifications, waivers, releases,
amendments or additional collateral with respect to this Financing Agreement,
the Collateral and/or the Obligations, which fees shall be based on the Lender's
then current fees in effect from time to time and the complexity of and issues
addressed in such modifications, waivers, releases, amendments and additional
collateral.
DOCUMENTS OF TITLE shall mean all present and future documents (as defined in
the UCC), and any and all warehouse receipts, bills of lading, shipping
documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and
non-cash proceeds of the foregoing.
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EARLY TERMINATION FEE shall have the meaning provided for in Paragraph 8.1(i)
Section 8 of this Financing Agreement.
EBITDA shall mean, in any period, all earnings of the Companies for said period
before interest and all tax, depreciation and amortization expenses and all
other non-cash charges of the Companies for said period, determined in
accordance with GAAP on a consistent basis with the latest audited financial
statements of the Companies, excluding the effect of extraordinary or
non-reoccurring gains or losses for such period; provided, however, that for
purposes of calculating Surplus Cash, only the effect of all extraordinary or
non-reoccurring cash gains or cash losses for such period shall be excluded.
ELIGIBLE DOMESTIC ACCOUNTS RECEIVABLE shall mean "Eligible Domestic Accounts
Receivable" as defined in the CIT Financing Agreement.
ELIGIBLE FOREIGN ACCOUNTS RECEIVABLES shall mean "Eligible Foreign Accounts
Receivable" as defined in the CIT Financing Agreement.
ELIGIBLE INVENTORY shall mean "Eligible Inventory" as defined in the CIT
Financing Agreement.
ELIGIBLE UNBILLED ACCOUNTS RECEIVABLE shall mean "Eligible Unbilled Accounts
Receivable" as defined in the CIT Financing Agreement.
ENVIRONMENTAL INDEMNITY AGREEMENTS shall mean those certain Environmental
Indemnity Agreements, dated the Closing Date, executed by each Company which is
a lessee or lessor of Real Estate, each in form and substance reasonably
satisfactory to the Lender, pursuant to which each Company which is a party
thereto shall indemnify the Lender as to the claims, costs and expenses more
particularly described therein.
ENVIRONMENTAL LAWS shall mean applicable federal, state or local laws, rules or
regulations, and any applicable judicial interpretations thereof, including any
judicial or administrative order, judgment, permit, approval decision or
determination, in each case pertaining to conservation or protection of the
environment, in effect at the time in question, including the Clean Air Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Federal Water Pollution Control Act, the Occupational Safety and Health Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Toxic
Substances Control Act, the Superfund Amendments and Reauthorization Act of
1986, the Hazardous Materials Transportation Act and analogous state and local
laws, each as amended from time to time thereby imposing either more or less
stringent requirements as relates to activity occurring after the date hereof.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the UCC) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds thereof of
whatever sort.
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EQUIPMENT APPRAISAL shall mean an appraisal of each Company's Equipment
conducted at the Companies' expense by an appraiser selected by the Companies
and acceptable to the Lender in its sole discretion, which shall be received on
or before the Closing Date and thereafter conducted with such frequency as the
Lender may require.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(s) OF DEFAULT shall have the meaning provided for in Section 10 of this
Financing Agreement.
EX-IM BANK shall mean the Export-Import Bank of the United States.
EX-IM BANK DOCUMENTS shall mean the Ex-Im Borrower Agreement together with the
"Master Guarantee Agreement", the "Loan Authorization Notice" and the other
agreements, documents and instruments executed and delivered in connection with
the Ex-Im Borrower Agreement,.
EX-IM BORROWER AGREEMENT shall mean the Borrower Agreement dated as of April 5,
2004 among CIT, the Borrowers and Ex-Im Bank.
EXISTING AGENT shall mean the Citicorp USA, Inc. as agent for the Existing
Lenders under the Existing Credit Facility.
EXISTING CREDIT FACILITY shall mean the Fifth Amended and Restated Credit
Agreement, dated as of July 12, 2002, as amended, among the Borrowers, the
Parent, the Guarantors, the Existing Agent, the Existing Lenders and Citibank,
N.A., as the Issuing Bank.
EXISTING LENDERS shall mean the lenders party to the Existing Credit Facility.
EXPENSE DEPOSIT shall have the meaning provided for in Paragraph (gg) of Section
2 of this Financing Agreement.
EXPORT TRANSACTION shall mean any transaction in which a Borrower will sell
goods or services to an account debtor located in a foreign country.
FISCAL QUARTER shall mean, with respect to the Companies, each three (3) month
period ending on March 31, June 30, September 30 and December 31 of each Fiscal
Year.
FISCAL YEAR shall mean each twelve (12) month period commencing on January 1 of
each year and ending on the following December 31.
FIXED CHARGE COVERAGE RATIO shall mean with respect to any period of
determination, the ratio of (a) EBITDA minus Capital Expenditures of the
Companies incurred during such period which are not financed by Indebtedness
secured by Purchase Money Liens for such period to (b) the sum of (i)
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payments of principal on all Indebtedness required to be paid by the Companies
during such period (excluding non-cash interest paid on the Subordinated Debt)
plus (ii) payments of interest on all Indebtedness required to be paid by the
Companies during such period plus (iii) dividends or distributions paid during
such period plus (iv) federal, state and local income taxes paid during such
period, in each case as determined in accordance with GAAP.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Companies
modify their accounting principles and procedures as applied as of the Closing
Date, the Companies shall provide such statements of reconciliation as shall be
in form and substance reasonably acceptable to the Lender.
GENERAL INTANGIBLES shall mean all present and hereafter acquired general
intangibles (as defined in the UCC), including, without limitation, all present
and future right, title and interest in and to: (a) all Trademarks, tradenames,
corporate names, business names, logos and any other designs or sources of
business identities, (b) Patents, together with any improvements on said
Patents, utility models, industrial models, and designs, (c) Copyrights, (d)
trade secrets, (e) licenses, permits and franchises, (f) all applications with
respect to the foregoing, (g) all right, title and interest in and to any and
all extensions and renewals, (h) goodwill with respect to any of the foregoing,
(i) any other forms of similar intellectual property, (j) all customer lists,
distribution agreements, supply agreements, blueprints, indemnification rights
and tax refunds, together with all monies and claims for monies now or hereafter
due and payable in connection with any of the foregoing or otherwise, and all
cash and non-cash proceeds thereof, including, without limitation, the proceeds
or royalties of any licensing agreements between any Company and any licensee of
any of such Company's General Intangibles.
GUARANTORS shall mean the Guarantors listed on page 1 of this Financing
Agreement and any other person or entity which may hereafter guarantee all or a
portion of the Obligations.
▇▇▇▇▇▇ GROUP shall mean (i) ▇▇▇▇ ▇▇▇▇▇▇, (ii) during the lifetime of ▇▇▇▇
▇▇▇▇▇▇, (x) any entity (including any trust) formed for estate planning purposes
which is under the Control of ▇▇▇▇ ▇▇▇▇▇▇, and (y) any member of ▇▇▇▇ ▇▇▇▇▇▇'▇
immediate family (so long as ▇▇▇▇ ▇▇▇▇▇▇ shall be solely responsible for voting
the Voting Shares of such family member pursuant to one or more written
agreements reasonably acceptable to the Lender) and (iii) at any time after the
death of ▇▇▇▇ ▇▇▇▇▇▇, the spouse, children or lineal descendants of ▇▇▇▇ ▇▇▇▇▇▇,
any trust or other entity established for the benefit thereof or the Scottish
Rights Hospital.
HAZARDOUS MATERIAL shall mean (a) any petroleum or petroleum products, flammable
explosives, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs); (b) any chemicals or other materials or substances which are now or
hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import under any Environmental Law; and (c) any
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other chemical or other material or substance, exposure to which is now or
hereafter prohibited, limited or regulated by any governmental or regulatory
authority under any Environmental Law.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be, capitalized. For avoidance of doubt,
"Indebtedness" shall exclude payables due and owing from one Company to another
arising in the ordinary course of business.
INDENTURES shall mean (i) the Indenture dated as of February 17, 1998 under
which the 8-1/8% Senior Subordinated Notes Due 2008 were issued by the Parent,
(ii) the Indenture dated as of September 20, 2002 under which the 8% Junior
Subordinated Convertible PIK Notes due 2007 were issued by the Parent and (iii)
the Indenture dated as of February 28, 2002 under which the 8% Senior
Subordinated Convertible PIK Notes due 2006 were issued by the Parent.
INSURANCE PROCEEDS shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
INTEREST RATES shall have the meaning provided for in Paragraph 8.1(a) Section 8
of this Financing Agreement.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986, as amended from
time to time and the rules and regulations promulgated thereunder from time to
time.
INVENTORY shall mean all of each Company's present and hereafter acquired
inventory (as defined in the UCC) and including, without limitation, all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production - from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
INVENTORY APPRAISAL shall mean an appraisal of each Company's Inventory
conducted at the Companies' expense by an appraiser selected by the Companies
and acceptable to the Lender in its sole discretion, which shall be received on
or before the Closing Date and thereafter conducted with such frequency as the
Lender may require.
INVESTMENT PROPERTY shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.
LETTERS OF CREDIT shall mean "Letters of Credit" as defined in the CIT Financing
Agreement.
LINE OF CREDIT shall mean the aggregate commitment of the CIT Lenders to (a)
make Revolving Loans pursuant to the CIT Financing Agreement, (b) assist the
Borrowers in opening Letters of
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Credit pursuant to the CIT Financing Agreement and (c) make the CIT Term Loan
pursuant to the CIT Financing Agreement, in the aggregate amount equal to
$41,400,000.
LJH LEASES shall mean the LJH Dallas Lease, LJH Equipment Lease and LJH Goodyear
Lease.
LJH, LTD. shall mean LJH, Ltd., a Texas limited partnership with an address at
▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
LJH DALLAS LEASE shall mean that certain lease, dated October 4, 2002, between
LHJ, Ltd. and AID, in respect of the premises located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇.
LJH DOCUMENTS shall mean the (a) $14,411,704.00 Amended and Restated
Consolidated Term Promissory Note, dated March 31, 2004, executed by the Parent
to the order of LJH, Ltd., (b) the Amended and Restated Guaranty, dated March
31, 2004, executed by each Company in favor of LJH, Ltd., (c) the Amended and
Restated Security Agreement, dated March 31, 2004, among each Company and LJH,
Ltd. and (d) the LJH Equipment Lease.
LJH EQUIPMENT LEASE shall mean the Equipment Lease dated April 4, 2004 between
LJH and the Parent.
LJH GOODYEAR LEASE shall mean that certain sublease agreement, dated as of April
1, 2003, between LHJ, Ltd. and TIMCO, in respect of the real property known as
Hangars 18 and 52 and additional land located at Phoenix-Goodyear Airport,
Goodyear, Arizona.
LJH SUBORDINATION AGREEMENT shall mean the Intercreditor and Subordination
Agreement between the Lender and LJH, Ltd. described in Section 2(aa) below.
LJH SUBORDINATED DEBT shall mean the Indebtedness owing by a Company to LJH,
Ltd. described on Schedule 10 hereto.
LOAN DOCUMENTS shall mean this Financing Agreement, the Term Note, the
Mortgages, the Pledge Agreements, the CIT Intercreditor Agreement, the LJH
Subordination Agreement, the Trademark Security Agreement, the Copyright
Security Agreement, the Environmental Indemnity Agreements, the Ex-Im Bank
Documents, the other closing documents and any other ancillary loan and security
agreements executed from time to time in connection with this Financing
Agreement, all as may be renewed, amended, extended, increased or supplemented
from time to time.
LOAN FACILITY FEE shall mean the fee payable to the Lender in accordance with,
and pursuant to, the provisions of Paragraph 8.1(6) of Section 8 of this
Financing Agreement.
MANDATORY PREPAYMENT shall be determined as set forth in Paragraph 4.6 of
Section 4 of this Financing Agreement.
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MATERIAL ADVERSE EFFECT shall mean, relative to any occurrence of whatever
nature (including any adverse determination in any litigation, arbitration or
governmental investigation or proceeding), (a) a material adverse effect on the
financial condition, business, operations, prospects or assets of a Company on
an individual basis or the Companies taken as a whole, or (b) a material
impairment of the ability of a Company on an individual basis or the Companies
taken as a whole to perform obligations under the Loan Documents or (c) an
impairment of the validity or enforceability of any Loan Document in any manner
which materially and adversely affects any material rights and/or material
benefits intended to be bestowed on the Lender under the Loan Documents.
MATURITY DATE shall mean December 31, 2007.
MINIMUM AVAILABILITY RESERVE shall mean "Minimum Availability Reserve" as
defined in the CIT Financing Agreement.
MORTGAGES shall mean the mortgages, deeds of trust, leasehold mortgages,
leasehold deeds of trust, assignments of leases, subleases and rents to be
executed by the Company which owns or leases such Real Estate on or about the
Closing Date in favor of the Lender and by which such Company shall grant and
convey to the Lender, as security for the Obligations, liens and security
interests upon the Real Estate owned or leased by such Company.
NET ORDERLY LIQUIDATION VALUE shall mean, with respect to any Inventory, the
liquidation proceeds of such Inventory, net of the anticipated liquidation
expenses associated therewith, which proceeds may be expected to be realized
from an orderly liquidation of such Inventory.
NET WORTH shall mean, at any date of determination, an amount equal to (a) Total
Assets minus (b) Total Liabilities, and shall be determined in accordance with
GAAP, on a consistent basis with the latest audited financial statements of the
Companies.
OBLIGATIONS shall mean all loans, advances and extensions of credit made or to
be made by the Lender to any Borrower or to others for any Borrower's account
(including, without limitation, the Term Loan), any and all indebtedness and
obligations which may at any time be owing by any Borrower to the Lender
pursuant to or under this Financing Agreement, whether now in existence or
incurred by a Borrower from time to time hereafter, whether principal, interest,
fees, costs, expenses or otherwise, whether secured by pledge, lien upon or
security interest in any of any Company's Collateral, assets or property or the
assets or property of any other person, firm, entity or corporation; whether
such indebtedness is absolute or contingent, joint or several, matured or
unmatured, direct or indirect and whether any Borrower is liable to the Lender
for such indebtedness as principal, surety, endorser, guarantor or otherwise.
Obligations shall also include indebtedness owing to the Lender by any Company
under any Loan Document or under any other agreement or arrangement now or
hereafter entered into between any Company and the Lender related or pursuant to
this Financing Agreement; indebtedness or obligations incurred by, or imposed
on, the Lender as a result of environmental claims arising out of any Company's
operations, premises or waste disposal practices or sites in accordance with
Paragraph 7.7 of Section 7 hereof; each Company's liability to the Lender as
maker or endorser of any promissory note or other instrument for the payment of
money; each
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Company's liability to the Lender under any instrument of guaranty or indemnity,
or arising under any guaranty, endorsement or undertaking which the Lender may
make or issue to others for any Company's account.
OPERATING LEASES shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
OTHER COLLATERAL shall mean all now owned and hereafter acquired lockbox,
blocked account and any other deposit accounts of each Company maintained with
any bank or financial institutions into which the proceeds of Collateral are or
may be deposited; all other deposit accounts and all Investment Property of each
Company; all cash and other monies and property of each Company in the
possession or control of the Lender; all books, records, ledger cards, disks and
related data processing software of each Company at any time evidencing or
containing information relating to any of the Collateral described herein or
otherwise necessary or helpful in the collection thereof or realization thereon;
all Cash Equivalents of each Company; and all cash and non-cash proceeds of the
foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Lender's present and future
reasonable expenses incurred relative to this Financing Agreement or any other
Loan Documents, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to: the cost of record searches; all costs and
expenses incurred by the Lender in opening bank accounts, depositing checks,
receiving and transferring funds, and wire transfer charges; any charges imposed
on the Lender due to returned items and "insufficient funds" of deposited checks
and the Lender's standard fees relating thereto; reasonable travel, lodging and
similar expenses of the Lender's personnel in connection with inspecting and
monitoring the Collateral from time to time hereunder; the costs and expenses
for any Inventory Appraisals and any Equipment Appraisals; any applicable
reasonable counsel fees and disbursements; fees and taxes relative to the filing
of financing statements; all expenses, costs and fees set forth in Paragraph
10.3 of Section 10 of this Financing Agreement; and title insurance premiums and
real estate survey costs, if any, and costs of preparing and recording Mortgages
against the Real Estate.
OVERADVANCES shall mean "Overadvances" as defined in the CIT Financing Agreement
PATENTS shall mean all of each Company's present and hereafter acquired patents,
patent applications, registrations, any reissues or renewals thereof, licenses,
any inventions and improvements claimed thereunder, and all general intangible,
intellectual property and patent rights with respect thereto of such Company,
and all income, royalties, cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: (a) liens existing on the date hereof as set
forth on Schedule 1 hereto, liens securing the Permitted Indebtedness described
in clause (f) of the definition thereof, and other liens expressly permitted, or
consented to in writing by the Lender; (b) Purchase Money Liens; (c) liens of
local or state authorities for franchise or other like Taxes, provided that the
aggregate amounts of such liens shall not exceed $250,000 in the aggregate at
any one time; (d) statutory liens of landlords and liens of carriers,
warehousemen, bailees, mechanics, materialmen and
13
other like liens imposed by law, created in the ordinary course of business and
for amounts not yet due (or which are being contested in good faith, by
appropriate proceedings or other appropriate actions which are sufficient to
prevent imminent foreclosure of such liens) and with respect to which adequate
reserves or other appropriate provisions are being maintained by the Companies
in accordance with GAAP; (e) deposits made (and the liens thereon) in the
ordinary course of business of a Company (including, without limitation,
security deposits for leases, indemnity bonds, surety bonds, appeal bonds and
performance bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of borrowed money or purchase money obligations), leases, surety
bonds, appeal bonds and performance bonds and other similar obligations arising
in the ordinary course of business; (f) easements (including, without
limitation, reciprocal easement agreements and utility agreements),
rights-of-way, encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by the
Company owning or leasing such Real Estate of its business or property so
encumbered and (B) in the reasonable business judgment of the Lender do not
materially and adversely affect the value of such Real Estate; (g) liens granted
the Lender by each Company; (h) liens of judgment creditors provided such liens
do not exceed, in the aggregate, at any time, $250,000 (other than liens bonded
or insured to the reasonable satisfaction of the Lender); (i) tax liens which
are not yet due and payable or which are being diligently contested in good
faith by the Company owing such taxes by appropriate proceedings, and which
liens are not (x) filed on any public records, (y) other than with respect to
Real Estate, senior to the liens of the Lender or (z) for Taxes due the United
States of America or any state thereof having similar priority statutes, as
further set forth in Paragraph 7.6 of Section 7 hereof; (j) liens in favor of
CIT as security for the CIT Loans; (k) liens in favor of LJH, Ltd. securing the
LJH Subordinated Debt and (l) normal and customary rights of set off on deposits
of cash in favor of banks or other depository institutions unless the Lender and
such bank or other depository institution agree otherwise pursuant to an account
control agreement, which the Lender may request be executed in connection with
any such accounts.
PERMITTED INDEBTEDNESS shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) the Indebtedness secured by
Purchase Money Liens; (c) Subordinated Debt, including (i) extensions and
renewals thereof that do not increase the outstanding principal amount of such
Indebtedness as of the date of such extension or renewal and do not increase the
amount of interest paid in cash thereon or, with respect to the LJH Equipment
Lease, increase the lease payments thereunder, and (ii) replacements thereof
that do not increase the outstanding principal amount of such Indebtedness as of
the date of such extension or renewal, do not increase the amount of interest
paid in cash thereon, or, with respect to the LJH Equipment Lease, increase the
lease payments thereunder and which is subject to subordination terms or a
Subordination Agreement satisfactory to the Lender, in its sole discretion; (d)
Indebtedness arising under this Financing Agreement; (e) deferred Taxes and
other expenses incurred in the ordinary course of business; (f) other
Indebtedness existing on the date of execution of this Financing Agreement and
listed in the most recent financial statement delivered to the Lender or
otherwise set forth on Schedule 2 hereto; (g) the CIT Loans
14
(subject to the limitations in Paragraph 7.9(a) of Section 7 of this Financing
Agreement; and (h) Indebtedness not included in clauses (a) through (g) above
which does not exceed in the aggregate, at any time, the sum of $100,000.
PIK INTEREST shall have the meaning provided for in Paragraph 8.1(a) Section 8
of this Financing Agreement.
PIK SUBORDINATED DEBT shall mean Indebtedness evidenced by (a) the 8% Junior
Subordinated Convertible PIK Notes due 2007 issued by Parent under that certain
Indenture dated as of September 20, 2002 and (b) the 8% Senior Subordinated
Convertible PIK Notes due 2006 issued by Parent under that certain Indenture
dated as of February 28, 2002.
PLEDGE AGREEMENTS shall mean (a) those Stock Pledge Agreements, dated the
Closing Date, executed by Parent, AVS/M-1, TIMCO and Whitehall pledging to the
Lender as additional collateral for the Obligations all of the issued and
outstanding stock of each of their respective corporate subsidiaries, and (b)
those Partnership Interests Pledge Agreements, dated the Closing Date, executed
by Property Management and Whitehall pledging to the Lender as additional
collateral for the Obligations all of the issued and outstanding partnership
interests of each of them in AVRSE, all in form and substance satisfactory to
the Lender.
PRIME RATE shall mean the rate of interest per annum announced by LaSalle
National Bank from time to time as its prime rate in effect at its principal
office in Chicago. (The prime rate is not intended to be the lowest rate of
interest charged by LaSalle National Bank to its borrowers).
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to the Lender, and (c) the debt incurred in connection
with such acquisitions shall not exceed, in the aggregate, $2,500,000 in any
Fiscal Year and $10,000,000 in the aggregate during the term of this Financing
Agreement.
REAL ESTATE shall mean each Company's fee and/or leasehold interests in the real
property, including any such real property which has been, or will be,
encumbered, mortgaged, pledged or assigned to the Lender or its designee other
than the real property leased by (a) ▇▇▇▇▇ located at 10252 and ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, Los Angeles County, California and (b) AID located in Opa
Locka, Miami-Dade County, Florida.
SENIOR SECURED DEBT shall mean on any date of determination thereof the sum of
(a) all "Obligations" outstanding under the CIT Documents and (b) all
Obligations outstanding hereunder.
SENIOR SECURED DEBT CAP CERTIFICATE shall have the meaning provided for in
Paragraph 7.9(b) of Section 7 of this Financing Agreement.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the
note(s) evidencing such) which has been subordinated, by a Subordination
Agreement or by the terms of note(s)
15
evidencing such debt or the documents executed in connection with such note(s),
to the prior payment and satisfaction of the Obligations, more particularly
described on Schedule 10 hereto.
SUBORDINATING CREDITOR shall mean LJH, Ltd., and any other party now or
hereafter executing a Subordination Agreement.
SUBORDINATION AGREEMENTS shall mean the agreements (in form and substance
satisfactory to the Lender) among the Companies, each Subordinating Creditor and
the Lender pursuant to which (a) Subordinated Debt is subordinated to the prior
payment and satisfaction of the Obligations and/or (b) liens and security
interests in all or portions of the Collateral are subordinated to the liens and
security interests in such Collateral granted pursuant to this Financing
Agreement in favor of the Lender.
SUCCESS FEE shall have the meaning provided for in Paragraph 8.1(j) Section 8 of
this Financing Agreement.
SURPLUS CASH shall mean, with respect to the Companies on a Consolidated basis
for any Fiscal Year, fifteen percent (15%) of the amount, if any, by which (a)
the sum of (i) EBITDA and (ii) non-cash charges exceeds (b) the sum, without
duplication, of (i) all cash interest obligations paid or due by the Companies
(but excluding all cash interest paid or due by the Companies with respect to
the LJH Subordinated Debt), (ii) the amount of all principal repaid on the CIT
Term Loan, (iii) the amount of all principal repaid to the Lender on the Term
Loan, (iv) Capital Expenditures which are not financed by Indebtedness secured
by Purchase Money Liens, (v) taxes paid in cash by the Companies, (vi) cash
payments in respect of Capital Leases and (vii) cash payments made with respect
to the Bonds.
TANGIBLE NET WORTH shall mean, as of any date of determination, Net Worth minus
deferred assets (other than prepaid insurance and prepaid taxes), patents,
copyrights, trademarks, trade names, non-compete agreements, franchises and
other similar intangibles, goodwill, including any amounts, however designated
on a Consolidated Balance Sheet, and Accounts, notes and other receivables due
from Affiliates or employees as of such date which would be treated as
intangibles in accordance with GAAP plus the principal amount of Subordinated
Debt as of such date.
TAXES shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by any Company
with respect to its business, operations, Collateral or otherwise.
TERM LOAN shall mean the term loan in the principal amount of $8,000,000 made by
the Lender pursuant to, and repayable in accordance with, the provisions of
Section 4 of this Financing Agreement.
TERM NOTE shall mean the promissory note, in the form of Exhibit A attached
hereto, delivered by the Borrowers to the Lender to evidence the Term Loan
pursuant to, and repayable in accordance with, the provisions of Section 4 of
this Financing Agreement.
16
TOTAL ASSETS shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Companies.
TOTAL LIABILITIES shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Companies minus PIK Subordinated Debt.
TRADE ACCOUNT RECEIVABLE shall mean "Trade Account Receivable" as defined in the
CIT Financing Agreement.
TRADEMARK SECURITY AGREEMENTS shall mean those certain Trademark Security
Agreements, each dated the Closing Date, pursuant to which the Parent shall
grant to the Lender liens and security interests in all its Trademarks.
TRADEMARKS shall mean all present and hereafter acquired trademarks, trademark
registrations, recordings, applications, tradenames, trade styles, service
marks, prints and labels (on which any of the foregoing may appear), licenses,
reissues, renewals, and any other intellectual property and trademark rights
pertaining to any of the foregoing, together with the goodwill associated
therewith, and all cash and non-cash proceeds thereof.
TTM EBITDA shall mean EBITDA of the Companies for the twelve (12) month period
most recently ended.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the State of Illinois.
VOTING STOCK shall mean, with respect to any corporation, the outstanding stock
of all classes (or equivalent interests) which ordinarily, in the absence of
contingencies, entitles holders thereof to vote for the election of directors
(or persons performing similar functions) of such corporation, even though the
right so to vote has been suspended by the happening of such contingency.
17
SECTION 2 CONDITIONS PRECEDENT
The obligation of the Lender to make the Term Loan hereunder is subject to the
satisfaction of, extension of or waiver of in writing, the following conditions
precedent:
(a) LIEN SEARCHES - The Lender shall have received tax, judgment
and Uniform Commercial Code searches satisfactory to the Lender for each
Company's location (as such term is defined in the UCC) and all locations
presently occupied or used by such Company.
(b) CASUALTY INSURANCE - The Companies shall have delivered to the
Lender evidence satisfactory to the Lender that casualty insurance policies
listing the Lender as additional insured, loss payee or mortgagee, as the case
may be, are in full force and effect, all as set forth in Paragraph 7.5 of
Section 7 of this Financing Agreement.
(c) UCC FILINGS - Any financing statements required to be filed in
order to create, in favor of the Lender, a first perfected security interest in
the Collateral, subject only to the Permitted Encumbrances, shall have been
properly filed in each office in each jurisdiction required in order to create
in favor of the Lender a perfected lien on the Collateral. The Lender shall have
received acknowledgment copies of all such filings (or, in lieu thereof, the
Lender shall have received other evidence satisfactory to the Lender that all
such filings have been made) and the Lender shall have received evidence that
all necessary filing fees and all taxes or other expenses related to such
filings have been paid in full.
(d) RESOLUTIONS - The Lender shall have received a copy of the
resolutions of the Board of Directors, members or partners of each Company
authorizing the execution, delivery and performance of (i) this Financing
Agreement, and (ii) the other Loan Documents, in each case certified by the
Secretary, Assistant Secretary, managing member or general partner of such
Company as of the date hereof, together with a certificate of the Secretary,
Assistant Secretary, managing member or general partner of such Company as to
the incumbency and signature of the officers, members, managers or partners of
such Company executing such Loan Documents and any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary, Assistant Secretary, managing member or general
partner.
(e) CORPORATE ORGANIZATION - The Lender shall have received (i) a
copy of the Certificate of Incorporation or Organization of each Company
certified by the Secretary of State of the state of its formation, and (ii) a
copy of the bylaws, operating agreement or partnership agreement of each Company
certified by the Secretary, Assistant Secretary, managing member or general
partner thereof, all as amended through the date hereof.
(f) OFFICER'S /GENERAL PARTNER'S CERTIFICATE - The Lender shall
have received an executed Officer's/General Partner's Certificate of each
Company, satisfactory in form and substance to the Lender, certifying that as to
such Company (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the Closing Date; (ii)
18
such Company is in compliance with all of the terms and provisions set forth
herein applicable to such Company; and (iii) no Default or Event of Default has
occurred.
(g) OPINIONS - Counsel for the Companies shall have delivered to
the Lender opinions satisfactory to the Lender opining, inter alia, that,
subject to the (i) filing, priority and remedies provisions of the applicable
Uniform Commercial Code, (ii) the provisions of the Bankruptcy Code, insolvency
statutes or other like laws, (iii) the equity powers of a court of law and (iv)
such other matters as may be agreed upon with the Lender: this Financing
Agreement and all other Loan Documents of each Company (x) are valid, binding
and enforceable according to their terms, (y) are duly authorized, executed and
delivered, and (z) do not violate any terms, provisions, representations or
covenants in the organizational documents, bylaws, operating agreement or
partnership agreement of any Company or, to the best knowledge of such counsel,
of any loan agreement, mortgage, deed of trust, note, security or pledge
agreement, indenture or other contract to which any Company is a signatory or by
which any Company or its assets are bound, and as to such other matters as the
Lender may, in its discretion require, all in form and substance satisfactory to
the Lender. In addition, counsel to the Subordinating Creditor(s) shall have
delivered an opinion satisfactory to the Lender that the Subordination
Agreement(s) have been duly authorized, executed and delivered and constitute
valid and binding agreements enforceable against such Subordinating Creditor(s)
in accordance with the terms thereof.
(h) ABSENCE OF DEFAULT - As of the Closing Date, no Default or
Event of Default shall have occurred and since December 31, 2002, no material
adverse change shall have occurred in the financial condition, business,
prospects, profits, operations or assets of the Companies.
(i) LEGAL RESTRAINTS/LITIGATION - As of the Closing Date, there
shall be no: (x) litigation, investigation or proceeding (judicial or
administrative) pending or threatened against any Company or their assets, by
any agency, division or department of any county, city, state or federal
government arising out of this Financing Agreement which, in the opinion of the
Lender, if adversely determined, could reasonably be expected to have a Material
Adverse Effect; (y) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements contemplated under
this Financing Agreement which, in the opinion of the Lender, if adversely
determined, could reasonably be expected to have a Material Adverse Effect; or
(z) suit, action, investigation or proceeding (judicial or administrative)
pending against any Company or their assets, which, in the opinion of the
Lender, if adversely determined, could reasonably be expected to have a Material
Adverse Effect.
(j) SUBORDINATION AGREEMENTS - The Subordinating Creditors shall
have executed and delivered to the Lender Subordination Agreements, each in form
and substance satisfactory to the Lender, subordinating the Indebtedness due
such Subordinating Creditor by one or more of the Companies to the prior payment
and satisfaction of the Obligations of the Company and, if applicable,
subordinating the liens granted to such Subordinating Creditor to secure such
Indebtedness to the liens granted to the Lender hereunder.
19
(k) CIT INTERCREDITOR AGREEMENT - The Agent shall have executed
and delivered to the Lender the CIT Intercreditor Agreement, in form and
substance satisfactory to the Lender, to which each Company shall have agreed.
(l) CASH BUDGET PROJECTIONS - The Lender shall have received,
reviewed and been satisfied with a twelve (12) month cash budget projection
prepared by the Companies on the form provided by the Lender.
(m) PLEDGE AGREEMENTS - Parent, AVS/M-1, TIMCO, Property
Management and Whitehall shall have each executed and delivered to the Lender
each Pledge Agreement and all stock and other certificates evidencing such
ownership interests together with duly executed stock and other powers (undated
and in-blank) with respect thereto, all in form and substance satisfactory to
the Lender.
(n) TRADEMARK SECURITY AGREEMENTS - The Parent shall have
delivered to the Lender the Trademark Security Agreement, in form and substance
satisfactory to the Lender.
(o) LOAN DOCUMENTS - The Companies shall have executed and
delivered to the Lender all Loan Documents and any other documents, instruments
and agreements necessary to consummate the lending arrangement contemplated
among the Companies and the Lender.
(p) DISBURSEMENT AUTHORIZATION - The Borrowers shall have
delivered to the Lender all information necessary for the Lender to issue wire
transfer instructions on behalf of the Borrowers for the Term Loan including,
but not limited to, disbursement authorizations in form acceptable to the
Lender.
(q) EXAMINATION & VERIFICATION - The Lender shall have completed,
to its satisfaction, an examination and verification of the Accounts, Inventory,
Equipment, other Collateral, financial statements, books and records of each
Company which examination shall indicate that, after giving effect to all CIT
Loans, the Term Loan and any other advances and extensions of credit to be made
at closing, the Borrowers shall have an opening Availability of at least
$5,000,000, as evidenced by a Borrowing Base Certificate delivered by the
Borrowers to the Lender as of the Closing Date, all in form and substance
satisfactory to the Lender. It is understood that such requirement contemplates
that all debts and obligations are current, and that all payables are being
handled in the normal course of the Companies' business and consistent with its
past practice.
(r) DEPOSITORY ACCOUNTS - The Companies shall have established a
system of lockbox and bank accounts with respect to the collection of Accounts
and the deposit of proceeds of Collateral as shall be acceptable to the Lender
in all respects. Such accounts shall be subject to three party agreements (among
the Company, the Agent and the depository bank), which shall be in form and
substance satisfactory to the Lender.
(s) EXISTING CREDIT FACILITY - The Existing Credit Facility (other
than the Bond Letter of Credit) shall be: (i) terminated and all obligations of
the Existing Lenders to make loans, and all rights of the Companies thereunder
to borrow, shall have terminated; (ii) all loans
20
and obligations of all Companies thereunder shall be paid or satisfied in full,
including through utilization of the proceeds of the Term Loan; and (iii) all
liens or security interests in favor of the Existing Agent and Existing Lenders
under the Existing Credit Facility on any of the Collateral and otherwise in
connection therewith shall be terminated and/or released upon such payment.
(t) CIT LOANS - The Companies shall have executed the CIT
Documents and shall have received the proceeds of the CIT Term Loan and such CIT
Revolving Loans as shall be necessary in order to consummate the transactions
contemplated hereby, and the Lender shall have received satisfactory evidence
thereof, all upon terms and conditions satisfactory to the Lender.
(u) MORTGAGES - The Companies which have any interest in any Real
Estate shall have executed and delivered to the Lender the Mortgages and
Assignments of Leases and Rents relating thereto, granting the Lender liens in
such Company's interest in such Real Estate and in the rents and profits
thereof, subject only to Permitted Encumbrances. The Lender shall have reviewed
and found satisfactory environmental reports on the Companies' Lake City,
Florida facility performed by an environmental engineering firm acceptable to
the Lender.
(v) APPRAISALS - The Lender shall have received satisfactory
appraisals on each Company's Inventory and Equipment, which appraisals: (i)
shall be by an appraiser acceptable to the Lender and (ii) shall indicate a Net
Orderly Liquidation Value of not less than $7,529,412 with respect to Equipment
owned by the Companies.
(w) BUSINESS VALUATION REPORT - The Lender shall have received a
satisfactory business valuation report of the Companies, which report: (i) shall
be by a valuation company acceptable to the Lender and (ii) shall indicate a
business valuation acceptable to the Lender.
(x) SCHEDULES - The Companies shall provide the Lender with
schedules of: (a) each Company's General Intangibles, in such detail as to
provide appropriate recording information with respect thereto, (b) Permitted
Encumbrances, (c) Permitted Indebtedness, (d) consignment agreements, (e)
locations of collateral, (f) Real Estate, (g) litigation, (h) benefit plans, (i)
investments, and (j) such other information as the Lender may reasonably
request, all of the foregoing in form and substance satisfactory to the Lender.
(y) CONSENTS - The Companies shall have delivered to the Lender
any consents of any persons required to consent to any part or all of the
transactions contemplated by this Financing Agreement and the other Loan
Documents, including, without limitation, Bank of America, N.A.
(z) ESTOPPEL AND/OR LANDLORD'S AGREEMENTS - The Companies shall
have delivered such estoppel and/or landlord's agreements as may be requested by
the Lender, duly executed by each person having an interest in any Real Estate
and each person having an interest in the real property leased by ▇▇▇▇▇ located
at 10252 and ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, in form and substance
satisfactory to the Lender.
21
(aa) LJH, LTD. SUBORDINATION AGREEMENT - LJH, Ltd. shall have
executed and delivered to the Lender the LJH Subordination Agreement, in form
and substance satisfactory to the Lender, to which each Company shall have
agreed.
(bb) INTENTIONALLY OMITTED
(cc) EX-IM BANK DOCUMENTS - The Lender shall have received a copy
of the Ex-Im Bank Documents duly executed by all parties thereto on terms
acceptable to the Lender.
(dd) COMMITMENT LETTER - The Companies shall have fully complied,
to the reasonable satisfaction of the Lender, with all of the terms and
conditions of the Commitment Letter.
(ee) BOND DOCUMENTS - The Lender shall have received copies of the
Bond Order, the Bond Guaranty, the Bond Letter of Credit, including all
amendments and endorsements thereto, in form and substance satisfactory to the
Lender.
(ff) COPYRIGHT SECURITY AGREEMENT - The Parent shall have delivered
to the Lender a Copyright Security Agreement, in form and substance satisfactory
to the Lender.
(gg) INTENTIONALLY OMITTED -.
(hh) INTENTIONALLY OMITTED.
(ii) OTHER DOCUMENTS - The Companies shall have delivered to the
Lender such other documents, instruments and agreements as the Lender may
reasonably request, all in form and substance satisfactory to the Lender.
(jj) EBITDA - The Lender shall have received and found satisfactory
(i) a report prepared by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ indicating the Companies
had EBITDA of not less than $10,200,000 for the Fiscal Year 2003 and: (ii) a
fairness opinion prepared by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇.
(kk) EXPENSE DEPOSIT - Out of the initial funding under the CIT
Loans, the Borrowers shall deposit with the Lender the sum of $25,000.00 as an
expense deposit (the "EXPENSE DEPOSIT") to cover Out-of-Pocket Expenses and any
other costs, expenses, and fees which may be incurred by the Lender during the
effective period of this Agreement, as to which the Companies are obligated to
reimburse the Lender, as otherwise provided herein. Upon the occurrence of any
Event of Default, the amount of the Expense Deposit shall be increased to
$50,000.00. On the first Business Day of each month, the Borrowers shall restore
the Expense Deposit to $25,000.00 (or $50,000.00, as may be applicable) for any
deficiency therein. The Companies shall remain obligated to reimburse the Lender
for any and all such fees and expenses, if the Expense Deposit does not contain
sufficient funds to cover all of those items.
Upon the execution of this Financing Agreement and the making of the Term Loan
hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as otherwise set forth
22
hereinabove or as the Companies and the Lender shall otherwise agree in writing.
SECTION 3 REVOLVING LOAN MATTERS
3.1 Intentionally Omitted.
3.2 In furtherance of the continuing assignment and security
interest in each Borrower's Accounts and Inventory, each Borrower will, upon the
creation of Accounts and purchase or acquisition of Inventory, execute and
deliver to the Lender such confirmatory schedules of Accounts and Inventory as
shall be delivered to the Agent under the CIT Financing Agreement. Borrowers
shall deliver to Lender (x) a Borrowing Base Certificate concurrently with the
delivery of such Certificate to the Agent under the CIT Financing Agreement and
(y) an "Export Related Borrowing Base Certificate" (as defined in the Ex-Im
Borrower Agreement) concurrently with the delivery of such Export Related
Borrowing Base Certificate to the Agent under the Ex-Im Borrower Agreement. In
addition, each Borrower shall provide the Lender with copies of such agreements
with, or purchase orders from, such Borrower's customers, and copies of invoices
to customers, proof of shipment or delivery, access to its computers, electronic
media and software programs associated therewith (including any electronic
records, contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral, in each case as shall be
delivered to the Agent under the CIT Financing Agreement and under the Ex-Im
Borrower Agreement. Failure to provide the Lender with any of the foregoing
shall in no way affect, diminish, modify or otherwise limit the security
interests granted herein. Each Borrower hereby authorizes the Lender to regard
such Borrower's printed name or rubber stamp signature on assignment schedules
or invoices as the equivalent of a manual signature by one of such Borrower's
authorized officers or agents.
3.3 Each Borrower hereby represents and warrants that: each Trade
Account Receivable is based on an actual and bona fide sale and delivery of
Inventory or rendition of services to customers, made by such Borrower in the
ordinary course of its business; the Inventory being sold, and the Trade
Accounts Receivable created, are the exclusive property of such Borrower and are
not and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of such Borrower; and the customers of such Borrower have accepted the
Inventory or services, owe and are obligated to pay the full amounts stated in
the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the
ordinary course of business with respect to which such Borrower has complied
with the notification requirements of Paragraph 3.5 of this Section 3. Each
Borrower confirms to the Lender that any and all Taxes or fees relating to its
business, its sales, the Accounts or Inventory relating thereto, are its sole
responsibility and that same will be paid by such Borrower when due, subject to
Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said
Taxes or fees represent a lien on or claim against the Accounts. Each Borrower
hereby further represents and warrants that it shall not acquire any Inventory
on a consignment basis unless (i) all such consignment Inventory is segregated
from other Inventory of such Borrower, (ii) all such consignment Inventory is
conspicuously marked as being consigned inventory, and (iii) the
23
consignor of such Inventory has complied will all applicable laws relating to
such consignment, including, without limitation, any notices required pursuant
to the applicable Uniform Commercial Code, nor will it co-mingle its Inventory
with any of its customers or any other person, including pursuant to any ▇▇▇▇
and hold sale or otherwise, and that its Inventory is marketable to its
customers in the ordinary course of business of such Borrower, except as it may
otherwise report in writing to the Lender pursuant to Paragraph 3.5 hereof from
time to time. Schedule 3 hereto describes all consignments of Inventory of each
Borrower existing on the Closing Date. Each Borrower also warrants and
represents that it is a duly and validly existing corporation and is qualified
to do business in all states where the failure to so qualify would have a
material adverse effect on the business of such Borrower or the ability of such
Borrower to enforce collection of Accounts due from customers residing in that
state. Each Borrower agrees to maintain such books and records regarding
Accounts and Inventory as the Lender may reasonably require and agrees that the
books and records of such Borrower will reflect the Lender's interest in the
Accounts and Inventory. All of the books and records of each Borrower will be
available to the Lender at normal business hours, including any records handled
or maintained for such Borrower by any other company or entity.
3.4
(a) Until the Lender has advised the Borrowers to the contrary
after the occurrence of an Event of Default, each Borrower, at its expense, will
enforce, collect and receive all amounts owing on the Accounts in the ordinary
course of its business and any proceeds it so receives shall be subject to the
terms hereof, and held on behalf of and in trust for the Lender. Such privilege
shall terminate automatically upon the institution by or against any Borrower of
any proceeding under any bankruptcy or insolvency law or, at the election of the
Lender, upon the occurrence of an Event of Default. Subject to the provisions of
the CIT Intercreditor Agreement, any checks, cash, credit card sales and
receipts, notes or other instruments or property received by any Borrower with
respect to any Collateral, including Accounts, shall be held by such Borrower in
trust for the Lender, separate from such Borrower's own property and funds, and
promptly turned over to the Lender with proper assignments or endorsements by
deposit to the Depository Accounts. Each Borrower shall: (i) indicate on all of
its invoices that funds should be delivered to and deposited in a Depository
Account; (ii) direct all of its account debtors to deposit any and all proceeds
of Collateral into the Depository Accounts; (iii) irrevocably authorize and
direct any banks which maintain such Borrower's initial receipt of cash, checks
and other items to promptly wire transfer all available funds to a Depository
Account; and (iv) advise all such banks of the Lender's security interest in
such funds. Each Borrower shall provide the Lender with prior written notice of
any and all deposit accounts opened or to be opened subsequent to the Closing
Date. No checks, drafts or other instrument received by the Lender shall
constitute final payment to the Lender unless and until such instruments have
actually been collected.
(b) Subject to the provisions of the CIT Intercreditor Agreement,
each Borrower shall establish and maintain, in its name and at its expense,
deposit accounts and lockboxes with such banks as are acceptable to the Lender
(the "BLOCKED ACCOUNTS") into which such Borrower shall promptly cause to be
deposited: (i) all proceeds of Collateral received by such Borrower, including
all amounts payable to such Borrower from credit card issuers and credit card
24
processors, and (ii) all amounts on deposit in deposit accounts used by such
Borrower at each of its locations, all as further provided in Paragraph 3.4(a)
above. The banks at which the Blocked Accounts are established shall enter into
an agreement, in form and substance satisfactory to the Lender (the "BLOCKED
ACCOUNT AGREEMENTS"), providing that all cash, checks and items received or
deposited in the Blocked Accounts are, subject to the provisions of the CIT
Intercreditor Agreement, the property of the Lender, that the depository bank
has no lien upon, or right of set off against, the Blocked Accounts and any
cash, checks, items, wires or other funds from time to time on deposit therein,
except as otherwise provided in the Blocked Account Agreements, and that
automatically, on a daily basis the depository bank will wire, or otherwise
transfer, in immediately available funds, all funds received or deposited into
the Blocked Accounts to such bank account as the Lender may from time to time
designate for such purpose. Each Borrower hereby confirms and agrees that all
amounts deposited in such Blocked Accounts and any other funds received and
collected by the Lender, whether as proceeds of Inventory or other Collateral or
otherwise, shall, subject to the provisions of the CIT Intercreditor Agreement,
be the property of the Lender
3.5 Each Borrower agrees to notify the Lender: (a) of any matters
affecting the value, enforceability or collectibility of any Account and of all
customer disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods not reported pursuant to clause
(b)(i) below, and of any adverse effect in the value of its Inventory, with its
Borrowing Base Certificate and other weekly and monthly collateral reports (as
applicable) provided to the Lender hereunder, in such detail and format as the
Lender may reasonably require from time to time; and (b) promptly of (i) all
customer disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, the amount of which dispute,
offset, defense, counterclaim, return or rejection is in excess of $500,000, and
(ii) any such matters which are material, as a whole, to the Accounts and/or the
Inventory. Each Borrower agrees to issue credit memoranda promptly (with
duplicates to the Lender upon request after the occurrence of an Event of
Default) upon accepting returns or granting allowances. Upon the occurrence of
an Event of Default (which is not cured or waived in writing by the Lender) and
on notice from the Lender, each Borrower agrees that all returned, reclaimed or
repossessed merchandise or goods shall be set aside by such Borrower, marked
with the Lender 's name (as secured party) and held by such Borrower, subject to
the provisions of the CIT Intercreditor Agreement, for the Lender 's account.
3.7 After the end of each month, the Companies shall promptly send the
Lender any statement received from the Agent showing the accounting for the
charges, loans, advances and other transactions occurring between the Agent, CIT
Lenders and the Companies during that month.
SECTION 4 TERM LOAN
4.1 Each Borrower hereby agrees to execute and deliver to the
Lender the Term Note to evidence the Term Loan to be extended by the Lender
25
4.2 Upon receipt of such Term Note and the satisfaction of the
conditions precedent set forth in Section 2 hereof, the Lender hereby agrees to
extend to the Borrowers the Term Loan.
4.3 Each Fiscal Year, on the first Business Day of the calendar
quarter immediately succeeding the delivery to the Lender of the audited
financial statements required under Paragraph 7.8(a) of Section 7 of this
Financing Agreement, commencing with the audited financial statements for the
Fiscal Year ending December 31, 2004, the Borrowers shall pay to the Lender an
amount equal to Surplus Cash for the Fiscal Year just ended for application
first, to any PIK Interest which has accrued to date pursuant to Paragraph
8.1(b) of Section 8 of this Financing Agreement, and then to such Obligations in
such order as the Lender shall determine in its sole discretion.
4.4 In the event this Financing Agreement is terminated for any
reason whatsoever, the Term Loan shall become due and payable on the effective
date of such termination notwithstanding any provision to the contrary in the
Term Note or this Financing Agreement.
4.5 The Borrowers may prepay at any time, at their option, in
whole or in part, the Term Loan, provided that on each such prepayment, the
Borrowers shall pay accrued interest on the principal so prepaid to the date of
such prepayment together with the Early Termination Fee, if applicable.
4.6 Except as provided in Paragraph 6.4 of Section 6 and Paragraph
7.5 of Section 7 of this Financing Agreement, if any Borrower sells any of the
Equipment, or if any of the Collateral is lost or destroyed or taken by
condemnation, such Borrower shall pay to the Lender, unless otherwise agreed by
the Lender, as and when received by such Borrower and as a mandatory prepayment
(the "MANDATORY PREPAYMENT") of the Term Loan, a sum equal to the proceeds
(including insurance payments) received by such Borrower from such sale, loss,
destruction or condemnation.
4.7 Unless otherwise provided herein, each prepayment of principal
(whether voluntary or mandatory) on the Term Loan shall be applied to the then
last maturing installments of principal of the Term Loan.
SECTION 5 INTENTIONALLY OMITTED
SECTION 6 COLLATERAL
6.1 As security for the prompt payment in full of all Obligations,
each Company hereby pledges and grants to the Lender a continuing general lien
upon, and security interest in, all of its assets, including, without
limitation, all of its:
(a) Accounts;
(b) Inventory;
26
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
(f) Equipment; and
(g) Real Estate.
6.2 The security interests granted hereunder shall extend and
attach to:
(a) All Collateral which is owned by such Company or in which such
Company has any interest, whether held by such Company or others for its
account, and, if any Collateral is Equipment, whether such Company's interest in
such Equipment is as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal property
or fixtures, including, but without limiting the generality of the foregoing,
all dies, jigs, tools, benches, molds, tables, accretions, component parts
thereof and additions thereto, as well as all accessories, motors, engines and
auxiliary parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Lender or such Company from
such Company's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by such Company, or to the sale,
promotion or shipment thereof.
6.3 Each Company agrees to safeguard, protect and hold all
Inventory for the Lender's account and make no disposition thereof except in the
ordinary course of its business of such Company, as herein provided. Each
Company represents and warrants that Inventory will be sold and shipped by such
Company to its customers only in the ordinary course of such Company's business,
and then only on open account and on payment terms not exceeding forty-five (45)
days from invoice date, provided that, absent the prior written consent of the
Lender, no Company shall sell Inventory on a consignment basis nor retain any
lien or security interest in any sold Inventory (other than Inventory with a
value not to exceed $250,000 at any time consigned to Qantas Airlines, and such
other consigned Inventory that is approved in writing by the Lender, after
receipt of documentation (i.e. consignment agreement, notice to creditors having
liens in inventory, properly filed UCC financing statements naming the party
receiving such consigned Inventory, as debtor, and such Company, as secured
party, and such other documents, instruments and agreements as Lender may
require). Upon the sale, exchange, or other disposition of Inventory, as herein
provided, the security interest in the Inventory provided for herein shall,
without break in continuity and without further formality or act, continue in,
and attach to, all proceeds, including any instruments for the payment of money,
Trade Accounts Receivable, documents of title, shipping documents, chattel paper
and all other cash and
27
non-cash proceeds of such sale, exchange or disposition. As to any such sale,
exchange or other disposition, the Lender shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation. Each Company hereby agrees to immediately forward any and all
proceeds of Collateral to the Depository Account, and to hold any such proceeds
(including any notes and instruments), in trust for the Lender pending delivery
to the Lender. Irrespective of the Lender's perfection status in any and all of
the General Intangibles, including, without limitations, any Patents,
Trademarks, Copyrights or licenses with respect thereto, each Company hereby
irrevocably grants the Lender a royalty free license to sell, or otherwise
dispose or transfer, in accordance with Paragraph 10.3 of Section 10 of this
Financing Agreement, and the applicable terms hereof, of any of the Inventory
upon the occurrence of an Event of Default which has not been waived in writing
by the Lender.
6.4 Subject to the provisions of the fourth sentence of this
Paragraph 6.4, each Company agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. Each Company also agrees to safeguard, protect and
hold all Equipment in accordance with the terms hereof and subject to the
Lender's security interest. Absent the Lender's prior written consent, any sale,
exchange or other disposition of any Equipment shall be made by a Company in the
ordinary course of business and as set forth herein. Each Company may, in the
ordinary course of its business, sell, exchange or otherwise dispose of obsolete
or surplus Equipment provided, however, that: (a) the then value of the
Equipment so disposed of by all Companies in any Fiscal Year does not exceed
$500,000 in the aggregate; and (b) the proceeds of any such sales or
dispositions shall, subject to the provisions of the CIT Intercreditor
Agreement, be held in trust by the selling Company for the Lender and shall be
immediately delivered to the Lender by deposit to the Depository Account, except
that the selling Company may retain and use such proceeds to purchase forthwith
replacement Equipment which such Company determines in its reasonable business
judgment to have a collateral value at least equal to the Equipment so disposed
of or sold; provided, however, that the aforesaid right shall automatically
cease upon the occurrence of a Default or an Event of Default which is not
waived in writing by the Lender. Upon the sale, exchange, or other disposition
of the Equipment, as herein provided, the security interest provided for herein
shall, without break in continuity and without further formality or act,
continue in, and attach to, all proceeds, including any instruments for the
payment of money, Accounts, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, the Lender
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation.
6.5 The rights and security interests granted to the Lender
hereunder are to continue in full force and effect, notwithstanding the
termination of this Financing Agreement until the final payment in full to the
Lender of all Obligations and the termination of this Financing Agreement. Any
delay, or omission by the Lender to exercise any right hereunder shall not be
deemed a waiver thereof, or be deemed a waiver of any other right, unless such
waiver shall be in writing
28
and signed by the Lender. A waiver on any one occasion shall not be construed as
a bar to, or waiver of, any right or remedy on any future occasion.
6.6 Notwithstanding the Lender's security interest in the
Collateral and to the extent that the Obligations are now or hereafter secured
by any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, the Lender shall have the
right in its sole discretion to determine which rights, liens, security
interests or remedies the Lender shall at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or the Lender's rights
hereunder.
6.7 Any reserves or balances to the credit of any Borrower and any
other property or assets of any Company in the possession or control of the
Lender may be held by the Lender as security for any Obligations and applied in
whole or partial satisfaction of such Obligations when due. The liens and
security interests granted herein, and any other lien or security interest the
Lender may have in any other assets of any Company, shall secure payment and
performance of all now existing and future Obligations.
6.8 Each Company possesses all General Intangibles and rights
thereto as set forth in Schedule 4 hereto reasonably necessary to conduct its
business as conducted as of the Closing Date and each Company shall maintain its
rights in, and the value of, the foregoing in the ordinary course of its
business, including, without limitation, by making timely payment with respect
to any applicable licensed rights. Each Company shall deliver to the Lender,
and/or shall use reasonable commercial efforts to cause the appropriate party to
deliver to the Lender, from time to time such pledge or security agreements with
respect to General Intangibles (now or hereafter acquired) of such Company as
the Lender shall require to obtain valid liens thereon. In furtherance of the
foregoing, each Company shall provide timely notice to the Lender of any
additional Patents, Trademarks, tradenames, service marks, Copyrights, brand
names, trade names, logos and other trade designations acquired or applied for
subsequent to the Closing Date and such Company shall execute such documentation
as the Lender may reasonably require to obtain and perfect its lien thereon.
Each Company hereby confirms that it shall deliver, or cause to be delivered,
any pledged stock issued subsequent to the Closing Date to the Lender in
accordance with the applicable terms of the Pledge Agreement and prior to such
delivery, shall hold any such stock in trust for the Lender.
6.9 This Financing Agreement and the obligation of the Companies
to perform all of their covenants and obligations hereunder are further secured
by the Mortgage(s) on the Real Estate.
6.10 Each Company shall give to the Lender from time to time such
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate or real estate
acquired after the date hereof as the Lender shall require to obtain a valid
lien thereon subject only to those exceptions of title as set forth in future
title insurance policies that are satisfactory to the Lender.
29
SECTION 7 REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Each Company hereby warrants and represents to the Lender as
follows:
(a) (i) The fair value of the Total Assets exceeds the
book value of the Total Liabilities; (ii) each Company is generally able to pay
its debts as they become due and payable; and (iii) no Company has unreasonably
small capital to carry on its business as it is currently conducted absent
extraordinary and unforeseen circumstances;
(b) (i) Schedule 5 hereto correctly and completely sets forth each
Company's (A) exact corporate or partnership name in its jurisdiction of
organization, (B) corporate or partnership name in each jurisdiction in which
such Company is qualified to do business, if different from its name in its
jurisdiction of organization, (C) chief executive office, (D) Collateral
locations, (E) jurisdiction of incorporation or formation, (F) federal taxpayer
identification number, and (G) organizational number or that no such number was
issued; (ii) except for the Permitted Encumbrances, after (1) the filing of
financing statements in the applicable filing offices at the jurisdictions of
organization set forth in Schedule 5, (2) delivery by the Companies of any
Collateral requiring the Lender's possession of the same to perfect its liens
and security interests therein, and (3) delivery by third parties of control
agreements required to perfect the Lender's liens and security interests in any
Collateral related thereto, this Financing Agreement creates a valid, perfected
and second priority security interest in the Collateral to the extent such
security interest may be perfected by any of the actions described in clause
(1), (2) or (3) above, and the security interests granted herein constitute and
shall at all times constitute the only liens on the Collateral except for
Permitted Encumbrances; (iii) except for the Permitted Encumbrances, each
Company is, or will be, at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of others; (iv) each Company will, at its expense,
forever warrant and, at the Lender's request, defend the same from any and all
claims and demands of any other person other than a holder of a Permitted
Encumbrance; (v) no Company will grant, create or permit to exist, any lien
upon, or security interest in, the Collateral, or any proceeds thereof, in favor
of any other person other than the holders of the Permitted Encumbrances; and
that the Equipment does not comprise a part of the Inventory of such Company;
and (vi) the Equipment is and will only be used by each Company in its business
and will not be held for sale or lease, or removed from its premises (other than
to move it to any other premises of any Company upon not less than ten (10) days
prior written notice to the Lender), or otherwise disposed of by such Company
except as otherwise permitted in this Financing Agreement;
(c) Each Company (i) is duly organized validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, (ii) has the corporate or limited partnership (as the case may be)
power to own its property and to carry on its business as now conducted and
(iii) is duly qualified to do business and is in good standing in each
jurisdiction set forth on Schedule 5 hereto, in each case, in each jurisdiction
in which the failure to be so qualified or in good standing would reasonably be
expected to have a Material Adverse Effect;
30
(d) Each Company has the corporate or limited partnership (as the
case may be) power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents to which such Company is a party
and all such action has been duly authorized by all necessary corporate or
partnership proceedings on its part. The Loan Documents to which it is a party
have been duly and validly executed and delivered by each Company and constitute
valid and legally binding agreements of each Company enforceable against such
Company in accordance with the respective terms thereof, except, in each case,
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or affecting
the enforcement of creditors' rights generally and general principles of equity.
(e) No authorization, consent, approval, license or exemption
(other than such exemptions that exist under applicable law, that are permitted,
or that have been obtained) of any person or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary for the valid delivery or
performance by any Company of any Loan Document to which it is a party or for
the grant of a security interest in or mortgage on the Collateral covered by the
Loan Documents, except such matters relating to performance as would ordinarily
be done in the ordinary course of business after the date hereof.
(f) Neither the delivery of the Loan Documents nor compliance with
the terms and provisions hereof or thereof will be contrary to the provisions
of, or constitute a default under (i) the charter or bylaws, operating agreement
or partnership agreement (as the case may be) of any Company or (ii) any
applicable law or any applicable regulation, order, writ, injunction or decree
of any court or governmental instrumentality or (iii) any material agreement to
which any Company is a party or by which it is bound or to which it is subject.
(g) Each Company has good title to all personal property and good
and indefeasible title to or a subsisting leasehold interest in, all Real Estate
as reflected as of the date hereof on its books and records as being owned or
leased by it after giving effect to the transaction contemplated herein, except,
as to the Real Estate, for minor defects in title that do not interfere with
such Company's ability to conduct its business as currently conducted or to
utilize such properties for their intended uses. Schedule 6 hereto lists all
Real Estate owned or leased by any Company and if leased, descriptions of such
leases, including all amendments, extensions and supplements thereto. All of
such assets are being maintained by the appropriate person in good working
condition, reasonable wear and tear excepted, in accordance with industry
standards.
(h) Except as listed on Schedule 7 hereto, no proceedings before
any court or governmental agency or department are pending against or affecting
any Company and to the knowledge of each Company, none of same have been
threatened which if adversely determined could reasonably be expected to have a
Material Adverse Effect.
(i) No Company is in default (i) under any material provisions of
any instrument evidencing any Indebtedness or of any agreement relating thereto
in such manner as to cause a Material Adverse Effect or (ii) in any respect
under or in violation of any order, writ, injunction
31
or decree of any court or governmental instrumentality, in such manner as to
cause a Material Adverse Effect or (iii) under any provision of any material
contract to which such Company is a party, which default would reasonably be
expected to have a Material Adverse Effect. Each Company will give the Lender
prompt written notice of any event or circumstance that may constitute such a
default and, in any event, will provide it upon receipt with copies of all
material notices from landlords or other property owners with respect to any
business location or operation of such Company.
(j) No Company is an "investment company," as such term is defined
in, or subject to registration under, the Investment Company Act of 1940, as
amended.
(k) No Company maintains or contributes to any Benefit Plan other
than those listed on Schedule 8 hereto. Each Benefit Plan has been and is being
maintained and funded in accordance with its terms and in compliance in all
material respects with all provisions of ERISA and the Internal Revenue Code
applicable thereto. Each Company and each ERISA Affiliate have fulfilled all
obligations related to the minimum funding standards of ERISA and the Internal
Revenue Code for each Benefit Plan and no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the Internal
Revenue Code, has occurred or is reasonably likely to occur, nor do the
conditions for imposition of a lien under Section 302(f) of ERISA exist or are
reasonably likely to exist, with respect to any Benefit Plan, and neither any
Company nor any ERISA Affiliate has incurred any liability (other than routine
liability for premiums) under Title IV of ERISA with respect to any Benefit
Plan. No event or events have occurred with respect to any Benefit Plan in
connection with which any Company, any ERISA Affiliate, or, to the knowledge of
any Company, any fiduciary of a Benefit Plan, directly or indirectly, would be
subject to any material liability (other than routine liability for premiums,
contributions (if required) and, with respect to a Benefit Plan, routine
liabilities for benefits), individually or in the aggregate, under ERISA or the
Internal Revenue Code.
(l) To the best of each Company's knowledge, such Company (i)
possesses all environmental, health and safety licenses, permits,
authorizations, registrations, approvals and similar rights necessary under
Environmental Laws for such Company to conduct its operations as now being
conducted, except where failure to have such licenses, permits, authorizations,
registrations, approvals, and similar rights would not reasonably be expected to
have a Material Adverse Effect, and (ii) each of such licenses, permits,
authorizations, registrations, approvals and similar rights is valid and
subsisting, in full force and effect and enforceable by such Company, and such
Company is in compliance with all terms, conditions or other provisions of such
permits, authorizations, regulations, approvals and similar rights except for
such failure or noncompliance that, individually or in the aggregate for such
Company, would not reasonably be expected to have a Material Adverse Effect. No
Company has received any written notices of any violation or noncompliance with,
or remedial obligation under, any Environmental Laws (which violation,
non-compliance, or remedial obligation has not been cured or would not
reasonably be expected to have a Material Adverse Effect) and there are no
writs, injunctions, decrees, orders or judgments outstanding under the
Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of
each Company, investigations or inquiries pending or threatened under
Environmental Laws, relating to the ownership, use, condition, maintenance or
32
operation of, or conduct of business related to, any property owned, leased or
operated by any Company or other assets of any Company other than those
violations, instances of noncompliance, obligations, writs, injunctions,
decrees, orders, judgments, lawsuits, claims, proceedings, investigations or
inquiries that individually or in the aggregate for the Companies, would not
reasonably be expected to have a Material Adverse Effect. There are no
obligations, undertakings or liabilities arising out of or relating to
Environmental Laws which any Company has agreed to, assumed or retained, or to
the best of each Company's knowledge, by which any Company is adversely
affected, by contract or otherwise, except such obligations, undertakings or
liabilities as would not reasonably be expected to have a Material Adverse
Effect. No Company has received a written notice or claim to the effect that it
is or may be liable to any other person as the result of a release or threatened
release of a Hazardous Material except such notice or claim that would not
reasonably be expected to have a Material Adverse Effect. Each Company has
complied with all Environmental Laws and the requirements of any permits,
licenses or other authorizations issued under any Environmental Laws, except any
noncompliance that would not reasonably be expected to have a Material Adverse
Effect.
(m) The proceeds of the Term Loan shall be used to refinance and
replace the Existing Credit Facility and to pay certain of the costs of closing
the transactions contemplated hereby. It is the intent of the parties hereto
that this Financing Agreement, together with the CIT Financing Agreement, be
deemed the "Credit Facility" as such term is defined in the Indentures, that the
Term Loan and all other Obligations constitute "Designated Senior Debt" as such
terms are defined in the Indentures and that all Indebtedness under the
Indentures be subordinated to the Obligations as set forth in such Indentures.
(n) The proceeds of each CIT Revolving Loan made after the Closing
Date will be used by the Borrowers for working capital purposes. None of the
proceeds of the Term Loan, the CIT Term Loan or the CIT Revolving Loans will be
used directly or indirectly for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry margin stock, or for any other purpose which might constitute this
transaction as a "purpose credit" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve. No Borrower nor any agent acting on
its behalf has taken or will take any action which might cause this Financing
Agreement or any other Loan Document to violate Regulations U or X of the Board
of Governors of the Federal Reserve or any other regulation of the Board of
Governors of the Federal Reserve or to violate the Securities Exchange Act of
1934.
(o) The Companies maintain insurance of such types as is usually
carried by corporations engaged in the same or similar businesses and similarly
situated with financially sound, responsible and reputable insurance companies
or associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdiction in which its
operations are carried on) and in such amounts (and with co-insurance and
deductibles) as such insurance is usually carried by corporations and engaged in
the same or similar businesses and similarly situated, but in any event, with
respect to improvements to real property and tangible personal property
(assuming the subject improvements are in fact replaced
33
or restored), in amounts acceptable to the Lender. No Company maintains any
formalized self-insurance program with respect to its assets or operations or
material risks with respect thereto.
(p) Except for Permitted Indebtedness, no Company has any
outstanding Indebtedness (excluding the loans and advances hereunder) or
material contractually assumed contingent liabilities.
(q) This Financing Agreement and the other Loan Documents create
valid security interests and liens in all of the Collateral described therein in
favor of the Lender securing the Obligations and constitute (subject to (i) the
filing of financing statements on the date hereof and thereafter from time to
time on the Lender's request therefor, (ii) delivery of any collateral after the
date hereof as provided herein or any other Loan Document, (iii) the execution
of Blocked Account Agreements with the banks which maintain Depository Accounts
and (iv) delivery of mortgages and/or deeds of trust to obtain liens on the Real
Estate), except for Permitted Encumbrances, perfected liens and security
interests in substantially all of such Collateral described therein subject to
no liens other than Permitted Encumbrances
(r) Neither the making of the Term Loan hereunder (or the
extension of any other credit contemplated hereunder) nor the Borrowers' use of
the proceeds thereof will violate either Executive Order 13224 or Sections 326
and 371 through 377 of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub.
L. No. 107-56 (also known as the USA Patriot Act) or any enabling legislation or
rules, regulations or executive orders relating thereto.
7.2 Each Company agrees to maintain books and records pertaining
to the Collateral in accordance with GAAP and in such additional detail, form
and scope as the Lender shall reasonably require. Each Company agrees that the
Lender or its agents may enter upon such Company's premises at any time during
normal business hours, and from time to time in its reasonable business
judgment, for the purpose of inspecting the Collateral and any and all records
pertaining thereto. Each Company agrees to afford the Lender fifteen (15) days
prior written notice of any change in the location of any Collateral, other than
to locations, that as of the Closing Date, are known to the Lender. Each Company
shall also advise the Lender promptly, in sufficient detail, of any material
adverse change relating to the type, quantity or quality of the Collateral or on
the security interests granted to the Lender herein.
7.3 Each Company agrees to: (a) execute and deliver to the Lender,
from time to time, solely for the Lender's convenience in maintaining a record
of the Collateral, such written statements, and schedules as the Lender may
reasonably require, designating, identifying or describing the Collateral; (b)
provide the Lender with Inventory Appraisals, on request, but no more frequently
than annually prior to the occurrence of a Default or an Event of Default unless
the Lender in the exercise of its reasonable business judgment requires
additional Inventory Appraisals, which Inventory Appraisals shall be at the
Borrowers' expense and otherwise acceptable to the Lender and (c) provide the
Lender with Equipment Appraisals, on request, but no more frequently than
annually prior to the occurrence of a Default or an Event of Default unless the
Lender in the exercise of its reasonable business judgment requires additional
34
Equipment Appraisals, which Equipment Appraisals shall be at the Borrowers'
expense and otherwise acceptable to the Lender. Any Company's failure, however,
to promptly give the Lender such statements, or schedules shall not affect,
diminish, modify or otherwise limit the Lender's security interests in the
Collateral.
7.4 Each Company agrees to comply with the requirements of all
state and federal laws in order to grant to the Lender a valid and perfected
security interests in the Collateral, subject only to the Permitted
Encumbrances. The Lender is hereby authorized by each Company to file (including
pursuant to the applicable terms of the UCC) from time to time any financing
statements, continuations or amendments covering the Collateral. Each Company
hereby consents to and ratifies any and all execution and/or filing of financing
statements on or prior to the Closing Date by the Lender. Each Company agrees to
do whatever the Lender may reasonably request, from time to time, by way of: (a)
filing notices of liens, financing statements, amendments, renewals and
continuations thereof; (b) cooperating with the Lender 's agents and employees;
(c) keeping Collateral records; (d) transferring proceeds of Collateral to the
Lender's possession; and (e) performing such further acts as the Lender may
reasonably require in order to effect the purposes of this Financing Agreement,
including but not limited to obtaining control agreements with respect to
deposit accounts and/or Investment Property.
7.5
(a) Each Company agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to the Lender. All policies covering the
Real Estate, Equipment and Inventory are, subject to the rights of any holders
of Permitted Encumbrances holding claims senior to the Lender, to be made
payable to the Lender, in case of loss, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause and are to contain such other
provisions as the Lender may reasonably require to fully protect the Lender's
interest in the Real Estate, Inventory and Equipment and to any payments to be
made under such policies. All original policies or true copies thereof are to be
delivered to the Lender, premium prepaid, with the loss payable endorsement in
the Lender's favor, and shall provide for not less than thirty (30) days prior
written notice to the Lender of the exercise of any right of cancellation. At
any Company's request, or if any Company fails to maintain such insurance, the
Lender may arrange for such insurance, but at the Borrowers' expense and without
any responsibility on the Lender's part for: (i) obtaining the insurance; (ii)
the solvency of the insurance companies; (iii) the adequacy of the coverage; or
(iv) the collection of claims. Upon the occurrence of an Event of Default which
is not waived in writing by the Lender, the Lender shall, subject to the rights
of any holders of Permitted Encumbrances holding claims senior to the Lender,
have the sole right, in the name of the Lender or any Company, to file claims
under any insurance policies, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
35
(b)
(i) In the event of any loss or damage by fire or other casualty,
Insurance Proceeds relating to Inventory shall, subject to the provisions of the
CIT Intercreditor Agreement, be applied to payment of the Term Loan. Upon the
occurrence of a Default or Event of Default, the Lender may apply Insurance
Proceeds to the Obligations in such manner as it may deem advisable in its sole
discretion;
(ii) In the event any part of the Real Estate or Equipment of a
Borrower is damaged by fire or other casualty and the Insurance Proceeds for
such damage or other casualty is less than or equal to $100,000, the Lender
shall, subject to the provisions of the CIT Intercreditor Agreement, promptly
apply such Insurance Proceeds to the prepayment of the Term Loan in accordance
with Paragraph 4.6 of Section 4 of this Financing Agreement. Upon the occurrence
of a Default or Event of Default, the Lender may apply Insurance Proceeds to the
Obligations in such manner as it may deem advisable in its sole discretion;
(iii) Absent the occurrence of an Event of Default, and provided
that (x) each Borrower has sufficient business interruption insurance to replace
the lost profits of any of such Borrower's facilities, and (y) the Insurance
Proceeds are in excess of $100,000, the Borrowers may elect (by delivering
written notice to the Lender) to replace, repair or restore such Real Estate or
Equipment to substantially the equivalent condition prior to such fire or other
casualty as set forth herein. If the Borrowers do not, or cannot, elect to use
the Insurance Proceeds as set forth above, the Lender may, subject to the rights
of any holders of Permitted Encumbrances holding claims senior to the Lender,
apply the Insurance Proceeds to the payment of the Obligations in such manner
and in such order as the Lender may reasonably elect; and
(iv) If the Borrowers elect in accordance with clause (iii) above
to use the Insurance Proceeds in excess of $100,000 for the repair, replacement
or restoration of any Real Estate and/or Equipment, and there is then no Event
of Default, subject to the provisions of the CIT Intercreditor Agreement, such
Insurance Proceeds will be applied to the prepayment of the Term Loan. The
Availability Reserve will be reduced dollar-for-dollar upon receipt of
non-cancelable executed purchase orders, delivery receipts or contracts for the
replacement, repair or restoration of Equipment and/or the Real Estate and
disbursements in connection therewith. Prior to the commencement of any material
restoration, repair or replacement of Real Estate, the Borrowers shall provide
the Lender with a restoration plan and a total budget certified by an
independent third party experienced in construction costing. If there are
insufficient Insurance Proceeds to cover the cost of restoration as so
determined, the Borrowers shall be jointly and severally responsible for the
amount of any such insufficiency, prior to the commencement of restoration and
shall demonstrate evidence of such before the reserve will be reduced.
Completion of restoration shall be evidenced by a final, unqualified
certification of the design architect employed, if any; an unconditional
Certificate of Occupancy, if applicable; such other certification as may be
required by law; or if none of the above is applicable, a written good faith
determination of completion by the Borrowers (herein collectively the
"Completion"). Upon Completion, any remaining reserve as established hereunder
will be automatically released.
36
(c) In the event the Companies fail to provide the Lender with
timely evidence, acceptable to the Lender of their maintenance of insurance
coverage required pursuant to paragraph 7.5(a) above, the Lender may purchase,
at the Companies' expense, insurance to protect the Lender' s interests in the
Collateral. The insurance acquired by the Lender may, but need not, protect the
Companies' interest in the Collateral, and therefore such insurance may not pay
claims which the Companies may have with respect to the Collateral or pay any
claim which may be made against the Companies in connection with the Collateral.
In the event the Lender purchases, obtains or acquires insurance covering all or
any portion of the Collateral, the Companies shall be responsible for all of the
applicable costs of such insurance, including premiums, interest (at the
Interest Rate applicable to Cash Interest as set forth in paragraph 8.1 of
Section 8 hereof), fees and any other charges with respect thereto, until the
effective date of the cancellation or the expiration of such insurance. Each
Company hereby acknowledges that the costs of the premiums of any insurance
acquired by the Lender may exceed the costs of insurance which the Companies may
be able to purchase on their own. In the event that the Lender purchases such
insurance, the Lender will notify the Companies of said purchase within thirty
(30) days of the date of such purchase. If, within thirty (30) days of the date
of such notice, the Companies provide the Lender with proof that the Companies
had the insurance coverage required pursuant to Paragraph 7.5(a) of Section 7 of
this Financing Agreement (in form and substance satisfactory to the Lender) as
of the date on which the Lender purchased insurance and the Companies continued
at all times to have such insurance, then the Lender agrees to cancel the
insurance purchased by the Lender and reimburse the Borrowers with the amount of
all costs, interest and other charges associated with any insurance purchased by
the Lender.
7.6 Each Company agrees to pay, when due, all Taxes, including
sales taxes, assessments, claims and other charges lawfully levied or assessed
upon each Company or the Collateral unless such Taxes are being diligently
contested in good faith by such Company by appropriate proceedings and adequate
reserves are established in accordance with GAAP. Notwithstanding the foregoing,
if any lien shall be filed or claimed thereunder (a) for Taxes due the United
States of America, or (b) which in the Lender's opinion is likely to create a
valid obligation having priority over the rights granted to the Lender herein
(exclusive of Real Estate), such lien shall not be deemed to be a Permitted
Encumbrance hereunder and such Company shall immediately pay such tax and remove
the lien of record. If any Company fails to do so promptly, then at the Lender's
election, the Lender may, upon the occurrence of a Default or Event of Default,
imminent risk of seizure, filing of any priority lien, forfeiture, or sale of
any of the Collateral, pay Taxes on any Company's behalf, and the amount thereof
shall be an Obligation secured hereby and due on demand.
7.7 Each Company: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would reasonably be expected to have
a material and adverse impact on the Collateral, or any material part thereof,
or on the business or operations of the Companies taken as a whole, provided
that such Company may contest any acts, rules, regulations, orders and
directions of such bodies or officials in any reasonable manner which will not,
in the Lender's reasonable opinion, materially and adversely effect the Lender's
rights or priority in the Collateral; (b) agrees to comply with all
environmental statutes, acts, rules, regulations or orders as presently existing
37
or as adopted or amended in the future, applicable to the Collateral, the
ownership and/or use of its real property and operation of its business, which
the failure to comply with would reasonably be expected to have a material and
adverse impact on the Collateral, or any material part thereof, or on the
operation of the business of the Companies taken as a whole; and (c) shall not
be deemed to have breached any provision of this Paragraph 7.7 if (i) the
failure to comply with the requirements of this Paragraph 7.7 resulted from good
faith error or innocent omission, (ii) such Company promptly commences and
diligently pursues a cure of such breach, and (iii) such failure is cured within
(30) days following such Company's receipt of notice of such failure, or if such
cannot in good faith be cured within thirty (30) days, then such breach is cured
within a reasonable time frame based upon the extent and nature of the breach
and the necessary remediation, and in conformity with any applicable consent
order, consensual agreement and applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, Parent agrees that, unless the
Lender shall have otherwise consented in writing, Parent will furnish to the
Lender: (a) within one hundred five (105) days after the end of each Fiscal Year
of the Companies, an audited Consolidated Balance Sheet, with an unaudited
Consolidating Balance Sheet attached thereto, as at the close of such year, and
statements of profit and loss, cash flow and reconciliation of surplus of the
Companies for such year, which consolidated financial statements shall be
audited by independent public accountants selected by Parent and satisfactory to
the Lender; (b) within sixty (60) days after the end of each Fiscal Quarter
(excluding the fourth Fiscal Quarter of each Fiscal Year), a Consolidated
Balance Sheet and Consolidating Balance Sheet as at the end of such period and
statements of profit and loss, cash flow and surplus of the Companies, certified
by the Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer, Treasurer or Controller of the Parent; (c) within thirty (30) days
after the end of each month a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and surplus of the Companies
for such period, certified by the Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, Treasurer or Controller of the Parent and (d)
from time to time, such further information regarding the business affairs and
financial condition of any Company as the Lender may reasonably request,
including, without limitation (i) the accountant's management practice letter
and (ii) annual cash flow projections in form satisfactory to the Lender. Each
financial statement which any Company is required to submit hereunder must be
accompanied by officer's certificates, signed by the President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer, Vice President,
Controller, or Treasurer of such Company, pursuant to which any one such officer
of such Company must certify that: (x) the financial statement(s) fairly and
accurately represent(s) in all material respects such Company's financial
condition at the end of the particular accounting period, as well as such
Company's operating results during such accounting period, subject to year-end
audit adjustments; and (y) during the particular accounting period: (A) there
has been no Default or Event of Default under this Financing Agreement,
provided, however, that if any such officer has knowledge that any such Default
or Event of Default, has occurred during such period, the existence of and a
detailed description of same shall be set forth in such officer's certificate;
(B) such Company has not received any notice of cancellation with respect to its
property insurance policies; (C) such Company has not received any notice that
could reasonably be expected to result in a Material Adverse Effect on the value
38
of the Collateral taken as a whole; and (D) the exhibits attached to such
financial statement(s) constitute detailed calculations demonstrating compliance
with all financial covenants contained in this Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, each Company agrees that, without the
prior written consent of the Lender, except as otherwise herein provided, such
Company will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment, (whether as a result
of a purchase money or title retention transaction, or other security interest,
or otherwise) to exist on any of such Company's Collateral or any other assets,
whether now owned or hereafter acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than Permitted
Indebtedness; provided, however, that notwithstanding the provisions of the CIT
Financing Agreement to the contrary, the following shall apply to the amount of
Senior Secured Debt which may be outstanding at any time:
(i) The maximum aggregate amount of Senior Secured Debt which can
be outstanding at any time shall not exceed an amount (the "SENIOR SECURED DEBT
CAP") equal to result of (i) TTM EBITDA multiplied by (ii)(a) 4.30 from the
Closing Date through the first Anniversary Date, (b) 4.00 after the first
Anniversary Date through the second Anniversary Date,(c) 3.80 after the second
Anniversary Date through the third Anniversary Date and (d) 3.60 at any time
after the third Anniversary Date;
(ii) The Senior Secured Debt Cap shall be calculated monthly based
upon a certificate (the "SENIOR SECURED DEBT CAP CERTIFICATE") to be delivered
to the Lender not later than seven (7) days after the end of each month which
shall be executed by the Chief Financial Officer, Treasurer or Controller of the
Parent and shall set forth calculations in reasonable detail demonstrating
compliance by the Companies with the Senior Secured Debt Cap;
(iii) The Borrower shall not request and the CIT Lenders shall not
make any CIT Revolving Loans in an amount such that Senior Secured Debt shall be
outstanding in an amount in excess of the Senior Secured Debt Cap and if Senior
Secured Debt shall be outstanding in an amount in excess of the Senior Secured
Debt Cap, then (a) no CIT Revolving Loans may be requested by the Borrowers or
made by the CIT Lenders until such time as the Senior Secured Debt obligations
shall be equal to or less than the Senior Secured Debt Cap and (b) the Borrowers
shall repay, in such amount as shall cause the outstanding Senior Secured Debt
to be less than or equal to the Senior Secured Debt Cap, FIRST, CIT Revolving
Loans, SECOND, after the CIT Revolving Loans shall be paid in full, the CIT Term
Loan, and THIRD, after payment in full of the CIT Term Loan, the Term Loan;
(iv) Notwithstanding the provisions of clauses (i) and (iii) above,
the Borrowers may elect, by notification to the Lender concurrently with the
delivery of the then current Senior
39
Secured Debt Cap Certificate, to not have the Senior Debt Cap apply for any two
non-consecutive months in each calendar year; and
(v) In any event, at no time shall Availability (including the
Availability Reserve) be reduced by application of the Senior Debt Cap by an
amount in excess of 50% of the then outstanding Term Loan; and
provided further, that Parent may pay cash interest with respect to the
Indebtedness evidenced by the 8-1/8% Senior Subordinated Notes Due 2008
Indenture dated as of February 17, 1998 and/or the LJH Subordinated Debt if and
only to the extent (1) both immediately before and after giving effect to the
payment of such interest (x) no Default or Event of Default exists, and (y)
Availability is not less than $3,000,000 and (2) with respect to payments made
on the LJH Subordinated Debt, such payment(s) are made in any year only after
the Lender has received payment in full of all Surplus Cash required to be paid
to the Lender for the Fiscal Year just ended pursuant to Paragraph 4.3 of
Section 4 of this Financing Agreement.
(c) Sell, lease, assign, transfer or otherwise dispose of
Collateral, except (i) sales, leases, assignments, transfers or other
dispositions by a Company to another Company, which proceeds received from, or
other consideration given in connection with, such sale, lease, assignment,
transfer or other disposition, when aggregated with other sales, leases,
assignments, transfers and other dispositions to other Companies do not exceed
$250,000 in the aggregate in any consecutive twelve (12) month period, provided
the Lender is given written notice thereof not less than five (5) days after
such sale, lease, assignment, transfer or other disposition becomes effective,
(ii) sales, leases, assignments, transfers or other dispositions by a Company to
another Company other than pursuant to clause (i) above provided the Lender is
given not less than five (5) days prior written notice of such transaction and
not less than five (5) days prior to the effective date thereof, the Lender is
provided copies of all documents evidencing or relating to such sale, lease,
assignment, transfer or other disposition, and (iii) as otherwise specifically
permitted by this Financing Agreement, including but not limited to Paragraph
7.13 of Section 7 of this Financing Agreement, or any other Loan Document;
(d) Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, or existence, re-incorporate or
re-organize, or enter into or engage in any operation or activity materially
different from that presently being conducted by such Company, except that such
Company may change its corporate name or address and such Company may engage in
operations and activities reasonably related to those presently being conducted;
provided that: (i) such Company shall give the Lender thirty (30) days prior
written notice thereof and (ii) such Company shall execute and deliver, prior to
or simultaneously with any such action, any and all documents and agreements
requested by the Lender to confirm the continuation and preservation of all
security interests and liens granted to the Lender hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation, except (i) by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (ii) guarantees executed by a
Company in the ordinary course of its business guaranteeing Indebtedness or
other
40
obligations of another Company if the incurring of such Indebtedness or other
obligations is permitted hereunder and (iii) guarantees of Indebtedness or other
obligations of non-Affiliate third parties in existence on the Closing Date and
listed on Schedule 2 hereto;
(f) Declare or pay any dividend or distributions of any kind on,
or purchase, acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter outstanding, except
(i) Parent may pay dividends with respect to any class of its capital stock
payable solely in additional shares of such class of stock, and (ii)
subsidiaries of Parent may pay dividends to Parent or another Company ratably
with respect to their capital stock,
(g) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation or purchase or acquire all or substantially all of
the stock or assets of any entity, person or corporation, except (i) investments
in Cash Equivalents if and only if the Lender has a perfected second priority
lien and security interest in such Cash Equivalents, (ii) investments existing
on the date of this Financing Agreement described on Schedule 9, (iii) loans
made by one Company to another Company permitted pursuant to clause (h) of the
definition of Permitted Indebtedness, and (iv) loans and advances to employees
of any Company in the ordinary course of business of such Company (including,
without limitation, for travel, entertainment and relocation expenses) which do
not exceed $100,000 in the aggregate at any time outstanding; or
(h) Pay any management, consulting or other similar fees to any
person, corporation or other entity which is an Affiliate of such Company in
excess of $100,000 in the aggregate in any Fiscal Year.
41
7.10 Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Companies shall:
(a) Maintain at all times during each Fiscal Quarter ending below
a Tangible Net Worth of not less than the amount set forth below for the
applicable period:
PERIOD TANGIBLE NET WORTH
------ ------------------
Fiscal Quarter ending June 30, 2004 $21,330,000
Fiscal Quarter ending September 30, 2004 $21,410,000
Fiscal Quarter ending December 31, 2004 $23,646,000
Fiscal Quarter ending March 31, 2005 $24,022,000
Fiscal Quarter ending June 30, 2005 $24,398,000
Fiscal Quarter ending September 30, 2005 $24,774,000
Fiscal Quarter ending December 31, 2005 $25,150,000
Fiscal Quarter ending March 31, 2006 $25,898,000
Fiscal Quarter ending June 30, 2006 $26,646,000
Fiscal Quarter ending September 30, 2006 $27,394,000
Fiscal Quarter ending December 31, 2006 $28,142,000
Fiscal Quarter ending March 31, 2007 $28,704,000
Fiscal Quarter ending June 30, 2007 $29,266,000
Fiscal Quarter ending September 30, 2007 $29,828,000
Fiscal Quarter ending December 31, 2007 $30,390,000
42
(b) Maintain a Fixed Charge Coverage Ratio of not less than the
ratio set forth below as of the end of the applicable period:
PERIOD RATIO
------ -----
Fiscal Quarter ending June 30, 2004 1.00:1.00
Fiscal Quarter ending September 30, 2004 1.00:1.00
Fiscal Quarter ending December 31, 2004 1.25:1.00
Fiscal Quarter ending March 31, 2005 1.25:1.00
Fiscal Quarter ending June 30, 2005 1.25:1.00
Fiscal Quarter ending September 30, 2005 1.25:1.00
Fiscal Quarter ending December 31, 2005 1.25:1.00
Fiscal Quarter ending March 31, 2006 1.35:1.00
Fiscal Quarter ending June 30, 2006 1.35:1.00
Fiscal Quarter ending September 30, 2006 1.35:1.00
Fiscal Quarter ending December 31, 2006 1.35:1.00
Fiscal Quarter ending March 31, 2007 1.40:1.00
Fiscal Quarter ending June 30, 2007 1.40:1.00
Fiscal Quarter ending September 30, 2007 1.40:1.00
Fiscal Quarter ending December 31, 2007 1.40:1.00
43
(c) Maintain a ratio of (i) the sum of Indebtedness as of such
date minus PIK Subordinated Debt as of such date to
(ii) EBITDA for the four (4) Fiscal Quarters then ending of
not more than the ratio set forth below as of the end of the
applicable period:
PERIOD RATIO
------ -----
Fiscal Quarter ending June 30, 2004 8.50:1.00
Fiscal Quarter ending September 30, 2004 7.50:1.00
Fiscal Quarter ending December 31, 2004 4.90:1.00
Fiscal Quarter ending March 31, 2005 4.50:1.00
Fiscal Quarter ending June 30, 2005 4.50:1.00
Fiscal Quarter ending September 30, 2005 4.50:1.00
Fiscal Quarter ending December 31, 2005 4.50:1.00
Fiscal Quarter ending March 31, 2006 4.30:1.00
Fiscal Quarter ending June 30, 2006 4.30:1.00
Fiscal Quarter ending September 30, 2006 4.30:1.00
Fiscal Quarter ending December 31, 2006 4.30:1.00
Fiscal Quarter ending March 31, 2007 4.00:1.00
Fiscal Quarter ending June 30, 2007 4.00:1.00
Fiscal Quarter ending September 30, 2007 4.00:1.00
Fiscal Quarter ending December 31, 2007 4.00:1.00
The Companies hereby acknowledge and agree that the financial covenants
set forth in this Paragraph 7.10 of Section 7 of this Financing Agreement will
need to be adjusted by the Lender if
44
any Indebtedness of the Companies shall be repurchased at a discount (for the
avoidance of doubt, this sentence shall not be deemed to permit any such
purchase of Indebtedness of the Companies).
7.11 The Companies agree to advise the Lender in writing of: (a)
all expenditures (actual or anticipated) in excess of $100,000 from the budgeted
amount therefor in any Fiscal Year for (i) environmental clean-up, (ii)
environmental compliance or (iii) environmental testing and the impact of said
expenses on the Companies' working capital; and (b) any notices any Company
receives from any local, state or federal authority advising any Company of any
environmental liability (real or potential) stemming from any Company's
operations, its premises, its waste disposal practices, or waste disposal sites
used by any Company and to provide the Lender with copies of all such notices if
so required.
7.12 Each Company hereby agrees to jointly and severally indemnify
and hold harmless the Lender and its officers, directors, employees, attorneys
and agents (each an "INDEMNIFIED PARTY") from, and holds each of them harmless
against, any and all losses, liabilities, obligations, claims, actions, damages,
costs and expenses (including reasonable attorney's fees) and any payments made
by the Lender pursuant to any indemnity provided by the Lender with respect to
or to which any Indemnified Party could be subject insofar as such losses,
liabilities, obligations, claims, actions, damages, costs, fees or expenses with
respect to the Loan Documents, including without limitation those which may
arise from or relate to: (a) the Depository Account, the Blocked Accounts, the
lockbox and/or any other depository account and/or the agreements executed in
connection therewith; and (b) any and all claims or expenses asserted against
the Lender as a result of any environmental pollution, hazardous material or
environmental clean-up relating to the Real Estate; or any claim or expense
which results from any Company's operations (including, but not limited to, any
Company's off-site disposal practices) and use of the Real Estate, which the
Lender may sustain or incur (other than solely as a result of the physical
actions of the Lender on any Company's premises which are determined to
constitute gross negligence or willful misconduct by a court of competent
jurisdiction), all whether through the alleged or actual negligence of such
person or otherwise, except and to the extent that the same results solely and
directly from the gross negligence or willful misconduct of such Indemnified
Party as finally determined by a court of competent jurisdiction. Each Company
hereby agrees that this indemnity shall survive termination of this Financing
Agreement, as well as payments of Obligations which may be due hereunder. The
Lender may, based on such credit, collateral and other considerations
customarily taken into account by the Lender in making such determinations,
establish such Availability Reserves with respect thereto as it determine under
the circumstances and, upon any termination hereof, hold such reserves as cash
reserves for any such contingent liabilities.
7.13 Without the prior written consent of the Lender, each Company
agrees that it will not enter into any transaction, including, without
limitation, any purchase, sale, lease, loan or exchange of property with any
Affiliate of any Company, provided that, except as otherwise set forth in this
Financing Agreement, so long as no Default or Event of Default exists or will
occur hereunder prior to and after giving effect to any such transaction, (a)
each Company may enter into sale and service transactions in the ordinary course
of its business and pursuant to the reasonable requirements of such Company, and
upon standard terms and conditions and fair and
45
reasonable terms, no less favorable to such Company than such Company could
obtain in a comparable arms length transaction with an unrelated third party,
(b) the Companies may pay the management, consulting and similar fees permitted
by Paragraph 7.9(h) of this Financing Agreement and (c) the Companies may pay
and perform their obligations under the LJH Leases including, without
limitation, payments not to exceed (x) $23,832.00 each month, increasing on
November 1, 2007 to $25,023.00 each month, under the LJH Dallas Lease, (y)
subject to the LJH Subordination Agreement, $74,076.67 each month under the LJH
Equipment Lease and (z) a base rent of $50,806.80 each month under the LJH
Goodyear Lease, plus additional rent under the "Master Lease" referred to in the
LJH Goodyear Lease.
SECTION 8 INTEREST, FEES AND EXPENSES
8.1
(a) Cash interest ("CASH INTEREST") on the Term Loan shall be
payable monthly in arrears as of the end of each calendar month, on the date
of each payment of principal thereof and on the Maturity Date at the per annum
rate calculated in accordance with the column "Cash Interest Pay Rate" in the
chart below. In addition to the Cash Interest accruing in accordance with the
prior sentence, interest ("PIK INTEREST") shall accrue on the outstanding
balance of the Term Loan at the per annum rate calculated in accordance with the
column "PIK Interest Pay Rate" in the chart below (the "Cash Interest Pay Rate"
and "PIK Interest Pay Rate" are hereinafter referred to as the "INTEREST RATES")
and shall be payable as set forth in Paragraph 8.1(b) of this Section 8. In no
event shall the Interest Rates aggregate less than nine percent (9%) or more
than eighteen percent (18%) per annum.
LEVELS RATIO OF SENIOR SECURED CASH INTEREST PAY PIK INTEREST
DEBT: TTM EBITDA RATE PAY RATE
------ ----------------------- ----------------- ------------
▇▇▇▇▇ ▇ <3.40:1.00 Prime Rate + 3.00% 2.00%
▇▇▇▇▇ ▇ > or = 3.40:1.00 and < 3.60:1.00 Prime Rate + 4.00% 2.00%
▇▇▇▇▇ ▇ > or = 3.60:1.00 and < 3.80:1.00 Prime Rate + 5.00% 3.00%
▇▇▇▇▇ ▇ > or = 3.80:1.00 and < 4.00:1.00 Prime Rate + 5.00% 4.00%
▇▇▇▇▇ ▇ > or = 4.00:1.00 and < 4.10:1.00 Prime Rate + 6.00% 4.00%
▇▇▇▇▇ ▇ > or = 4.10:1.00 Prime Rate + 6.00% 5.00%
The Interest Rates shall, in each case, be determined after receipt by the
Lender of the financial statements as of the end of each Fiscal Quarter of the
Companies and for that portion of the Fiscal Year of the Companies then ended
which are required to be delivered to the Lender in accordance with the
provisions of Paragraph 7.8 of Section 7 hereof, commencing with the first
46
Fiscal Quarter of the Fiscal Year ending December 31, 2004, and shall be
adjusted based on the Level as of the end of each consecutive Fiscal Quarter
thereafter, effective on the first day of the month following the receipt by the
Lender of such financial statements (each, an "ADJUSTMENT DATE"); provided,
however, that notwithstanding the foregoing, if a Default or an Event of Default
has occurred, then, Level 6 shall be effective until such time as such Default
or Event of Default shall have been cured, waived or otherwise terminated. Such
Interest Rates shall be effective from such Adjustment Date until the next such
Adjustment Date. Level 4 shall be effective as of the Closing Date until the
first such Adjustment Date.
(b) On each Anniversary Date, PIK Interest which has accrued
during the prior twelve (12) months shall be added to the principal amount
outstanding of the Term Loan. PIK Interest shall be payable upon the earliest to
occur of (i) the due date of any Surplus Cash payment made in accordance with
Paragraph 4.3 of Section 4 of this Financing Agreement, but only to the extent
of such Surplus Cash payment, (ii) the Maturity Date or (iii) the Termination
Date.
(c) Interest shall accrue based upon a 360 day year and actual
days elapsed. Changes in the Prime Rate shall take effect for the purpose of
calculating interest on the Term Loan when such changes take effect generally
with respect to loans made by LaSalle National Bank.
(d) Upon and after the occurrence of an Event of Default and the
giving of any required notice by the Lender in accordance with the provisions of
Section 10, Paragraph 10.2 hereof, all Obligations shall bear interest at the
Default Rate of Interest.
(e) In consideration for the Lender issuing the Commitment Letter,
the Companies paid to the Lender in cash a commitment fee (the "COMMITMENT FEE")
in the aggregate amount of $125,000.00, against which was credited an
underwriting fee in the amount of $25,000 previously paid to the Lender.
(f) On the Closing Date, a closing fee in the amount of $360,000
(the "CLOSING FEE") shall be earned and payable. The Lender has agreed that the
Commitment Fee shall be credited toward payment of the Closing Fee so the
balance of the Closing Fee in the amount of $235,000 shall be due and payable in
cash on the Closing Date.
(g) In consideration for the Lender entering into this Financing
Agreement and extending the Term Loan to the Borrowers, the Borrowers shall pay
to the Lender a loan facility fee (the "LOAN FACILITY FEE") which shall be
deemed fully earned at closing and shall be payable in four (4) installments, on
March 31, 2005, March 31, 2006, March 31, 2007 and December 31, 2007, in an
amount equal to three percent (3%) of the principal amount of the Term Loan
outstanding on such date; provided, however, that in the event the Term Loan is
prepaid in full prior to June 30, 2005, the final two (2) payments of the Loan
Facility Fee shall be waived.
(h) To induce the Lender to enter into this Financing Agreement
and to extend to the Borrowers the Term Loan, and in consideration of, and
compensation for the establishment of all Collateral as security for the
Obligations, including without limitation, the continued monitoring
47
and administration of the Collateral by the Lender, the Borrowers shall pay to
the Lender a collateral management fee (the "COLLATERAL MANAGEMENT FEE") in the
amount of $67,500.00 which has been fully earned upon the execution of this
Financing Agreement. The Collateral Management Fee shall be payable in
forty-five (45) consecutive monthly installments in the amount of $1,500.00 each
commencing on the Closing Date and continuing on the last day of each calendar
month thereafter until paid in full. Any unpaid installment of the Collateral
Management Fee shall be immediately due and payable in full along with all other
Obligations upon Default or an Event of Default, as set forth in Section 10.2
hereof.
(i) In view of the impracticability and extreme difficulty of
ascertaining the actual amount of damages to, or profits lost by, the Lender as
a result of the early repayment of the Term Loan, and by mutual agreement of the
parties as to a reasonable estimation and calculation of the lost profits or
damages suffered by the Lender if the Term Loan shall be so prepaid, it is
hereby agreed that if the Term Loan shall be prepaid, in whole or in part, at
any time prior to the first Anniversary Date, the Borrowers shall pay to the
Lender together with such prepayment a fee (the "EARLY TERMINATION FEE") in an
amount equal to three percent (3%) of the principal amount of the Term Loan
prepaid, except that such Early Termination Fee shall not be payable with
respect to any amounts of the Term Loan prepaid with Surplus Cash in accordance
with Paragraph 4.3 of Section 4 of this Financing Agreement.
(j) The Borrowers shall pay to the Lender a success fee (the
"SUCCESS FEE") equal to (i) $400,000 on any date the Term Loan is repaid in full
within the first eighteen (18) months after the Closing Date and (ii) $800,000
on any date the Term Loan is repaid in full after eighteen (18) months from the
Closing Date.
(k) The Borrowers shall reimburse or pay the Lender, as the case
may be, for: all (a) Out-of-Pocket Expenses. and (b) any applicable
Documentation Fee.
8.2 The Borrowers shall pay the Lender's standard charges and fees
for the Lender's personnel used by the Lender for reviewing the books and
records of the Borrowers and for verifying, testing, protecting, safeguarding,
preserving or disposing of all or any part of the Collateral (which fees shall
be in addition to the Collateral Management Fee and any Out-of-Pocket Expenses)
as set forth in the Fee Agreement.
8.3 In the event that the Lender or any participant hereunder (or
any financial institution which may from time to time become a participant or
lender hereunder) shall have determined in the exercise of its reasonable
business judgment that, subsequent to the Closing Date, any change in applicable
law, rule, regulation or guideline regarding capital adequacy, or any change in
the interpretation or administration thereof, or compliance by the Lender or
such participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Lender's or such participant's capital as a consequence of its
obligations hereunder to a level below that which the Lender or such participant
could have achieved but for such adoption, change or compliance (taking into
consideration the Lender's or such participant's policies with respect to
capital adequacy) by an amount reasonably deemed by
48
the Lender or such participant to be material, then, from time to time, the
Borrowers shall pay no later than five (5) days following demand to the Lender
or such participant such additional amount or amounts as will compensate the
Lender or such participant for such reduction. In determining such amount or
amounts, the Lender or such participant may use any reasonable averaging or
attribution methods. The protection of this Paragraph 8.9 shall be available to
the Lender or such participant regardless of any possible contention of
invalidity or inapplicability with respect to the applicable law, regulation or
condition. A certificate of the Lender or such participant setting forth such
amount or amounts as shall be necessary to compensate the Lender or such
participant with respect to this Section 8 and the calculation thereof when
delivered to the Borrowers shall be conclusive on the Borrowers absent manifest
error. Notwithstanding anything in this paragraph to the contrary, in the event
the Lender or such participant has exercised its rights pursuant to this
paragraph, and subsequent thereto determines that the additional amounts paid by
the Borrowers in whole or in part exceed the amount which the Lender or such
participant actually required to be made whole, the excess, if any, shall be
promptly returned to the Borrowers by the Lender or such participant.
8.4 In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by the Lender or any participant with any request or
directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority, shall:
(a) Subject the Lender or such participant to any tax of any kind
whatsoever with respect to this Financing Agreement or change the basis of
taxation of payments to the Lender or such participant of principal, fees,
interest or any other amount payable hereunder or under any other documents
(except for changes in the rate of tax on the overall net income of the Lender
or such participant by the federal government or the jurisdiction in which it
maintains its principal office);
(b) Impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by the
Lender or such participant by reason of or in respect to this Financing
Agreement and the Loan Documents, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) Impose on the Lender or such participant any other condition
with respect to this Financing Agreement or any other document, and the result
of any of the foregoing is to increase the cost to the Lender or such
participant of making, renewing or maintaining its loans hereunder by an amount
that the Lender or such participant deems to be material in the exercise of its
reasonable business judgment or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the loans by an amount
that the Lender or such participant deems to be material in the exercise of its
reasonable business judgment, then, in any case the Borrowers shall pay the
Lender or such participant, within five (5) days following its demand, such
additional cost or such reduction, as the case may be. The Lender or such
participant shall certify the amount of such additional cost or reduced amount
to the Borrowers and the calculation thereof and such certification shall be
conclusive upon the Borrowers absent
49
manifest error. Notwithstanding anything in this paragraph to the contrary, in
the event the Lender or such participant has exercised its rights pursuant to
this paragraph, and subsequent thereto determines that the additional amounts
paid by the Borrowers in whole or in part exceed the amount which the Lender or
such participant actually required pursuant hereto, the excess, if any, shall be
returned to the Borrowers by the Lender or such participant.
(d) For purposes of this Financing Agreement and Section 8 hereof,
any reference to the Lender shall include any financial institution which may
become a participant or co-lender subsequent to the Closing Date.
SECTION 9 POWERS
9.1 Each Company hereby constitutes the Lender, or any person or
agent the Lender may designate, as its attorney-in-fact, at the Companies' cost
and expense, to exercise all of the following powers, which being coupled with
an interest, shall be irrevocable until all Obligations have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Lender or such Company, any and all checks, notes, drafts, and
other documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to such
Company and to notify postal authorities to change the address for delivery
thereof to such address as the Lender may designate;
(c) To request from customers indebted on Accounts at any time, in
the name of the Lender information concerning the amounts owing on the Accounts;
(d) To request from customers indebted on Accounts at any time, in
the name of such Company, in the name of certified public accountant designated
by the Lender or in the name of the Lender's designee, information concerning
the amounts owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of the
Lender's interest therein and to notify customers indebted on Accounts to make
payment directly to the Lender for such Company's account; and
(f) To take or bring, in the name of the Lender or such Company,
all steps, actions, suits or proceedings deemed by the Lender necessary or
desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in clauses (b), (c), (e) and (f) above may only be exercised
after the occurrence of an Event of Default and until such time as such Event of
Default is waived in writing by the Lender.
SECTION 10 EVENTS OF DEFAULT
50
10.1 Notwithstanding anything hereinabove to the contrary, the
Lender may terminate this Financing Agreement immediately upon the occurrence of
any of the following Events of Default:
(a) Cessation of the business of any Company or the calling of a
meeting of the creditors of any Company for purposes of compromising the debts
and obligations of the Company (other than a meeting of the holders of any of
the PIK Subordinated Indebtedness or the Indebtedness evidenced by the 8-1/8%
Senior Subordinated Notes Due 2008 Indenture dated as of February 17, 1998);
(b) The failure of any Borrower to generally meet its debts as
they mature or the failure of the Companies taken as a whole to generally meet
their debts as they mature;
(c) (i) The commencement by any Company of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law; (ii) the commencement against any Company, of
any bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under any federal or state law by creditors of any Company, provided
that such Default shall not be deemed an Event of Default if such proceeding is
controverted within twenty (20) days and dismissed and vacated within forty-five
(45) days of commencement, except in the event that any of the actions sought in
any such proceeding shall occur or any Company shall take action to authorize or
effect any of the actions in any such proceeding;
(d) Breach by any Company of any warranty, representation or
covenant contained herein (other than those referred to in sub-paragraph (e)
below) or in any other Loan Document between any Company and the Lender, and the
breach of such warranty, representation or covenant is not cured to Lender's
satisfaction within ten (10) days from the date of such breach; provided,
however, no Event of Default shall be deemed to have occurred solely as a result
of the breach by a Company of any warranties, representations or covenants
contained in the Bond Letter of Credit Application which are more restrictive
than the warranties, representations or covenants contained in this Financing
Agreement;
(e) Breach by any Company of any warranty, representation or
covenant of Paragraphs 3.3 (other than the fifth sentence of Paragraph 3.3) and
3.4 of Section 3 hereof; Paragraphs 6.3 and 6.4 (other than the first sentence
of Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, 7.8 through
7.11 and 7.13 hereof;
(f) Failure of any Company to pay (i) when due, any principal of
the Term Loan or (ii) within two (2) Business Days of the due date thereof, any
interest, fees or other Obligations;
(g) Any Company shall (i) engage in any "prohibited transaction"
as defined in ERISA, (ii) have any "accumulated funding deficiency" as defined
in ERISA, (iii) have any "reportable event" as defined in ERISA, (iv) terminate
any Benefit Plan, as defined in ERISA or (v) be engaged in any proceeding in
which the Pension Benefit Guaranty Corporation shall seek appointment, or is
appointed, as trustee or administrator of any "plan", as defined in ERISA, and
51
with respect to this sub-paragraph (g) such event or condition (x) remains
uncured for a period of thirty (30) days from date of occurrence and (y) could,
in the reasonable opinion of the Lender, subject any Company to any tax, penalty
or other liability material to the business, operations or financial condition
of the Company;
(h) Without the prior written consent of the Lender and, except as
permitted in the Subordination Agreement, any Company shall (i) amend or modify
the Subordinated Debt except as permitted pursuant to clause (c) of the
definition of Permitted Indebtedness, or (ii) make any payment on account of the
Subordinated Debt except as permitted by its terms or by the terms of the
Subordination Agreement executed in connection therewith;
(i) Any default or event of default (after giving effect to any
applicable grace or cure periods) under any instrument or agreement evidencing
(x) Subordinated Debt or (y) any other Indebtedness of the Company having a
principal amount in excess of $250,000;
(j) Without the prior written consent of the Lender and, except as
permitted in the LJH Subordination Agreement or the CIT Intercreditor Agreement,
any Company shall amend or modify the Indebtedness described therein;
(k) An "Event of Default" (as defined in the CIT Documents) under
the CIT Documents;
(l) The failure of any Company to (i) pay any amounts due under
any lease when such amounts are due and payable (after giving effect to any
applicable cure or grace periods), or (ii) observe any of such Company's other
obligations or covenants under such lease (and not involving a payment of the
type referred to in clause (i)) which is not remedied within any applicable
grace period specified in such lease;
(m) Termination of any lease prior to its expiration date; or
(n) A Change of Control.
10.2 Upon the occurrence of a Default and/or an Event of Default,
the Lender may (at its option) declare that upon the occurrence of an Event of
Default: (A) all Obligations shall become immediately due and payable; (b) the
Default Rate of Interest shall be charged on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in Section 8 of this
Financing Agreement, provided that, with respect to this clause (b) the Lender
has given the Borrowers written notice of the Event of Default; provided,
however, that no notice is required if the Event of Default is the Event listed
in Paragraph 10.1(c) of this Section 10, and (C) this Financing Agreement shall
immediately terminate upon notice to the Borrowers; provided, however, that upon
the occurrence of an Event of Default listed in Paragraph 10.1(c) of this
Section 10, this Financing Agreement shall automatically terminate and all
Obligations shall become due and payable, without any action, declaration,
notice or demand. The exercise of any option is not exclusive of any other
option, which may be exercised at any time by the Lender.
52
10.3 Immediately upon the occurrence of any Event of Default, the
Lender may, to the extent permitted by law: (a) remove from any premises where
same may be located any and all books and records, computers, electronic media
and software programs associated with any Collateral (including any electronic
records, contracts and signatures pertaining thereto), documents, instruments,
files and records, and any receptacles or cabinets containing same, relating to
the Accounts, or the Lender may use, at the Companies' expense, such of any
Company's personnel, supplies or space at any Company's places of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (b) bring suit, in the
name of any Company or the Lender, and generally shall have all other rights
respecting said Accounts, including without limitation the right to: accelerate
or extend the time of payment, settle, compromise, release in whole or in part
any amounts owing on any Accounts and issue credits in the name of any Company
or the Lender; (c) sell, assign and deliver the Collateral and any returned,
reclaimed or repossessed Inventory, with or without advertisement, at public or
private sale, for cash, on credit or otherwise, at the Lender's sole option and
discretion, and the Lender may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by each
Company; (d) foreclose the security interests in the Collateral created herein
or by the other Loan Documents by any available judicial procedure, or to take
possession of any or all of the Collateral, including any Inventory, Equipment
and/or Other Collateral without judicial process, and to enter any premises
where any Inventory and Equipment and/or Other Collateral may be located for the
purpose of taking possession of or removing the same; and (e) exercise any other
rights and remedies provided in law, in equity, by contract or otherwise. The
Lender shall have the right, without notice or advertisement, to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, in the name of any Company
or the Lender, or in the name of such other party as the Lender may designate,
either at public or private sale or at any broker's board, in lots or in bulk,
for cash or for credit, with or without warranties or representations (including
but not limited to warranties of title, possession, quiet enjoyment and the
like), and upon such other terms and conditions as the Lender in its sole
discretion may deem advisable, and the Lender shall have the right to purchase
at any such sale. If any Inventory and Equipment shall require rebuilding,
repairing, maintenance or preparation, the Lender shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Inventory and Equipment in such saleable form as the Lender shall deem
appropriate and any such costs shall be deemed an Obligations hereunder. Any
action taken by the Lender pursuant to this paragraph shall not affect the
commercial reasonableness of the sale. Each Company agrees, at the request of
the Lender, to assemble the Inventory and Equipment and to make it available to
the Lender at premises of any Company or elsewhere and to make available to the
Lender the premises and facilities of any Company for the purpose of the
Lender's taking possession of, removing or putting the Inventory and Equipment
in saleable form. If notice of intended disposition of any Collateral is
required by law, it is agreed that ten (10) days prior written notice shall
constitute reasonable notification and full compliance with the law. The net
cash proceeds resulting from the Lender's exercise of any of the foregoing
rights, (after deducting all charges, costs and expenses, including reasonable
attorneys' fees) shall be applied by the Lender to the payment of the
Obligations, whether due or to become due, in such order as the Lender may
elect, and each Company shall remain jointly
53
and severally liable to the Lender for any deficiencies, and the Lender in turn
agrees to remit to the Companies or their successors or assigns, any surplus
resulting therefrom. The enumeration of the foregoing rights is not intended to
be exhaustive and the exercise of any right shall not preclude the exercise of
any other rights, all of which shall be cumulative. Each Company hereby jointly
and severally indemnifies the Lender and holds the Lender harmless from any and
all reasonable costs, expenses, claims, liabilities, Out-of-Pocket Expenses or
otherwise, incurred or imposed on the Lender by reason of the exercise of any of
its rights, remedies and interests hereunder, including, without limitation,
from any sale or transfer of Collateral, preserving, maintaining or securing the
Collateral, defending its interests in Collateral (including pursuant to any
claims brought by any Company, any Company as debtor-in-possession, any secured
or unsecured creditors of any Company, any trustee or receiver in bankruptcy, or
otherwise), and each Company hereby agrees to so indemnify and hold the Lender
harmless, absent the Lender's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. The foregoing indemnification
shall survive termination of this Financing Agreement until such time as all
Obligations (including the foregoing) have been finally and indefeasibly paid in
full. In furtherance thereof the Lender, may establish such reserves for
Obligations hereunder (including any contingent Obligations) as it may deem
advisable in its reasonable business judgment. Any applicable mortgage(s),
deed(s) of trust or assignment(s) issued to the Lender on the Real Estate shall
govern the rights and remedies of the Lender thereto.
SECTION 11 TERMINATION
The Lender may terminate this Financing Agreement immediately upon the
occurrence of an Event of Default, provided, however, that if the Event of
Default is an event listed in Paragraph 10.1(c) of Section 10 of this Financing
Agreement, this Financing Agreement shall automatically terminate in accordance
with Paragraph 10.2 of Section 10 of this Financing Agreement. The Companies may
terminate this Financing Agreement at any time upon not less than ninety (90)
days' prior written notice. All Obligations shall become due and payable as of
any termination hereunder (including, without limitation, as of the date of
termination stated in any notice delivered to the Lender pursuant to the
previous sentence) or under Section 10 hereof and, pending a final accounting,
the Lender may withhold funded reserves (unless supplied with an indemnity
satisfactory to the :Lender) to cover all of the Obligations, whether absolute
or contingent, including, but not limited to, cash reserves for any contingent
Obligations. All of the Lender's rights, liens, and security interests shall
continue after any termination until all Obligations have been irrevocably paid
and satisfied in full.
SECTION 12 JOINT AND SEVERAL LIABILITY; CROSS-GUARANTY; RIGHT OF
SUBROGATION; WAIVER OF SURETYSHIP DEFENSES; SUBORDINATION; APPOINTMENT
12.1 Notwithstanding anything to the contrary contained herein, the
Companies shall be jointly and severally liable to the Lender for all
Obligations hereunder, regardless of whether such Obligations arise as a result
of the Term Loan or credit extensions to one Company, it being stipulated and
agreed that the Term Loan and credit extensions hereunder to one Company inure
54
to the benefit of all Companies, and that the Lender is relying on the joint and
several liability of the Companies in making the Term Loan and extending credit
hereunder.
12.2 Each Company hereby guarantees to the Lender the timely
payment in full of all of the Obligations of each Borrower and further
guarantees the due performance by the other Companies of their respective duties
and covenants made in favor of the Lender hereunder. Each Company agrees that
neither this cross-corporate guaranty nor the joint and several liability of
Companies hereunder nor the liens of the Lender in any of the Collateral of any
Company shall be unconditional irrespective of (i) the validity, enforceability,
avoidance or subordination of any of the Obligations, (ii) the absence of any
attempt to collect any of the Obligations from any other Company or any
Collateral or other security therefor, or the absence of any other action to
enforce the same, (iii) the waiver, consent, extension, forbearance or granting
of any indulgence by the Lender with respect to any provision of any instrument
evidencing or securing the payment of any of the Obligations, or any other
agreement now or hereafter executed by any other Company and delivered to the
Lender,(iv) the failure by the Lender to take any steps to perfect or maintain
the perfected status of its lien or security interest in, or to preserve its or
their rights to, any of the Collateral or other security for the payment or
performance of any of the Obligations or the Lender's release of any Collateral
or of its or their liens and security interests upon any Collateral, (v) the
Lender's election, in any proceeding instituted under the Bankruptcy Code, for
the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing
or grant of a security interest by any Company, as debtor-in-possession under
Section 364 of the Bankruptcy Code, (vii) the release or compromise, in whole or
in part, of the liability of any Company for the payment of any of the
Obligations, (ix) any amendment or modification of any of the provisions of this
Financing Agreement or waiver of any Default or Event of Default, (x) any
increase in the amount of the Obligations beyond any limits imposed herein or in
the amount of any interest, fees or other charges payable in connection
therewith, or any decrease in the same, (xi) the disallowance of all or any
portion of the Lender's claims for the repayment of any of the Obligations under
Section 502 of the Bankruptcy Code, or (xii) any other circumstances that might
constitute a legal or equitable discharge or defense of any Company. After the
occurrence and during the continuance of any Event of Default, the Lender may
proceed directly and at once, without notice to any Company, against any or all
of the Companies to collect and recover all or any part of the Obligations,
without first proceeding against any other Company or against any Collateral or
other security for the payment or performance of any of the Obligations, and
each Company waives any provision that might otherwise require the Lender under
applicable law to pursue or exhaust its remedies against any Collateral or
Company before pursuing another Company. Each Company consents and agrees that
the Lender shall not be under any obligation to ▇▇▇▇▇▇▇▇ any assets in favor of
any Company or against or in payment of any or all of the Obligations.
12.3 No payment or payments made by a Company or received or
collected by the Lender from a Company or any other person by virtue of any
action or proceeding or any setoff or appropriation or application at any time
or from time to time in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Company under this Financing Agreement, each of whom shall remain jointly and
severally
55
liable for the payment and performance of all Obligations until the Obligations
are paid in full and this Financing Agreement is terminated in writing.
12.4 Each Company is unconditionally obligated to repay the
Obligations as a joint and several obligor under this Financing Agreement. If,
as of any date, the aggregate amount of payments made by Company on account of
the Obligations and proceeds of such Company's Collateral that are applied to
the Obligations exceeds the aggregate amount of loan proceeds actually used by
such Company in its business (such excess amount being referred to as an
"Accommodation Payment"), then each of the other Companies (each such Company
being referred to as a "Contributing Company") shall be obligated to make
contribution to such Company (the "Paying Company") in an amount equal to (i)
the product derived by multiplying the sum of each Accommodation Payment of each
Company by the Allocable Percentage of the Company from whom contribution is
sought less (ii) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Company (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such Contributing Company by way of contribution hereunder, and to be
decreased by any amounts theretofore received by such Contributing Company by
way of contribution hereunder); provided, however, that a Paying Company's
recovery of contribution hereunder from the other Companies shall be limited to
that amount paid by the Paying Company in excess of its Allocable Percentage of
all Accommodation Payments then outstanding of all Companies. As used herein,
the term "Allocable Percentage" shall mean, on any date of determination
thereof, a fraction the denominator of which shall be equal to the number of
Companies who are parties to this Financing Agreement on such date and the
numerator of which shall be 1; provided, however, that such percentages shall be
modified in the event that contribution from a Company is not possible by reason
of insolvency, bankruptcy or otherwise by reducing such Company's Allocable
Percentage equitably and by adjusting the Allocable Percentage of the other
Companies proportionately so that the Allocable Percentages of all Companies at
all times equals 100%.
12.5 Each Company hereby subordinates any claims (other than claims
evidenced by notes which have been assigned and delivered to the Lender),
including, without limitation, any other right of payment, subrogation,
contribution and indemnity, that it may have from or against any other Company,
and any successor or assign of any other Company, including, without limitation,
any trustee, receiver or debtor-in-possession, howsoever arising, due or owing
and whether heretofore, now or hereafter existing, to the payment in full of all
of the Obligations.
12.6 Notwithstanding the provisions of Paragraph 12.5 of Section 12
of this Financing Agreement, for so long as no Default or an Event of Default
shall exist, each Company may pay to any other Company indebtedness validly owed
to such other Company which arises in the ordinary course of such Company's
business.
SECTION 13 MISCELLANEOUS
13.1 Each Company hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of
56
nonpayment. No delay or omission of the Lender or any Company to exercise any
right or remedy hereunder, whether before or after the happening of any Event of
Default, shall impair any such right or shall operate as a waiver thereof or as
a waiver of any such Event of Default. No single or partial exercise by the
Lender of any right or remedy precludes any other or further exercise thereof,
or precludes any other right or remedy.
13.2 This Financing Agreement and the other Loan Documents executed
and delivered in connection therewith constitute the entire agreement between
the Companies and the Lender with respect to the subject matter hereof and
thereof; supersede any prior agreements with respect hereto and thereto; and
shall bind and benefit each Company and the Lender and their respective
successors and assigns. This Financing Agreement can be amended, modified,
supplemented or restated only by a writing executed by the Companies and the
Lender. The Lender shall have the right, upon prior written notice to the
Parent, at any time to assign to one or more commercial banks, commercial
finance lenders or other financial institutions all or a portion of its rights
and obligations under this Financing Agreement. The Companies shall, if
necessary, execute any documents reasonably required to effectuate the
assignments. No Company may assign its interest in the Term Loan hereunder
without the prior written consent of the Lender.
13.3 In no event shall any Company, upon demand by the Lender for
payment of any Indebtedness relating hereto, by acceleration of the maturity
thereof, or otherwise, be obligated to pay interest and fees in excess of the
amount permitted by law. Regardless of any provision herein or in any agreement
made in connection herewith, the Lender shall never be entitled to receive,
charge or apply, as interest on any indebtedness relating hereto, any amount in
excess of the maximum amount of interest permissible under applicable law. If
the Lender ever receives, collects or applies any such excess, it shall be
deemed a partial repayment of principal and treated as such; and if principal is
paid in full, any remaining excess shall be refunded to such Company. This
paragraph shall control every other provision hereof, the other Loan Documents
and of any other agreement made in connection herewith.
13.4 If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there shall
be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
13.5 EACH COMPANY AND THE LENDER EACH HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH COMPANY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL THE AGENT OR ANY
LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
57
13.6 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from any Company with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Companies for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Companies from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
(a) if to Hilco, at:
Hilco Capital LP
One Northbrook Place
▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Alex Franky, Vice President
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to any Company at:
TIMCO Aviation Services, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
With a courtesy copy of any material notice to the Companies' counsel at:
Akerman Senterfitt
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as any party may designate for itself by like notice;
provided, however, that the failure of the Lender to provide the Companies'
counsel with a copy of such notice shall not invalidate any notice given to the
Companies and shall not give any Company any rights, claims or defenses due to
the failure of the Lender to provide such additional notice.
13.7 Each Company agrees that (a) it will not setoff all or any
portion of the Obligations owing from time to time to the Lender or any of its
Affiliates against any accounts or accounts receivable for products sold or
leased or services rendered by such Company which may
58
be owing at any time and from time to time to such Company by the Lender or any
of its Affiliates ("AFFILIATE ACCOUNTS") and (b) it will not withhold payment in
respect of any of the Obligations on account of any such Affiliate Accounts;
provided, however, each Company to which an Affiliate Account is owed may offset
against such Affiliate Account any claim arising out of the specific transaction
giving rise to such Affiliate Account.
13.8 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
13.9 The Companies hereby authorizes the Lender to publish the name
of the Companies and the amount of the credit facility provided hereunder in any
"tombstone" or comparable advertisement which the Lender elects to publish.
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59
IN WITNESS WHEREOF, the parties hereto have caused this FINANCING
AGREEMENT to be effective, executed, accepted and delivered under seal in
Greensboro, North Carolina, by their proper and duly authorized officers on this
5 day of April, 2004.
AIRCRAFT INTERIOR DESIGN, INC.
By: /s/
---------------------------------
Title:
-------------------------------
▇▇▇▇▇ MANUFACTURING COMPANY, INC.
By: /s/
---------------------------------
Title:
-------------------------------
TIMCO AVIATION SERVICES, INC.
By: /s/
---------------------------------
Title:
-------------------------------
TIMCO ENGINE CENTER, INC.
By: /s/
---------------------------------
Title:
-------------------------------
TIMCO ENGINEERED SYSTEMS, INC.
By: /s/
---------------------------------
Title:
-------------------------------
TRIAD INTERNATIONAL MAINTENANCE
CORPORATION
By: /s/
---------------------------------
Title:
-------------------------------
AVIATION SALES DISTRIBUTION
SERVICES COMPANY
By: /s/
---------------------------------
Title:
-------------------------------
AVIATION SALES LEASING COMPANY
By: /s/
---------------------------------
Title:
-------------------------------
AVIATION SALES PROPERTY
MANAGEMENT CORP.
By: /s/
---------------------------------
Title:
-------------------------------
AVS/CAI, INC.
By: /s/
---------------------------------
Title:
-------------------------------
AVS/M-1, INC.
By: /s/
---------------------------------
Title:
-------------------------------
2
AVS/M-2, INC.
By: /s/
---------------------------------
Title:
-------------------------------
AVS/M-3, INC.
By: /s/
---------------------------------
Title:
-------------------------------
AVSRE, L.P.
By: Aviation Sales Property Management Corp.,
its general partner
By: /s/
---------------------------------
Title:
-------------------------------
HYDROSCIENCE, INC.
By: /s/
---------------------------------
Title:
-------------------------------
TMAS/ASI, INC.
By: /s/
---------------------------------
Title:
-------------------------------
WHITEHALL CORPORATION
By: /s/
---------------------------------
Title:
-------------------------------
3
HILCO CAPITAL LP
By: /s/
---------------------------------
Title:
-------------------------------
4