Exhibit 10(38)
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
CONGOLEUM CORPORATION
as Borrower
Dated: December 10, 2001
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS......................................................1
SECTION 2. CREDIT FACILITIES...............................................20
2.1 Revolving Loans.................................................20
2.2 Letter of Credit Accommodations.................................20
SECTION 3. INTEREST AND FEES...............................................23
3.1 Interest........................................................23
3.2 Closing Fee.....................................................25
3.3 Servicing Fee...................................................25
3.4 Unused Line Fee.................................................25
3.5 Changes in Laws and Increased Costs of Revolving Loans..........25
SECTION 4. CONDITIONS PRECEDENT............................................26
4.1 Conditions Precedent to Initial Revolving Loans and
Letter of Credit Accommodations.................................26
4.2 Conditions Precedent to All Revolving Loans and
Letter of Credit Accommodations.................................28
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST.......................29
5.1 Grant of Security Interest......................................29
5.3 Perfection of Security Interests................................29
SECTION 6. COLLECTION AND ADMINISTRATION...................................32
6.1 Borrower's Loan Account.........................................33
6.2 Statements......................................................33
6.3 Collection of Accounts..........................................33
6.4 Payments........................................................34
6.5 Authorization to Make Revolving Loans...........................35
6.6 Use of Proceeds.................................................35
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS...................36
7.1 Collateral Reporting............................................36
7.2 Accounts Covenants..............................................37
7.3 Inventory Covenants.............................................38
7.4 Equipment and Real Property Covenants...........................38
7.5 Power of Attorney...............................................39
7.6 Right to Cure...................................................40
7.7 Access to Premises..............................................40
(i)
SECTION 8. REPRESENTATIONS AND WARRANTIES..................................40
8.1 Corporate Existence; Power and Authority........................40
8.2 Name; State of Organization; Chief Executive Office;
Collateral Locations............................................41
8.3 Financial Statements; No Material Adverse Change................41
8.4 Priority of Liens; Title to Properties..........................42
8.5 Tax Returns.....................................................42
8.6 Litigation......................................................42
8.7 Compliance with Other Agreements and Applicable Laws............42
8.8 Environmental Compliance........................................42
8.9 Employee Benefits...............................................43
8.10 Bank Accounts...................................................44
8.11 Intellectual Property...........................................44
8.12 Subsidiaries; Affiliates; Capitalization; Solvency..............45
8.13 Labor Disputes..................................................45
8.14 Restrictions on Subsidiaries....................................46
8.15 Material Contracts..............................................46
8.16 Payable Practices...............................................46
8.17 Accuracy and Completeness of Information........................46
8.18 Survival of Warranties; Cumulative..............................46
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..............................46
9.1 Maintenance of Existence........................................46
9.2 New Collateral Locations........................................47
9.3 Compliance with Laws, Regulations, Etc..........................47
9.4 Payment of Taxes and Claims.....................................48
9.5 Insurance.......................................................49
9.6 Financial Statements and Other Information......................49
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.........51
9.8 Encumbrances....................................................51
9.9 Indebtedness....................................................52
9.10 Loans, Investments, Etc.........................................54
9.11 Dividends and Redemptions.......................................57
9.12 Transactions with Affiliates....................................57
9.13 Compliance with ERISA. ........................................58
9.14 End of Fiscal Years: Fiscal Quarters............................58
9.15 Change in Business..............................................58
9.16 Limitation of Restrictions Affecting Subsidiaries...............58
9.17 Adjusted Tangible Net Worth.....................................59
9.18 Minimum Excess Availability.....................................59
9.19 Capital Expenditures............................................59
9.20 License Agreements..............................................59
9.21 Costs and Expenses..............................................60
9.22 Further Assurances..............................................60
(ii)
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..................................61
10.1 Events of Default...............................................61
10.2 Remedies........................................................63
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW....66
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver...............................................66
11.2 Waiver of Notices...............................................68
11.3 Amendments and Waivers..........................................68
11.4 Waiver of Counterclaims.........................................68
11.5 Indemnification.................................................68
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................................69
12.1 Term............................................................69
12.2 Interpretative Provisions.......................................71
12.3 Notices.........................................................72
12.4 Partial Invalidity..............................................73
12.5 Successors......................................................73
12.6 Entire Agreement................................................73
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Compliance Certificate
Exhibit 7.1 Form of Finished Goods Monthly Inventory Supply Report
Exhibit 9.12 Existing Agreements with Affiliates
Exhibit 9.17 Calculation of Adjusted Tangible Net Worth
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated December 10, 2001 is entered into
by and between Congress Financial Corporation, a Delaware corporation ("Lender")
and Congoleum Corporation, a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts"shall mean all of the Borrower's now existing and future:
(a) accounts receivable (whether or not specifically listed on the schedules
furnished to Lender), and any and all related instruments, documents, contract
rights, chattel paper and general intangibles (relating to the Borrower's
accounts receivable) including, without limitation, all accounts created by or
arising from all of the Borrower's sales of goods or rendition of services to
its customers, and all accounts arising from sales or rendition of services made
under any styles or trade names of the Borrower, or through any division of the
Borrower; (b) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (c) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (d) reserves and credit
balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) insurance policies or rights relating to any of the foregoing,
and (g) cash and non-cash proceeds of any and all of the foregoing.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For
purposes hereof, "Reserve Percentage" shall mean the reserve percentage,
expressed as a decimal, prescribed by any United States or foreign banking
authority for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-United States or an
international banking office of Reference Bank used to fund a Eurodollar Rate
Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether
or not the Reference Bank actually holds or has made any such deposits or loans.
The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
1.3 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements,
prepaid assets, Net Income resulting from income or gain derived from the
conversion of Indebtedness to equity or forgiveness of Indebtedness, deferred
taxes, other intangible assets and other "current and non-current assets, as
those terms are defined in the most recent year-end financial statements of
Borrower delivered to Lender), calculating the book value of Inventory for this
purpose on a last-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (b) the
aggregate amount of the Indebtedness and other liabilities of such Person and
its Subsidiaries (including tax and other proper accruals).
1.4 "Affiliate" shall mean, with respect to a specified Person, any other
Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds ten (10%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds ten
(10%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Borrowing Base" shall mean, at any time, the amount equal to:
(a) eighty-five (85%) percent of the Net Amount of Eligible
Accounts, plus
(b) the lesser of:
(i) the sum of: (A) the lesser of (1) fifty (50%) percent of
the Value of Eligible Inventory consisting of finished goods
or (2)
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$20,000,000, plus (B) the lesser of (1) the sum of (aa)
thirty-five (35%) percent of the Value of Eligible Inventory
consisting of raw materials (other than resin) for such
finished goods plus (bb) fifty (50%) percent of the Value of
Eligible Inventory consisting of resin, or (2) $3,000,000; or
(ii) $23,000,000,
less
(c) any Reserves.
For purposes only of applying the sublimit on Revolving Loans based on Eligible
Inventory set forth in clause (b)(ii) above, Lender may treat the then undrawn
amounts of outstanding Letter of Credit Accommodations for the purpose of
purchasing Eligible Inventory as Revolving Loans to the extent Lender is in
effect basing the issuance of the Letter of Credit Accommodations on the Value
of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Reserves shall be attributed first to any components of the
lending formulas set forth above that are not subject to such sublimit, before
being attributed to the components of the lending formulas subject to such
sublimit.
1.7 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.8 "Capital Expenditures" shall mean all expenditures of a Person for any
fixed or capital assets or improvements, or for replacements, substitutions or
additions thereto, which have a useful life of more than one (1) year,
including, but not limited to, the direct or indirect acquisition of such assets
by way of increased product service charges, offset items or otherwise and shall
include payments in respect of Capital Leases.
1.9 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.10 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
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interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.11 "Cash Equivalents" (a) shall have the meaning set forth in the Senior
Note Indenture at all times that the Senior Note Indenture is in full force and
effect and (b) at all other times , shall mean, (i) any evidence of Indebtedness
with a maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (ii) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (iii) commercial paper (including variable rate demand notes) with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by Standard
& Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at
least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (iv) repurchase obligations with a
term of not more than thirty (30) days for underlying securities of the types
described in clause (a) above entered into with any financial institution having
combined capital and surplus and undivided profits of not less than
$250,000,000; (v) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; and (vi) investments in money market funds and mutual funds
which invest substantially all of their assets in securities of the types
described in clauses (b)(i) through (vi) above.
1.12 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of
Borrower to any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act); (b) the liquidation or dissolution of Borrower or the adoption of
a plan by the stockholders of Borrower relating to the dissolution or
liquidation of Borrower; (c) the acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act) of beneficial ownership,
directly or indirectly, of fifty (50%) percent or more of the voting power of
the total outstanding Voting Stock of Borrower; or (d) during any period of two
(2) consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of Borrower (together with any new directors
whose nomination for election by the stockholders of Borrower, was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Borrower then still in office; provided,
that, for the duration of such time, American Biltrite Inc., fails to own
directly or indirectly, that amount of the voting power of the total outstanding
Voting Stock of Borrower required to nominate and elect two-thirds (2/3) of a
majority of the Board of Directors of Borrower.
4
1.13 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.14 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.15 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, from any lessor of premises to
Borrower, or any other person to whom any Collateral (including Inventory, bills
of lading or other documents of title) is consigned or who has custody, control
or possession of any such Collateral or is otherwise the owner or operator of
any premises on which any of such Collateral is located, pursuant to which such
lessor, consignee or other person, inter alia, acknowledges the first priority
security interest of Lender in such Collateral, agrees to waive any and all
claims such lessor, consignee or other person may, at any time, have against
such Collateral, whether for processing, storage or otherwise, and agrees to
permit Lender access to, and the right to remain on, the premises of such
lessor, consignee or other person so as to exercise Lender's rights and remedies
and otherwise deal with such Collateral and, in the case of any consignee or
other person who at any time has custody, control or possession of any
Collateral, acknowledges that it holds and will hold possession of the
Collateral for the benefit of Lender and agrees to follow all instructions of
Lender with respect thereto.
1.16 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.17 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any bank at which any deposit account of Borrower is at any time
maintained which provides that such bank will comply with instructions
originated by Lender directing disposition of the funds in the deposit account
without further consent by Borrower and such other terms and conditions as
Lender may require, including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Lender, that the bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Lender Payment Account all funds received or deposited into the Blocked
Accounts.
1.18 "Dilution" shall mean for any period, the fraction, expressed as a
percentage, the numerator of which is the aggregate amount of non-cash
reductions in Accounts of Borrower for such period and the denominator of which
is the aggregate dollar amount of the sales of Borrower for such period.
1.19 "Dilution Reserve" shall mean a Reserve in amounts established by
Lender to reflect that Dilution with respect to the Accounts of Borrower as
calculated by Lender for any period is or is reasonably anticipated to be
greater than two (2%) percent.
5
1.20 "Documents of Title" shall mean all present and future, wherever
located, warehouse receipts, bills of lading shipping documents, documents of
title, chattel paper, instruments and similar documents. all whether negotiable
or not and all goods and inventory relating thereto, in each case to the extent
arising out of or entered into or acquired by the Borrower in connection with
any Letter of Credit Accommodation or any of its Inventory.
1.21 "Eligible Accounts" shall mean Accounts created by Borrower which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of sixty (60)
days after the original due date for such Accounts or ninety (90) days after the
date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be reasonably required by Lender to perfect the security
interests of Lender in those Accounts of an account debtor with its chief
executive office or principal place of business in Canada in accordance with the
applicable laws of the Province of Canada in which such chief executive office
or principal place of business is located and take or cause to be taken such
other and further actions as Lender may reasonably request to enable Lender as
secured party with respect thereto to collect such Accounts under the applicable
Federal or Provincial laws of Canada);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon Borrower's satisfactory completion of any further performance under the
agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage invoices,
except as to ▇▇▇▇ and hold invoices, if Lender shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to
Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;
6
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(n) such Accounts are supported by a letter of credit or are the
subject of credit insurance;
(o) such Accounts of a single account debtor or its affiliates do
not constitute more than twenty (20%) percent of all otherwise Eligible Accounts
( the "Percentage Limitation;" but the portion of the Accounts not in excess of
such percentage may be deemed Eligible Accounts) except, that, the Percentage
Limitation in respect of (i) Mohawk, shall be forty (40%) percent (the "Mohawk
Percentage Limitation"); and (ii) LaSalle Bristol, Inc., shall be twenty-five
(25%) (the "LaSalle Percentage Limitation"), but the portion of the Accounts not
in excess of the Mohawk Percentage Limitation and the LaSalle Percentage
Limitation shall be deemed Eligible Accounts for purposes of this clause (o).
Each of the Percentage Limitation, Mohawk Percentage
7
Limitation and the LaSalle Percentage Limitation shall be subject to increase or
decrease as Lender may, in good faith, determine from time to time due to an
event, condition or other circumstance arising after the date hereof with
respect to Borrower or such account debtor;
(p) such Accounts are not owed by an account debtor who has Accounts
unpaid more than the earlier of (i) sixty (60) days after the original due date
for such Accounts or (ii) ninety (90) days after the date of the original
invoice for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(q) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit Borrower to seek judicial enforcement in such State of payment of such
Account, unless Borrower has qualified to do business in such state or has filed
a Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost;
(r) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time in the ordinary
course of business consistent with its current practices as of the date hereof
and as is reasonably acceptable to Lender (but the portion of the Accounts not
in excess of such credit limit may be deemed Eligible Accounts); and
(s) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender in good faith.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from Borrower prior to the date hereof, in either case under clause (i) or (ii)
which adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith determination of Lender. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.22 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and raw
materials for such finished goods, in each case which are acceptable to Lender
based on the criteria set forth below. In general, Eligible Inventory shall not
include (a) work-in-process; (b) components which are not part of finished
goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e)
supplies used or consumed in Borrower's business; (f) Inventory at premises
other than those owned and controlled by Borrower, except any Inventory which
would otherwise be deemed Eligible Inventory that is not located at premises
owned and operated by Borrower may nevertheless be considered Eligible
Inventory: (i) as to locations which are leased by Borrower if Lender shall have
received a Collateral Access Agreement from the owner and lessor of such
8
location, duly authorized, executed and delivered by such owner and lessor or if
Lender shall not have received such Collateral Access Agreement (or Lender shall
determine to accept a Collateral Access Agreement that does not include all
required provisions or provisions in the form otherwise required by Lender),
Lender may, at its option, nevertheless consider Inventory at such location to
be Eligible Inventory to the extent Lender shall have established such Reserves
in respect of amounts at any time payable by Borrower to the owner and lessor
thereof as Lender shall determine, and (ii) as to locations owned and operated
by a third person, (A) if Lender shall have received a Collateral Access
Agreement from such owner and operator with respect to such location, duly
authorized, executed and delivered by such owner and operator or if Lender shall
not have received such Collateral Access Agreement (or Lender shall determine to
accept a Collateral Access Agreement that does not include all required
provisions or provisions in the form otherwise required by Lender), Lender may,
at its option, nevertheless consider Inventory at such location to be Eligible
Inventory to the extent Lender shall have established such Reserves in respect
of amounts at any time payable by Borrower to the owner and operator thereof as
Lender shall determine, and (B) in addition, as to locations owned and operated
by a third person, Lender shall have received, if required by Lender: (1) UCC-1
financing statements between the owner and operator, as consignee or bailee and
Borrower, as consignor or ▇▇▇▇▇▇, in form and substance satisfactory to Lender,
which are duly assigned to Lender and (2) a written notice to any lender to the
owner and operator of the first priority security interest in such Inventory of
Lender; (g) Inventory subject to a security interest or lien in favor of any
person other than Lender except those permitted in this Agreement (but without
limiting the right of Lender to establish any Reserves with respect to amounts
secured by such security interest or lien in favor of any Person even if
permitted herein); (h) ▇▇▇▇ and hold goods; (i) unserviceable, obsolete or slow
moving Inventory; (j) Inventory which is not subject to the first priority,
valid and perfected security interest of Lender; (k) returned Inventory, except,
that, returned Inventory having an aggregate Value not in excess of $500,000 may
be deemed Eligible Inventory provided, that, such Inventory satisfies the
following conditions as determined by Lender: (A) it is in good saleable
condition, (B) it is an active product line of Borrower and (C) it otherwise
satisfies the criteria of Eligible Inventory, (l) damaged and/or defective
Inventory; (m) Inventory purchased or sold on consignment and (n) Inventory
located outside the United States of America. The criteria for Eligible
Inventory set forth above may only be changed and any new criteria for Eligible
Inventory may only be established by Lender in good faith based on either: (i)
an event, condition or other circumstance arising after the date hereof, or (ii)
an event, condition or other circumstance existing on the date hereof to the
extent Lender has no written notice thereof from Borrower prior to the date
hereof, in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Inventory in the good faith
determination of Lender. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.23 "Environmental Laws" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life
9
or any other natural resource), or to human health or safety, (b) relating to
the exposure to, or the use, storage, recycling, treatment, generation,
manufacture, processing, distribution, transportation, handling, labeling,
production, release or disposal, or threatened release, of Hazardous Materials,
or (c) relating to all laws with regard to recordkeeping, notification,
disclosure and reporting requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
1.24 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment that is necessary for the conduct of its business, wherever
located, including machinery, data processing and computer equipment and
computer hardware and software, whether owned or licensed, and including
embedded software, vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
1.25 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.26 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.27 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be liable;
(f) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer Plan or a cessation of operations which is treated as such a
withdrawal or notification of Borrower or any ERISA Affiliate that a
Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit
Guaranty Corporation to terminate a Plan; (h) an event or condition which might
reasonably be expected to
10
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (i) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
Borrower or any ERISA Affiliate in excess of $1,000,000; and (j) any other event
or condition with respect to a Plan including any Plan subject to Title IV of
ERISA maintained, or contributed to, by any ERISA Affiliate that could
reasonably be expected to result in liability of Borrower in excess of
$1,000,000.
1.28 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.29 "Eurodollar Rate Loans" shall mean any Revolving Loans or portion
thereof on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.30 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.31 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the Borrowing Base and
(ii) the Maximum Credit, minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations, plus (ii) the aggregate amount of all then
outstanding and unpaid trade payables and other obligations of Borrower which
are more than sixty (60) days past due as of such time, plus (iii) the amount of
checks issued by Borrower to pay trade payables and other obligations which are
more than fifteen (15) days past due as of such time, but not yet sent (but
without duplication of clause (b)(ii)) and the book overdraft of Borrower to the
extent the aggregate amount of such book overdraft exceeds $3,000,000.
1.32 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.33 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement.
1.34 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the
11
statements and pronouncements of the Financial Accounting Standards Board which
are applicable to the circumstances as of the date of determination consistently
applied, except that, for purposes of Sections 9.18 and 9.19 hereof, GAAP shall
be determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the most recent audited
financial statements delivered to Lender prior to the date hereof.
1.35 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.36 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.37 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for such Person's account; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any
12
asset of such Person, whether or not such obligations, liabilities or
indebtedness are assumed by or are a personal liability of such Person, all as
of such time; (h) all obligations, liabilities and indebtedness of such Person
(marked to market) arising under swap agreements, cap agreements and collar
agreements and other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency or commodity values and (i)
all obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments.
1.38 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.39 "Intellectual Property" shall mean Borrower's now owned and hereafter
arising or acquired: patents, patent rights, patent applications, copyrights,
works which are the subject matter of copyrights, copyright registrations,
trademarks, trade names, trade styles, trademark and service ▇▇▇▇ applications,
and licenses and rights to use any of the foregoing; all extensions, renewals,
reissues, divisions, continuations, and continuations-in-part of any of the
foregoing; all rights to ▇▇▇ for past, present and future infringement of any of
the foregoing; inventions, trade secrets, formulae, processes, compounds,
drawings, designs, blueprints, surveys, reports, manuals, and operating
standards; goodwill (including any goodwill associated with any trademark or the
license of any trademark); customer and other lists in whatever form maintained;
and trade secret rights, copyright rights, rights in works of authorship, domain
names and domain name registrations; software and contract rights relating to
software, in whatever form created or maintained.
1.40 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.41 "Interest Rate" shall mean, as to Prime Rate Loans, a rate equal to
one-quarter (.25%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of two and three-quarters (2.75%) percent per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower); provided,
that, notwithstanding anything to the contrary contained herein, the Interest
Rate shall mean the rate of two and one-quarter (2.25%) percent per annum in
excess of the Prime Rate as to Prime Rate Loans and the rate of four and
three-quarters (4.75%) percent per annum in excess of the Adjusted Eurodollar
Rate as to Eurodollar Rate Loans, at Lender's option, without notice, (a) either
(i) for the period on and after the date of termination or non-renewal hereof
until such time as all Obligations are indefeasibly paid and satisfied in full
in immediately available funds, or (ii) for the period from and after the
13
date of the occurrence of any Event of Default, and for so long as such Event of
Default is continuing as determined by Lender in good faith and (b) on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es) arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
1.42 "Inventory" shall mean as to the Borrower all present and hereafter
acquired merchandise, inventory and goods (excluding Equipment which is not sold
by the Borrower in the ordinary course of business), and all additions,
substitutions and replacements thereof, including but not limited to vinyl floor
covering, resins, inks, pulp, talc and felt backing, wherever located, together
with all goods (excluding Equipment) 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
inventory and all proceeds thereof of whatever sort.
1.43 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of Borrower
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Lender, that it will comply with entitlement orders originated by Lender with
respect to such investment property, or other instructions of Lender, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Lender, in each case, without the further consent of Borrower and
including such other terms and conditions as Lender may reasonably require.
1.44 "Lender Payment Account" shall mean account no. 50000 ▇▇▇▇▇▇▇▇ Ref:
Congoleum Corporation of Lender at First Union National Bank or such other
account of Lender as Lender may from time to time designate to Borrower as the
Lender Payment Account for purposes of this Agreement.
1.45 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guarantee to the issuer the performance by Borrower of its obligations to
such issuer.
1.46 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.47 "Material Adverse Effect" shall mean a material adverse effect on (a)
the condition (financial or otherwise), business, performance, operations or
properties of Borrower; (b) the legality, validity or enforceability of this
Agreement or any of the other Financing Agreements; (c) the legality, validity,
enforceability, perfection or priority of the security interests, liens, charges
or hypothecs of Lender upon the Collateral; (d) the Collateral or the value of
the Collateral; (e) the ability of Borrower to repay the Obligations or of any
Obligor to perform its
14
obligations under this Agreement or any of the other Financing Agreements; (f)
the ability of Lender to enforce the Obligations or realize upon the Collateral
or (g) the rights and remedies of Lender under this Agreement or any of the
other Financing Agreements.
1.48 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in an amount in excess of $1,000,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a Material Adverse Effect.
1.49 "Maximum Credit" shall mean the amount of $30,000,000.
1.50 "Mohawk" shall mean Mohawk Industries, Inc., a Delaware
corporation, and its successors and assigns.
1.51 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by Borrower or any
ERISA Affiliate.
1.52 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.53 "Net Income" shall mean, with respect to any Person, for any period,
the aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (excluding to the extent included therein
any extraordinary, one-time or non-recurring gains) after deducting all charges
which should be deducted before arriving at the net income (loss) for such
period and after deducting the Provision for Taxes (as defined below) for such
period, all as determined in accordance with GAAP; provided, that, (a) the net
income of any Person that is not a wholly-owned Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid or payable to such Person or a
wholly-owned Subsidiary of such Person; (b) the effect of any change in
accounting principles adopted by such Person or its Subsidiaries after the date
hereof shall be excluded; and (c) the net income (if positive) of any
wholly-owned Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such wholly-owned Subsidiary to such
Person or to any other wholly-owned subsidiary of such Person is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such wholly-owned Subsidiary shall be excluded. For the purpose of this
definition, net income excludes any gain (but not loss) together with any
related Provision for Taxes for such gain (but not loss) realized upon the sale
or other disposition of any assets that are not sold in the ordinary course of
business (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or of any Capital Stock of such Person or a Subsidiary
of such Person and any net income realized as a
15
result of changes in accounting principles or the application thereof to such
Person. For purposes of this definition the term "Provision for Taxes" shall
mean an amount equal to all taxes imposed on or measured by net income, whether
Federal, State, Provincial, municipal or local, and whether foreign or domestic,
that are paid or payable by any Person in respect of any period in accordance
with GAAP.
1.54 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.55 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.56 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.57 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, other than a Multiemployer Plan.
1.58 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.59 "Prime Rate Loans" shall mean any Maximum Credits or portion thereof
on which interest is payable based on the Prime Rate in accordance with the
terms thereof.
1.60 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
16
1.61 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.62 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
1.63 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.64 "Reserves" shall mean as of any date of determination, such amounts
as Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security interests
and other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Lender determines in good faith constitutes a Default or an
Event of Default. The term "Reserves" as used herein, shall include, in addition
and not in limitation, the Dilution Reserve. To the extent Lender may revise the
lending formulas used to determine the Borrowing Base or establish new criteria
or revise existing criteria for Eligible Accounts or Eligible Inventory so as to
address any circumstances, condition, event or contingency in a manner
satisfactory to Lender, Lender shall not establish a Reserve for the same
purpose. The amount of any Reserve established by Lender shall have a reasonable
relationship to the event, condition or other matter which is the basis for such
reserve as determined by Lender in good faith.
1.65 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.66 "Senior Note Indenture" shall mean the Indenture, dated as of August
3, 1998, by and between Borrower, as issuer, and First Union National Bank, as
trustee, with respect to the Senior Notes, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
17
1.67 "Senior Notes" shall mean, collectively, the 8 5/8% Senior Notes due
August 1, 2008 issued by Borrower pursuant to the Senior Note Indenture, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.68 "Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.69 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.70 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Lender may otherwise determine).
1.71 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a last-in first-out
basis in accordance with GAAP or (b) market value provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the Value of Inventory consisting of raw
materials equal to the profit earned by any Affiliate on the sale thereof to
Borrower or (B) write-ups or write-downs in value with respect to currency
exchange rates and (ii) notwithstanding anything to the contrary contained
herein, the cost of the Inventory shall be computed in the same manner and
consistent with the most recent appraisal of the Inventory received and accepted
by Lender prior to the date hereof, if any.
1.72 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
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SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Maximum Credit.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Borrower, reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Lender determines that: (i) the
number of days of the turnover of the Inventory for any period has changed or
(ii) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, including any such decrease attributable to any change in the
nature, quality or mix of the Inventory. The amount of any decrease in the
lending formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Lender in
good faith. In determining whether to reduce the lending formula(s), Lender may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Lender's discretion, (i) the aggregate amount of the
Revolving Loans outstanding at any time based upon the Net Amount of Eligible
Accounts in respect of which Mohawk is the Account debtor shall not exceed the
amount equal to (A) fifty (50%) percent of the Value of Inventory of Borrower
sold to Mohawk pursuant to the terms of the Distribution Agreement, dated
September 25, 2000, by and between Borrower and Mohawk, and located at the
premises of Mohawk, as shown on the most recent report delivered to Lender
pursuant to Section 7.1(a)(iii) hereof minus (B) the "gross profit margin" with
respect to such Inventory as set forth on the most recent monthly financial
statement delivered to Lender in accordance with Section 9.6 hereof, (ii) the
aggregate amount of the Revolving Loans outstanding at any time shall not exceed
the Maximum Credit and (iii) the aggregate amount of the Revolving Loans and the
Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit. In the event that the outstanding amount of any component of the
Maximum Credits, or the aggregate amount of the outstanding Maximum Credits and
Letter of Credit Accommodations, exceed the amounts available pursuant to the
Borrowing Base, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2(e) or the Maximum Credit, as applicable, such event shall not limit,
waive or otherwise affect any rights of Lender in that circumstance or on any
future occasions and Borrower shall, upon demand by Lender, which may be made at
any time or from time to time, immediately repay to Lender the entire amount of
any such excess(es) for which payment is demanded.
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2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions reasonably acceptable to Lender, and the issuer thereof. Any payments
made by Lender to any issuer thereof and/or related parties in connection with
the Letter of Credit Accommodations shall constitute additional Revolving Loans
to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to two and one-quarter
(2.25%) percent per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to four and one-quarter (4.25%) percent per
annum on such daily outstanding balance for: (i) the period from and after the
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender in good faith. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) Borrower shall give Lender two (2) Business Days' prior written
notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. Borrower shall
attach to such notice the proposed form of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower shall have delivered
to the proposed issuer of such Letter of Credit Accommodation at such times and
in such manner as such proposed issuer may require, an application in form and
substance satisfactory to such proposed issuer and Lender for the issuance of
the Letter of Credit Accommodation and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed Letter of
Credit Accommodation shall be satisfactory to Lender and such proposed issuer,
(ii) as of the date of issuance, no order of any court, arbitrator
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or other Governmental Authority shall purport by its terms to enjoin or restrain
money center banks generally from issuing letters of credit of the type and in
the amount of the proposed Letter of Credit Accommodation, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit Accommodation refrain
from, the issuance of letters of credit generally or the issuance of such
Letters of Credit Accommodation; and (iii) the Excess Availability, prior to
giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent minus the then applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$5,000,000.
(f) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation except for losses, claims, damages, liabilities, costs and
expenses arising from the gross negligence or wilful misconduct of Lender as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. Borrower assumes all risks with respect to the acts or omissions
of the drawer under or beneficiary of any Letter of Credit Accommodation and for
such purposes the drawer or beneficiary shall be deemed Borrower's agent.
Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State
and local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation, except for the gross negligence or wilful misconduct of
Lender as determined pursuant to a final,
21
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(f) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrower shall, at Lender's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Lender
holds a security interest to deliver them to Lender and/or subject to Lender's
order, and if they shall come into Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form. Borrower shall also, at
Lender's request, designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.
(h) Borrower hereby irrevocably authorizes and directs any issuer of
a Letter of Credit Accommodation to name Borrower as the account party therein
and to deliver to Lender all instruments, documents and other writings and
property received by issuer pursuant to the Letter of Credit Accommodations and
to accept and rely upon Lender's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(i) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
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SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Revolving Loans at the Interest Rate. All interest
accruing hereunder on and after the date of any Event of Default or termination
or non-renewal hereof shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate Loans or
may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that
any existing Eurodollar Rate Loans continue for an additional Interest Period.
Such request from Borrower shall specify the amount of the Eurodollar Rate Loans
or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans
or the amount of the Eurodollar Rate Loans to be continued (subject to the
limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from Borrower,
such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted
to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, provided, that, (i) no Default or Event of Default shall exist or
have occurred and be continuing, (ii) no party hereto shall have sent any notice
of termination or non-renewal of this Agreement, (iii) Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to
eighty (80%) percent of the lowest principal amount of the Revolving Loans which
it is anticipated will be outstanding during the applicable Interest Period, in
each case as determined by Lender in good faith (but with no obligation of
Lender to make such Revolving Loans), and (vii) Lender shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to Lender
through the Reference Bank and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by Borrower. Any request by Borrower for
Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or
to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that this
Agreement
23
shall terminate or not be renewed. Borrower shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account of Borrower) any
amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), reasonable
cost or reasonable expense incurred by such person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the
foregoing except for any loss, cost or expense arising from the gross negligence
or willful misconduct of Lender as determined pursuant to a final, and
non-appealable order of a court of competent jurisdiction.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
of $225,000, which shall be fully earned and payable as of the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee in
an amount equal to $2,500 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to three-eighths (.375%) percent per annum calculated upon
(a) at all times that Excess Availability is equal to or exceeds $3,000,000, the
amount by which $27,000,000 exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) or (b) at all times that Excess
Availability is less than $3,000,000, the amount by which the Maximum Credit
exceeds the average daily principal balance of the outstanding Revolving Loans
and Letter of Credit Accommodations during the immediately preceding month (or
part thereof) while this Agreement is in effect and for so long thereafter as
any of the Obligations are outstanding, which fee shall be payable on the first
day of each month in arrears.
3.5 Changes in Laws and Increased Costs of Revolving Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall
24
either (A) make it unlawful for Lender, Reference Bank or any participant with
Lender to make or maintain Eurodollar Rate Loans or to comply with the terms
hereof in connection with the Eurodollar Rate Loans, or (B) shall result in the
increase in the costs to Lender, Reference Bank or any participant of making or
maintaining any Eurodollar Rate Loans by an amount deemed by Lender, in good
faith, to be material, or (C) reduce the amounts received or receivable by
Lender in respect thereof, by an amount deemed by Lender to be material or (ii)
the cost to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by
Lender, in good faith, to be material. Borrower shall pay to Lender, upon demand
by Lender (or Lender may, at its option, charge any loan account of Borrower)
any amounts required to compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated profits), reasonable
cost or reasonable expense incurred by such person as a result of the foregoing,
including, without limitation, any such loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
person to make or maintain the Eurodollar Rate Loans or any portion thereof
except for any loss, cost or expense arising from the gross negligence or
willful misconduct of Lender as determined pursuant to a final and
non-appealable order of a court of competent jurisdiction. A certificate of
Lender setting forth the basis for the determination of such amount necessary to
compensate Lender as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), reasonable cost or reasonable expense incurred by
such person as a result of such prepayment or payment, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such person to make or
maintain such Eurodollar Rate Loans or any portion thereof except for any loss,
cost or expense arising from the gross negligence or willful misconduct of
Lender as determined pursuant to a final and non-appealable order of a court of
competent jurisdiction.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Revolving Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Revolving Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all releases, terminations and such other documents as
Lender may reasonably request to evidence and effectuate the termination by the
existing lenders to Borrower of their respective financing arrangements with
Borrower and the termination and release by it or them, as the case may be, of
any interest in and to any assets and properties of Borrower and each Obligor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) UCC
25
termination statements for all UCC financing statements previously filed by it
or any of them or their predecessors, as secured party and Borrower or any
Obligor, as debtor and (ii) satisfactions and discharges of any mortgages, deeds
of trust or deeds to secure debt by Borrower or any Obligor in favor of such
existing lender or lenders, in form acceptable for recording with the
appropriate Governmental Authority;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of Borrower certified by
the Secretary of State (or equivalent Governmental Authority) which shall set
forth the same complete corporate name of Borrower as is set forth herein and
such document as shall set forth the organizational identification number of
Borrower, if one is issued in its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower (including,
without limitation, current perpetual inventory records and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender, not
more than three (3) Business Days prior to the date hereof;
(e) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may reasonably deem necessary or
desirable in order to permit, protect and perfect its security interests in and
liens upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation,
Collateral Access Agreements by owners and lessors of leased premises of
Borrower and by warehouses at which Collateral is located;
(f) the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $12,500,000 after giving effect to the initial
Revolving Loans made or to be made and Letter of Credit Accommodations issued or
to be issued in connection with the initial transactions hereunder;
26
(g) Lender shall have received, in form and substance satisfactory
to Lender, Deposit Account Control Agreements by and among Lender, Borrower and
each bank where Borrower has a deposit account into which Collateral may be
deposited, in each case, duly authorized, executed and delivered by such bank
and Borrower (or Lender shall be the bank's customer with respect to such
deposit account, as Lender may specify);
(h) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(i) Lender shall have received and reviewed lien and judgement
search results for the jurisdiction of incorporation or organization of
Borrower, the jurisdiction of the chief executive office of Borrower and all
jurisdictions in which assets of Borrower are located, which search results
shall be in form and substance satisfactory to Lender;
(j) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(k) Lender shall have received and reviewed all information
requested by Lender and its counsel regarding any of the pending litigation set
forth in Section 8.6 of the Information Certificate, and the results of such
review shall be satisfactory to Lender;
(l) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request; and
(m) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Revolving Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Revolving Loans and/or providing Letter of Credit Accommodations
to Borrower, including the initial Revolving Loans and Letter of Credit
Accommodations and any future Revolving Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Revolving Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
27
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Revolving Loans or
providing the Letter of Credit Accommodations, or (B) the consummation of the
transactions contemplated pursuant to the terms hereof or the other Financing
Agreements or (ii) has or could reasonably be expected to have a Material
Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and
be continuing on and as of the date of the making of such Revolving Loan or
providing each such Letter of Credit Accommodation and after giving effect
thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, Borrower hereby grants to Lender a continuing security interest in,
a lien upon, and a right of set off against, and hereby assigns to Lender as
security, all of the following property of Borrower (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Lender, collectively, the "Collateral"):
(a) all present and future Accounts;
(b) all present and future acquired Inventory; and
(c) all Documents of Title.
5.2 (a) The security interests granted hereunder shall extend and attach
to all Collateral which is presently in existence and which is owned by the
Borrower or in which the Borrower has any interest, whether held by the Borrower
or others for its account; or in which the Borrower obtains any interest
hereafter, including all Inventory and any portion thereof which may be
returned, rejected, reclaimed or repossessed by either the Agent, the Lenders or
the Borrower from the Borrower's customers, as well as all supplies, goods,
incidentals, packaging materials, labels and any other similar items which
contribute to the finished goods or products manufactured or processed by the
Borrower, or to the sale, promotion or shipment thereof.
(b) Any reserves or balances to the credit of the Borrower and any
other property or assets of the Borrower in the possession of 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 the Borrower, shall secure payment and performance of all
now existing and future Obligations.
5.3 Perfection of Security Interests.
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(a) Borrower irrevocably and unconditionally authorizes Lender (or
its agent) to file at any time and from time to time such financing statements
with respect to the Collateral naming Lender or its designee as the secured
party and Borrower as debtor, as Lender may require, and including any other
information with respect to Borrower or otherwise required by part 5 of Article
9 of the Uniform Commercial Code of such jurisdiction as Lender may determine,
together with any amendment and continuations with respect thereto, which
authorization shall apply to all financing statements filed on, prior to or
after the date hereof. Borrower hereby ratifies and approves all financing
statements naming Lender or its designee as secured party and Borrower as debtor
with respect to the Collateral (and any amendments with respect to such
financing statements) filed by or on behalf of Lender prior to the date hereof
and ratifies and confirms the authorization of Lender to file such financing
statements (and amendments, if any). Borrower hereby authorizes Lender to adopt
on behalf of Borrower any symbol required for authenticating any electronic
filing. In the event that the description of the collateral in any financing
statement naming Lender or its designee as the secured party and Borrower as
debtor includes assets and properties of Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by Borrower to the extent of the Collateral
included in such description and it shall not render the financing statement
ineffective as to any of the Collateral or otherwise affect the financing
statement as it applies to any of the Collateral. In no event shall Borrower at
any time, without the prior written consent of Lender, file, or permit or cause
to be filed, any correction statement or termination statement with respect to
any financing statement (or amendment or continuation with respect thereto)
naming Lender or its designee as secured party and Borrower as debtor.
(b) Borrower does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that Borrower shall be entitled to or
shall receive any chattel paper or instrument in respect of Collateral after the
date hereof, Borrower shall promptly notify Lender thereof in writing. Promptly
upon the receipt thereof by or on behalf of Borrower (including by any agent or
representative), Borrower shall deliver, or cause to be delivered to Lender, all
tangible chattel paper and instruments relating to Collateral that Borrower has
acquired or may at any time acquire, accompanied by such instruments of transfer
or assignment duly executed in blank as Lender may from time to time specify, in
each case except as Lender may otherwise agree. At Lender's option, Borrower
shall, or Lender may at any time on behalf of Borrower, cause the original of
any such instrument or chattel paper to be conspicuously marked in a form and
manner acceptable to Lender with the following legend referring to chattel paper
or instruments as applicable: "This [chattel paper][instrument] is subject to
the security interest of Congress Financial Corporation and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the
rights of such secured party."
(c) In the event that Borrower shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record" (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction relating to
Collateral), Borrower shall promptly notify Lender thereof in writing. Promptly
upon Lender's
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request, Borrower shall take, or cause to be taken, such actions as Lender may
reasonably request to give Lender control of such electronic chattel paper under
Section 9-105 of the UCC and control of such transferable record under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act or,
as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in
effect in such jurisdiction.
(d) Borrower does not have any deposit accounts as of the date
hereof, except as set forth in the Information Certificate. Borrower shall not,
directly or indirectly, after the date hereof open, establish or maintain any
deposit account into which Collateral shall be deposited unless each of the
following conditions is satisfied: (i) Lender shall have received not less than
five (5) Business Days prior written notice of the intention of Borrower to open
or establish such account which notice shall specify in reasonable detail and
specificity acceptable to Lender the name of the account, the owner of the
account, the name and address of the bank at which such account is to be opened
or established, the individual at such bank with whom Borrower is dealing and
the purpose of the account, (ii) the bank where such account is opened or
maintained shall be acceptable to Lender, and (iii) on or before the opening of
such deposit account, Borrower shall as Lender may specify either (A) deliver to
Lender a Deposit Account Control Agreement with respect to such deposit account
duly authorized, executed and delivered by Borrower and the bank at which such
deposit account is opened and maintained or (B) arrange for Lender to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Lender. The terms of this subsection (d) shall solely apply to
deposit accounts into which Collateral shall be deposited.
(e) Borrower does not own or hold, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) Borrower shall not, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless Lender shall
have received not less than five (5) Business Days prior written notice of the
intention of Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Lender the name of
the account, the owner of the account, the name and address of the securities
intermediary or commodity intermediary at which such account is to be opened or
established, the individual at such intermediary with whom Borrower is dealing
and the purpose of the account.
(f) Borrower is not the beneficiary or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that Borrower shall be entitled to or shall receive
any right to payment under any letter of credit, banker's acceptance or any
similar instrument relating to Collateral, whether as beneficiary thereof or
otherwise after the date hereof, Borrower shall promptly notify Lender thereof
in writing. Borrower shall immediately,
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as Lender may specify, either (i) deliver, or cause to be delivered to Lender,
with respect to any such letter of credit, banker's acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Lender, consenting to
the assignment of the proceeds of the letter of credit to Lender by Borrower and
agreeing to make all payments thereon directly to Lender or as Lender may
otherwise direct or (ii) cause Lender to become, at Borrower's expense, the
transferee beneficiary of the letter of credit, banker's acceptance or similar
instrument (as the case may be).
(g) Borrower has no commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
shall at any time after the date hereof have any commercial tort claims,
Borrower shall promptly notify Lender thereof in writing, which notice shall set
forth in reasonable detail the basis for and nature of such commercial tort
claim.
(h) Borrower does not have any Collateral in the custody, control or
possession of a third party as of the date hereof, except as set forth in the
Information Certificate and except for goods located in the United States in
transit to a location of Borrower permitted herein in the ordinary course of
business of Borrower in the possession of the carrier transporting such goods.
In the event that any goods, documents of title or other Collateral are at any
time after the date hereof in the custody, control or possession of any other
person not referred to in the Information Certificate or such carriers, Borrower
shall promptly notify Lender thereof in writing. Promptly upon Lender's request,
Borrower shall deliver to Lender a Collateral Access Agreement duly authorized,
executed and delivered by such person and Borrower.
(i) Borrower shall take any other actions reasonably requested by
Lender from time to time to cause the attachment, perfection and first priority
of, and the ability of Lender to enforce, the security interest of Lender in any
and all of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC or other applicable law, to the extent, if any,
that Borrower's signature thereon is required therefor, (ii) causing Lender's
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Lender to enforce, the security interest of Lender in such
Collateral, (iii) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
Lender to enforce, the security interest of Lender in such Collateral, (iv)
obtaining the consents and approvals of any Governmental Authority or third
party, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, and (v) taking all actions required by any
earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Revolving Loans,
Letter of Credit Accommodations and
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other Obligations and the Collateral, (b) all payments made by or on behalf of
Borrower and (c) all other appropriate debits and credits as provided in this
Agreement, including fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. Borrower shall deliver, or
cause to be delivered to Lender, a Depository Account Control Agreement duly
authorized, executed and delivered by each bank where a Blocked Account is
maintained as provided in Section 5.2 hereof or at any time and from time to
time Lender may become bank's customer with respect to the Blocked Accounts and
promptly upon Lender's request, Borrower shall execute and deliver such
agreements or documents as Lender may require in connection therewith. Lender
shall instruct the depository banks at which the Blocked Accounts are maintained
to transfer the funds on deposit in the Blocked Accounts to such operating bank
account of Borrower as Borrower may specify in writing to Lender until such time
as Lender shall notify the depository bank otherwise. Lender will only instruct
the depository banks at which the Blocked Accounts are maintained to transfer
all funds received or deposited into the Blocked Accounts to the Lender Payment
Account upon the earlier to occur of: (i) a Default or an Event of Default shall
exist or have occurred, or (ii) the making by Lender of the initial Revolving
Loan hereunder. Borrower agrees that all payments made to such Blocked Accounts
or other funds received and collected by Lender, whether in respect of the
Accounts, as proceeds of Inventory or other Collateral or otherwise shall be
treated as payments to Lender in respect of the Obligations and therefore shall
constitute the property of Lender to the extent of the then outstanding
Obligations.
(b) For purposes of calculating the amount of the Revolving Loans
available to Borrower, such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Lender Payment Account provided such payments
and notice thereof are received in accordance with Lender's
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usual and customary practices as in effect from time to time and within
sufficient time to credit Borrower's loan account on such day, and if not, then
on the next Business Day. For the purposes of calculating interest on the
Obligations, such payments or other funds received will be applied (conditional
upon final collection) to the Obligations one (1) Business Day following the
date of receipt of immediately available funds by Lender in the Lender Payment
Account provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time to
time and within sufficient time to credit Borrower's loan account on such day,
and if not, then on the next Business Day.
(c) Borrower and its shareholders, directors, employees, agents, or
Subsidiaries shall, acting as trustee for Lender, receive, as the property of
Lender, any monies, checks, notes, drafts or any other payment relating to
and/or proceeds of Accounts or other Collateral which come into their possession
or under their control and immediately upon receipt thereof, shall deposit or
cause the same to be deposited in the Blocked Accounts, or remit the same or
cause the same to be remitted, in kind, to Lender. In no event shall the same be
commingled with Borrower's own funds. Borrower agrees to reimburse Lender on
demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of Lender's payments to or indemnification
of such bank or person. The obligation of Borrower to reimburse Lender for such
amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement. Borrower's and its shareholders', directors',
employees', agents', Subsidiaries' and other Affiliates' agreement to act as a
trustee for Lender pursuant to this Section 6.3(c) shall not be deemed to create
a fiduciary relationship between them.
6.4 Payments.
(a) All Obligations shall be payable to the Lender Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender shall apply payments received or collected from Borrower or for
the account of Borrower (including the monetary proceeds of collections or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense reimbursements then due to Lender from Borrower; second, to pay
interest due in respect of any Revolving Loans; third, to pay principal due in
respect of the Revolving Loans; fourth, to pay or prepay any other Obligations
whether or not then due, in such order and manner as Lender determines.
Notwithstanding anything to the contrary contained in this Agreement, (i) unless
so directed by Borrower, or unless a Default or an Event of Default shall exist
or have occurred and be continuing, Lender shall not apply any payments which it
receives to any Eurodollar Rate Loans, except (A) on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loans, or (B) in the
event that there are no outstanding Prime Rate Loans and (ii) to the extent
Borrower uses any proceeds of the Revolving Loans or Letter of Credit
Accommodations to acquire rights in or the use of any Collateral or to repay any
Indebtedness used to acquire rights in or the use of any Collateral, payments in
respect of the obligations shall be deemed applied first to the Obligations
arising from Revolving Loans and Letter of Credit Accommodations that were not
used for such purposes and second to the Obligations arising from Revolving
Loans and Letter of Credit Accommodations the proceeds of which were used to
acquire rights in or the use of any Collateral in the chronological order in
which Borrower acquired such rights or use.
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(b) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain effective notwithstanding any contrary
action which may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
6.5 Authorization to Make Revolving Loans. Lender is authorized to make
the Revolving Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower or other authorized person or, at the discretion of Lender,
if such Revolving Loans are necessary to satisfy any Obligations. All requests
for Revolving Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Revolving Loan. Requests received after 11:00 a.m. New York time
on any day shall be deemed to have been made as of the opening of business on
the immediately following Business Day. All Revolving Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Revolving Loans provided by Lender to Borrower hereunder only for: (a) payments
to each of the persons listed in the disbursement direction letter furnished by
Borrower to Lender on or about the date hereof and (b) costs, expenses and fees
in connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Revolving Loans made or
Letter of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating, working
capital and other proper corporate purposes of Borrower not otherwise prohibited
by the terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Revolving Loans to be considered a "purpose credit" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.
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SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents in a
form satisfactory to Lender:
(i) on a regular basis as required by Lender, a schedule of
sales made, credits issued and cash received;
(ii) as soon as possible after the end of each calendar week
(but in any event within five (5) days after the end thereof), on a weekly basis
or more frequently as Lender may request, (A) perpetual inventory reports, and
(B) inventory reports by location and category (including identifying Inventory
at locations owned and operated by third parties or on consignment);
(iii) the last day of each month or more frequently as Lender
may request, a report of the Value of the Inventory of Borrower sold to Mohawk
during the period covered by such report and located on the premises of Mohawk;
(iv) as soon as possible after the end of each month (but in
any event within ten (10) days after the end thereof), on a monthly basis or
more frequently as Lender may request, (A) agings of accounts payable (and
including information indicating the status of payments to owners and lessors of
the leased premises of Borrower), (B) agings of accounts receivable (together
with a reconciliation to the previous month's aging and general ledger) and (C)
the "sku report" in the form annexed hereto as Exhibit 7.1 hereto, which report
shall include the supply of Inventory of Borrower then on-hand;
(v) upon Lender's reasonable request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower;
(vi) such other reports as to the Collateral as Lender shall
reasonably request from time to time; and
(b) If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.
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7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to Borrower
relating to the financial condition of any account debtor and (iii) any event or
circumstance which, to Borrower's knowledge would cause Lender to consider any
then existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the ordinary
course of Borrower's business in accordance with the current practices and
policies of Borrower as of the date hereof, and except as set forth in the
schedules delivered to Lender pursuant to Section 7.1(a) above. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall, in
its sole discretion, settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
upon notice to Borrower of its intention to exercise its rights under this
Section 7.2(a), have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete (other than as to de minimis discrepancies with respect to the
amounts of such Accounts), (ii) no payments shall be made thereon except
payments immediately delivered to Lender pursuant to the terms of this
Agreement, (iii) no credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor except as reported
to Lender in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower's
business in accordance with the current practices and policies of Borrower as of
the date hereof, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable foreign,
Federal, State or local laws or regulations, all documentation relating thereto
will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(c) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical count shall supply
36
Lender with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location and
except for Inventory shipped from the manufacturer thereof to Borrower which is
in transit to the locations set forth or permitted herein; (d) upon Lender's
request, Borrower shall, at its expense, no more than once in any twelve (12)
month period, but at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written appraisals
as to the Inventory in form, scope and methodology reasonably acceptable to
Lender and by an appraiser reasonably acceptable to Lender, addressed to Lender
and upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof; (g) Borrower assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (h) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory other than Inventory sold
to Mohawk which Inventory shall be sold on terms consistent with those in effect
on the date hereof; (i) Borrower shall keep the Inventory in good and marketable
condition; and (j) Borrower shall not, without prior written notice to Lender or
the specific identification of such Inventory with respect thereto provided by
Borrower to Lender pursuant to Section 7.1(a) hereof, acquire or accept any
Inventory on consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (b) Borrower
shall use the Equipment and Real Property with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with all applicable laws except where the failure to do so would not be
reasonably likely to have a Material Adverse Effect; (c) the Equipment is and
shall be used in Borrower's business and not for personal, family, household or
farming use; (d) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrower in the ordinary course of business; and (e) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or other Collateral, (ii)
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enforce payment of Accounts by legal proceedings or otherwise, (iii) exercise
all of Borrower's rights and remedies to collect any Account or other
Collateral, (iv) sell or assign any Account upon such terms, for such amount and
at such time or times as the Lender deems advisable, (v) settle, adjust,
compromise, extend or renew an Account, (vi) discharge and release any Account,
(vii) prepare, file and sign Borrower's name on any proof of claim in bankruptcy
or other similar document against an account debtor or other obligor in respect
of any Accounts or other Collateral, (viii) notify the post office authorities
to change the address for delivery of remittances from account debtors or other
obligors in respect of Accounts or other proceeds of Collateral to an address
designated by Lender, and open and dispose of all mail addressed to Borrower and
handle and store all mail relating to the Collateral; and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment in respect of
Accounts or constituting Collateral or otherwise received in or for deposit in
the Blocked Accounts or otherwise received by Lender, (ii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Accounts or other proceeds of Collateral are sent or
received, (iii) endorse Borrower's name upon any items of payment in respect of
Accounts or constituting Collateral or otherwise received by Lender and deposit
the same in Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods pertaining
thereto or any other Collateral, including any warehouse or other receipts, or
bills of lading and other negotiable or non-negotiable documents, (v) clear
Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs or foreign export control authorities in
Borrower's name, Lender's name or the name of Lender's designee, and to sign and
deliver to customs officials powers of attorney in Borrower's name for such
purpose, and to complete in Borrower's or Lender's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, (vi) sign Borrower's name on any verification of Accounts
and notices thereof to account debtors or any secondary obligors or other
obligors in respect thereof. Borrower hereby releases Lender and its officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except such liabilities attributable to or incurred as a result of
Lender's own gross negligence or wilful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) upon notice to Borrower,
cure any default by Borrower under any material agreement with a third party
that affects the Collateral, its value or the ability of Lender to collect, sell
or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower to perform its obligations hereunder or under
the other Financing Agreements, (b) pay or bond on appeal any judgment entered
against Borrower, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any reasonable amount, incur any reasonable expense or perform any
act which, in Lender's good faith judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the Obligations
and charge Borrower's account therefor, such amounts to be repayable by Borrower
on demand. Lender
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shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after one
(1) day's notice to Borrower, or at any time and without notice to Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request in good faith, and (c) Lender or its designee may use during normal
business hours such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of Accounts and realization
of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Revolving Loans
and providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence; Power and Authority. Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a Material Adverse Effect. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder (a) are all within Borrower's corporate powers, (b)
have been duly authorized, (c) are not in contravention of law or the terms of
Borrower's certificate of incorporation, by-laws, or other organizational
documentation, or any indenture (including, without limitation, the Senior Note
Indenture), or other Material Contract, or other agreement by which Borrower's
property is bound or by which Borrower or its property are bound and (d) will
not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of Borrower under the Senior Note Indenture or otherwise
(other than in favor of Lender pursuant to the terms of the Financing
Agreements). This Agreement and the other Financing Agreements constitute legal,
valid and binding obligations of Borrower enforceable against it in accordance
with their respective terms.
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8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of Borrower is as set forth on the
signature page of this Agreement and in the Information Certificate. Borrower
has not, during the past five years, been known by or used any other corporate
or fictitious name or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in the Information Certificate.
(b) Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
Borrower or accurately states that Borrower has none and accurately sets forth
the federal employer identification number of Borrower.
(c) The chief executive office and mailing address of Borrower and
Borrower's Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 to the Information Certificate and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in Schedule 8.2 to the Information Certificate, subject
to the right of Borrower to establish new locations in accordance with Section
9.2 below. The Information Certificate correctly identifies any of such
locations which are not owned by Borrower and sets forth the owners and/or
operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP (except as to any
interim financial statements other than quarterly financial statements, to the
extent such statements are subject to normal year-end adjustments and do not
include any notes) and fairly present the financial condition and the results of
operations of Borrower, in all material respects, as at the dates and for the
periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrower to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrower, since the date of the most
recent audited financial statements furnished by Borrower to Lender prior to the
date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
the Information Certificate and the other liens permitted under Section 9.8
hereof. Borrower has good and marketable fee simple title to or valid leasehold
interests in all of its Real Property and good, valid and merchantable title to
all of its other properties and assets subject to no liens, mortgages, pledges,
security interests, encumbrances or charges of any kind, except those granted to
Lender and such others as are specifically listed on Schedule 8.4 to the
Information Certificate or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner (within the period required for such filing or any applicable extension
period) all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and
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declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision, in accordance with GAAP, has been made
for the payment of all accrued and unpaid Federal, State, county, local, foreign
and other taxes whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth in Schedule 8.6 to the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrower's knowledge threatened, against or affecting
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrower's knowledge threatened,
against Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrower would result in a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
in default in any respect under, or in violation in any respect of any of the
terms of, any agreement, contract, instrument, lease or other commitment
(exclusive of Material Contracts) to which it is a party or by which it or any
of its assets are bound, where such default or violation would have a Material
Adverse Effect and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local Governmental Authority where
the failure to so comply could reasonably be expected to have a Material Adverse
Effect.
8.8 Environmental Compliance. Except as set forth on Schedule 8.8 of the
Information Certificate or except as would not be reasonably likely to have a
Material Adverse Effect:
(a) Borrower and any Subsidiary have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower and any Subsidiary complies in all respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder;
(b) there has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of Borrower's knowledge threatened,
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by Borrower and any Subsidiary or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects Borrower or its business, operations or assets or any
properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.
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(c) Borrower and its Subsidiaries have no liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in material compliance with the applicable
provisions of ERISA, the Code and other federal or state law. Each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and to the best of
Borrower's knowledge, nothing has occurred which would cause the loss of such
qualification. Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and to any
Multiemployer Plan and no application for a funding waiver or an extension of
any amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. To the best of Borrower's knowledge there has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan which would be reasonably likely to result in a Material
Adverse Effect.
(c)(i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrower and its ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth in Schedule 8.10 to the Information
Certificate, subject to the right of Borrower to establish new accounts in
accordance with Section 5.2 hereof.
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8.11 Intellectual Property. Borrower owns or licenses or otherwise has the
right to use all Intellectual Property necessary for the operation of its
business as presently conducted, except where the failure to so own or to have
such rights to use any such Intellectual Property would not be reasonably likely
to have a Material Adverse Effect. As of the date hereof, Borrower does not have
title ownership of any Intellectual Property registered, or subject to pending
applications, in the United States Patent and Trademark Office or any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 to the Information Certificate hereto and has not granted any
licenses with respect thereto other than in the ordinary course of business as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of Borrower's
knowledge, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by
Borrower in its business infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against or
affecting Borrower contesting its right to sell or use any such Intellectual
Property. Schedule 8.11 to the Information Certificate sets forth all of the
agreements or other arrangements of Borrower pursuant to which Borrower has a
license or other right to use any trademarks, logos, designs, representations or
other Intellectual Property owned by another person as in effect on the date
hereof (excluding non-exclusive licenses entered into in the ordinary course of
business) and the dates of the expiration of such agreements or other
arrangements of Borrower as in effect on the date hereof (collectively, together
with such agreements or other arrangements as may be entered into by Borrower
after the date hereof, collectively, the "License Agreements" and individually,
a "License Agreement"). No trademark, servicemark or other Intellectual Property
protectable as a matter of law at any time used by Borrower which is owned by
another person, or owned by Borrower subject to any security interest, lien,
collateral assignment, pledge or other encumbrance in favor of any person other
than Lender, is affixed to any Eligible Inventory, except to the extent
permitted under the term of the License Agreements listed on Schedule 8.11 to
the Information Certificate.
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) As of the date hereof, Borrower does not have any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate,
subject to the right of Borrower to form or acquire Subsidiaries in accordance
with Section 9.10 hereof.
(b) Borrower is the record and beneficial owner of all of the issued
and outstanding shares of Capital Stock of each of the Subsidiaries listed on
Schedule 8.12 to the Information Certificate as being owned by Borrower and
there are no proxies, irrevocable or otherwise, with respect to such shares and
no equity securities of any of the Subsidiaries are or may become required to be
issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any kind or nature and there are no contracts, commitments,
understandings or
43
arrangements by which any Subsidiary is or may become bound to issue additional
shares of its Capital Stock or securities convertible into or exchangeable for
such shares.
(c) The issued and outstanding shares of Capital Stock of Borrower
are directly and beneficially owned and held by the persons indicated in the
Information Certificate, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as disclosed in writing to
Lender prior to the date hereof.
(d) Borrower is Solvent and will continue to be Solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to Borrower and any union, labor organization
or other bargaining agent in respect of the employees of Borrower on the date
hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against Borrower or, to the best of Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against Borrower
or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower,
except, which in either case, would not be reasonably likely to have a Material
Adverse Effect.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which Borrower is a party or is bound as of the
date hereof. Borrower has delivered true, correct and complete copies of such
Material Contracts to Lender on or before the date hereof. Borrower is not in
breach of or in default under any Material Contract and has not received any
notice of the intention of any other party thereto to terminate any Material
Contract.
8.16 Payable Practices. Borrower has not made any material change in the
historical accounts payable practices from those in effect immediately prior to
the date hereof.
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8.17 Accuracy and Completeness of Information. All information (other than
financial projections, if any) furnished by or on behalf of Borrower in writing
to Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction contemplated hereby or thereby, including all
information on the Information Certificate is true and correct in all material
respects on the date as of which such information is dated or certified and does
not omit any material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Effect which has not been
fully and accurately disclosed to Lender in writing prior to the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Borrower shall at all times preserve, renew and keep in full
force and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted.
(b) Borrower shall not change its name unless each of the following
conditions is satisfied: (i) Lender shall have received not less than thirty
(30) days prior written notice from Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Lender shall have received a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of
Borrower as soon as it is available.
(c) Borrower shall not change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Lender shall have received not less than
thirty (30) days' prior written notice from Borrower of such proposed change,
which notice shall set forth such information with respect thereto as Lender may
reasonably require and Lender shall have received such agreements as Lender may
reasonably require in connection therewith. Borrower shall not change its type
of organization, jurisdiction of organization or other legal structure.
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9.2 New Collateral Locations. Borrower may only open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days prior written notice from Borrower of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem necessary or desirable to protect its interests in the Collateral at such
location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
permits, approvals and orders applicable to it and duly observe all requirements
of any foreign, Federal, State or local Governmental Authority, including ERISA,
the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including all of the Environmental Laws.
(b) Borrower shall give written notice to Lender promptly upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by Borrower or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material other than in the ordinary course of business and other than
as permitted under any applicable Environmental Law, which in either instance,
could reasonably be expected to have a Material Adverse Effect. Upon Lender's
request, copies of all environmental surveys, audits, assessments, feasibility
studies and results of remedial investigations shall be promptly furnished, or
caused to be furnished, by Borrower to Lender. Borrower shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws where such non-compliance could reasonably expected to have a
Material Adverse Effect and shall regularly report to Lender on such response.
(c) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at Lender's
request and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
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(d) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including reasonable attorneys' fees and legal expenses)
directly or indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and implementation of any closure,
remedial or other required plans. All indemnifications in this Section 9.3 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all material taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, as the case may be, and with respect to which adequate reserves have
been set aside on its books. Borrower shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Revolving Loans,
provided, that, nothing contained herein shall be construed to require Borrower
to pay any income or franchise taxes attributable to the income of Lender from
any amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary to, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably satisfactory
to Lender as to form, amount and insurer. Borrower shall furnish certificates,
policies or endorsements to Lender as Lender shall require as proof of such
insurance, and, if Borrower fails to do so, Lender is authorized upon notice to
Borrower, but not required, to obtain such insurance at the expense of Borrower.
All policies shall provide for at least thirty (30) days prior written notice to
Lender of any cancellation or reduction of coverage and that Lender may act as
attorney for Borrower in obtaining, and at any time an Event of Default exists
or has occurred and is continuing, adjusting, settling, amending and canceling
such insurance. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its Affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
47
9.6 Financial Statements and Other Information.
(a) Borrower shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly
furnish to Lender all such financial and other information as Lender shall
reasonably request relating to the Collateral and the assets, business and
operations of Borrower, and to notify the auditors and accountants of Borrower
that Lender is authorized to obtain such information directly from them. Without
limiting the foregoing, Borrower shall furnish or cause to be furnished to
Lender, the following: (i) within twenty-five (25) days after the end of each
fiscal month, monthly unaudited consolidated financial statements, and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrower and its Subsidiaries as
of the end of and through such fiscal month, certified to be correct by the
chief financial officer of Borrower, subject to normal year-end adjustments and
accompanied by a compliance certificate substantially in the form of Exhibit B
hereto, along with a schedule in form reasonably satisfactory to Lender of the
calculations used in determining, as of the end of such month, whether Borrower
was in compliance with the covenants set forth in Sections 9.18 and 9.19 of this
Agreement for such month and (ii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements and audited consolidating
financial statements of Borrower and its Subsidiaries (including in each case
balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrower and its Subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrower and its Subsidiaries
as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations having a fair market value in excess of $250,000 or which would
result in any Material Adverse Effect, (ii) any Material Contract of Borrower
being terminated or materially amended or any new Material Contract entered into
(in which event Borrower shall provide Lender with a copy of such Material
Contract), (iii) any order, judgment or decree in excess of $500,000, shall have
been entered against Borrower or any of its properties or assets, (iv) any
notification of violation of laws or regulations received by Borrower which
would be reasonably likely to result in a Material Adverse Effect, (v) any ERISA
Event (except that in the case of an ERISA Event described in Sections1.27 (i)
and (j), the threshold amount for notification of Lender shall be $500,000, not
$1,000,000) and (vi) the occurrence of any Default or Event of Default.
48
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall deliver to Lender, as soon as it is available
prior to the end of each fiscal year but in no event later than thirty (30) days
prior to the end of each such fiscal year, a budget by quarter of projected
revenues and expenses, for the next fiscal year.
(e) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any
court or other Governmental Authority, to the extent required by statute, rule,
regulation, subpoena or court order, or to any participant or assignee or
prospective participant or assignee. Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Lender, at Borrower's expense,
copies of the financial statements of Borrower and any reports or management
letters prepared by such accountants or auditors on behalf of Borrower and to
disclose to Lender such information as they may have regarding the business of
Borrower. Any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender one (1) year after the same
are delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it; or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for (i) sales of Inventory in the ordinary course of
business, (ii) the disposition of worn-out or obsolete Equipment so long as such
sales do not involve Equipment having an aggregate fair market value in excess
of $1,000,000 for all such Equipment disposed of in any fiscal year of Borrower;
(iii) any transfer by a Subsidiary of Borrower of any of its respective property
or assets to Borrower or any other Subsidiary of Borrower, and (iv) the issuance
and sale by Borrower of Capital Stock of Borrower after the date hereof;
provided, that, (A) Lender shall have received not less than ten (10) Business
Days prior written notice of such issuance and sale by Borrower, which notice
shall specify the parties to whom such shares are to be sold, the terms of such
sale, the total amount which it is anticipated will be realized from the
issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by Borrower from such sale, (B)
49
Borrower shall not be required to pay any cash dividends or repurchase or redeem
such Capital Stock or make any other payments in respect thereof, (C) the terms
of such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
Borrower to request or receive Revolving Loans or Letter of Credit
Accommodations or the right of Borrower to amend or modify any of the terms and
conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the arrangements of Borrower with
Lender or are more restrictive or burdensome to Borrower than the terms of any
Capital Stock in effect on the date hereof, (D) except as Lender may otherwise
agree in writing, all of the proceeds from such sale and issuance of its Capital
Stock shall be paid to Lender for application to the Obligations in such order
and manner as Lender may determine, and (E) as of the date of such issuance and
sale and after giving effect thereto, no Default or Event of Default shall exist
or have occurred;
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall not permit any Subsidiary
to, create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, except: (a) the
security interests and liens of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower or
such Subsidiary, as the case may be and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's or such Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
Borrower or such Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books; (d) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of Real Property
which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of Borrower or such Subsidiary as
presently conducted thereon or materially impair the value of the Real Property
which may be subject thereto; (e) purchase money security interests in Equipment
(including Capital Leases) and purchase money mortgages on Real Property to
secure Indebtedness permitted under Section 9.9(b) hereof; (f) liens arising
from operating leases and the precautionary UCC financing statement filings in
respect thereof; and (g) the security interests and liens set forth on Schedule
8.4 to the Information Certificate.
9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
to, incur, create, assume, become or be liable in any manner with respect to,
suffer or permit to exist, any Indebtedness or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the performance,
dividends or other obligations of any Person, except:
50
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $3,500,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
Borrower or its Subsidiaries other than the Equipment or Real Property so
acquired, and the Indebtedness secured thereby does not exceed the cost of the
Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Subsidiaries of Borrower of the Obligations in
favor of Lender;
(d) Indebtedness of Borrower under interest swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
exchange agreements and similar contractual agreements entered into for the
purpose of protecting a Person against fluctuations in interest rates; provided,
that, such arrangements are with banks or other financial institutions that have
combined capital and surplus and undivided profits of not less than $250,000,000
and are not for speculative purposes and such Indebtedness shall be unsecured;
(e) Indebtedness of Borrower evidenced by or arising under the
Senior Notes as in effect on the date hereof, provided, that:
(i) the aggregate amount of such Indebtedness shall not exceed
$100,000,000 less the aggregate amount of all repayments, repurchases or
redemptions, whether optional or mandatory, in respect thereof, plus interest
thereon at the rate provided for in the Senior Notes as in effect on the date
hereof,
(ii) Borrower and its Subsidiaries shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that
Borrower may make regularly scheduled payments of interest and principal, if
any, in respect of such Indebtedness when due in accordance with the terms of
the Senior Notes as in effect on the date hereof,
(iii) Borrower and its Subsidiaries shall not, directly or
indirectly, (A) amend, modify, alter or change in any material respect any terms
of such Indebtedness or any of the Senior Notes or the Senior Note Indenture or
any related agreements, documents and instruments, except that Borrower may,
after prior written notice to Lender, amend, modify, alter or change the terms
thereof so as to extend the maturity thereof or defer the timing of any payments
in respect thereof, or to forgive or cancel any portion of such Indebtedness
other than pursuant to payments thereof, or to reduce the interest rate or any
fees in connection therewith, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and
51
(iv) Borrower shall furnish to Lender all notices of default
or demands in connection with such Indebtedness received by Borrower or on its
behalf, promptly after the receipt thereof;
(f) unsecured Indebtedness of Borrower arising after the date hereof
to any third person (other than Indebtedness otherwise permitted under this
Section 9.9), provided, that, each of the following conditions is satisfied as
determined by Lender: (i) such Indebtedness shall be on terms and conditions
acceptable to Lender and shall be subject and subordinate in right of payment to
the right of Lender to receive the prior indefeasible payment and satisfaction
in full payment of all of the Obligations pursuant to the terms of an
intercreditor agreement between Lender and such third party, in form and
substance satisfactory to Lender, (ii) Lender shall have received not less than
ten (10) days prior written notice of the intention of Borrower to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Lender the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Lender may
reasonably request with respect thereto, (iii) Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as Lender may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Lender for
application to the Obligations in such order and manner as Lender may determine,
(v) on and before the date of incurring such Indebtedness and after giving
effect thereto, no Default or Event of Default shall exist or have occurred,
(vi) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such Indebtedness or any agreement, document or instrument
related thereto, except, that, Borrower may, after prior written notice to
Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness (except pursuant to regularly scheduled payments permitted herein),
or set aside or otherwise deposit or invest any sums for such purpose, and (vii)
Borrower shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf promptly after the
receipt thereof, or sent by Borrower or on its behalf concurrently with the
sending thereof, as the case may be;
(g) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof except, that, Borrower may, after prior written notice to Lender,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or
52
otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall
furnish to Lender all notices or demands in connection with such Indebtedness
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be; and
(h) Indebtedness of Borrower to its Subsidiaries in accordance with
Section 9.10(g) hereof.
9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, make, or suffer or permit to exist, any
loans or advance money or property to any person, or any investment in (by
capital contribution, dividend or otherwise) or purchase or repurchase the
Capital Stock or Indebtedness or all or a substantial part of the assets or
property of any person, or form or acquire any Subsidiaries, or agree to do any
of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, no
Revolving Loans are then outstanding;
(c) the existing equity investments of Borrower as of the date
hereof in its Subsidiaries, provided, that, Borrower shall have no obligation to
make any other investment in, or loans to, or other payments in respect of, any
such Subsidiaries;
(d) equity investments of Borrower in any wholly-owned Subsidiary
incorporated under the laws of any State of the United States of America formed
or acquired after the date hereof, provided, that, (i) promptly upon such
formation or acquisition, Borrower shall cause any such Subsidiary to execute
and deliver to Lender, in form and substance satisfactory to Lender, to the
extent not prohibited by the terms of the Senior Note Indenture (A) an absolute
and unconditional guarantee of payment of the Obligations, (B) a security
agreement granting to Lender a first security interest and lien (except as
otherwise consented to in writing by Lender) upon all of the assets of such
Subsidiary, and (C) such other agreements, documents and instruments as Lender
may require, including, but not limited to, supplements and amendments hereto
and other loan agreements or instruments evidencing Indebtedness of such new
Subsidiary to Lender, (ii) promptly upon Lender's request, to the extent not
prohibited by the terms of the Senior Note Indenture: (A) Borrower shall execute
and deliver to Lender, in form and substance satisfactory to Lender, a pledge
and security agreement granting to Lender a first pledge of and lien on all of
the issued and outstanding shares of Capital Stock of such Subsidiary, and (B)
Borrower shall deliver the original stock certificates evidencing such shares of
Capital Stock (or such other evidence as may be issued in the case of a limited
liability company or other entity) together with stock powers with respect
thereto duly executed in blank (or the equivalent thereof in the case of a
limited liability company), (iii) as of the date of any payment in respect of
such investment and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, (iv) in no event shall the aggregate amount of all
capital contributions, investments or
53
other amounts paid by Borrower to any Subsidiary formed or acquired after the
date hereof or to any other person for or otherwise in connection with the
formation or acquisition thereof exceed $1,000,000, and (v) as of the date of
any payment in respect of such investment and after giving effect thereto,
Excess Availability (A) shall be not less than $10,500,000, and (B) for each of
the immediately preceding thirty (30) consecutive days shall have been not less
than $10,500,000;
(e) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower arising out of or in connection with Collateral, in connection with
the insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; provided, that, the
original of any such stock or instrument evidencing such obligations shall be
promptly delivered to Lender, upon Lender's request, together with such stock
power, assignment or endorsement by Borrower as Lender may request;
(f) obligations of account debtors to Borrower arising from Accounts
which are past due evidenced by a promissory note made by such account debtor
payable to Borrower; provided, that, promptly upon the receipt of the original
of any such promissory note by Borrower, such promissory note shall be endorsed
to the order of Lender by Borrower and promptly delivered to Lender as so
endorsed;
(g) unsecured loans by any Subsidiary of Borrower to Borrower
provided, that, as to any such loan, each of the following conditions is
satisfied: (i) the Indebtedness arising pursuant to such loan is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
indefeasible payment and satisfaction in full of all of the Obligations on terms
and conditions acceptable to Lender, (ii) Lender shall have received, in form
and substance reasonably satisfactory to Lender, a subordination agreement
providing for the terms of the subordination in right of payment of such
Indebtedness of any Borrower to the prior final payment and satisfaction in full
of all of the Obligations, duly authorized, executed and delivered by such
Subsidiary and such Borrower, (iii) Borrower shall not, directly or indirectly
make, or be required to make, any payments in respect of such Indebtedness,
except that Borrower may make payments in respect of the interest owing in
respect of such Indebtedness so long as to any such payment, each of the
following conditions is satisfied: (A) as of the date of such payment and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing, and (B) within ten (10) days of any such payment the
amount of any such payment is either loaned or dividended to Borrower by such
Subsidiary, (iv) each month Borrower shall provide to Lender a report in form
and substance reasonably satisfactory to Lender of the amount of such loans made
in the immediately preceding month, any repayments in connection therewith and
the outstanding amount thereof as of the last day of the immediately preceding
month, and (v) Indebtedness arising pursuant to such loans shall not be
evidenced by a promissory note or other instrument, unless such promissory note
made by Borrower evidencing such Indebtedness provides for the subordination in
right of payment of the Indebtedness of such Borrower to such Subsidiary to the
prior payment and satisfaction in full of all of the Obligations;
54
(h) loans or advances by Borrower to any of its employees, officers
and directors after the date hereof, or guaranties made by Borrower of
indebtedness or obligations of any of its employees not to exceed the principal
amount of $500,000 in the aggregate at any time outstanding in the ordinary
course of Borrower's business for reasonable and necessary work-related travel,
moving, entertainment and other ordinary business expenses to be incurred by
such employees in connection with their employment with Borrower, provided,
that, (i) if the Indebtedness of any such employee to such Borrower arising
pursuant to such loan is in excess of $25,000, the original of such note or
instrument is promptly delivered to Lender, as Lender may specify, upon the
issuance thereof, duly indorsed and assigned by Borrower to Lender and (ii) as
of the date of any such loan or guarantee thereof by any Borrower and after
giving effect thereto, no Event of Default shall exist or have occurred and be
continuing;
(i) investments constituting capital expenditures to the extent
permitted by the terms of this Agreement;
(j) investments consisting of the extension of trade credit by any
Borrower in the ordinary course of business not involving (i) the borrowing of
money or (ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with the normal sales of
goods and services; and
(k) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i)
Borrower shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such loans and advances either received by Borrower or on its
behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of Borrower or such Subsidiary now or hereafter outstanding, or
set aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except
(a) in any case, in the form of shares of Capital Stock consisting
of common stock or options exchangeable for common stock,
(b) any Subsidiary of Borrower (i) may pay any dividends to Borrower
or (ii) make other payments or distributions on its Capital Stock owned by
Borrower or any Subsidiary of Borrower; and
(c) Borrower may repurchase its Capital Stock consisting of common
stock, provided, that, as to any such repurchase, each of the following
conditions is satisfied: (i) as of the date of
55
the payment for such repurchase and after giving effect thereto, no Event of
Default or any act, condition or event which, with notice or passage of time or
both, would constitute an Event of Default, shall exist or have occurred and be
continuing, (ii) such repurchase shall be paid with funds legally available
therefor, (iii) such repurchase shall not violate any law or regulation
applicable to Borrower or the terms of any Material Contract, (iv) after giving
effect to any such repurchase, Excess Availability shall be not less than
$20,000,000, and (E) the aggregate amount of all payments for such repurchases
during the term of this Agreement shall not exceed $5,000,000.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower except (i) reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business, (ii) loans and advances permitted in accordance
with Section 9.10 hereof, and (iii) the transactions contemplated under the
agreements described on Exhibit 9.12 hereof (as such agreements are in effect on
the date hereof).
9.13 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan (other than a Multiemployer Plan) in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (f) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (g) not allow or suffer
to exist any occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation.
9.14 End of Fiscal Years: Fiscal Quarters. Borrower shall, for financial
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end on December 31 of each year and (b) fiscal quarters to end on March 31, June
30, September 30 and December 31 of each year.
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9.15 Change in Business. Borrower shall not engage in any business other
than the business of Borrower on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which Borrower is engaged
on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans
or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its
properties or assets to Borrower or any Subsidiary of Borrower; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of Borrower or any of its Subsidiaries, (iv) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of Borrower or its Subsidiary, (v) any agreement relating to
permitted Indebtedness incurred by a Subsidiary of Borrower prior to the date on
which such Subsidiary was acquired by Borrower and outstanding on such
acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
9.17 Adjusted Tangible Net Worth. At any time that Excess Availability is
less than $15,000,000, Borrower and its Subsidiaries on a consolidated basis
shall, at all times (including as of the end of the month immediately prior
thereto) have, and shall maintain, Adjusted Tangible Net Worth of not less than
negative $22,000,000; compliance with this covenant shall be determined
utilizing the formula set forth on Exhibit 9.17 hereto.
9.18 Minimum Excess Availability. The Excess Availability of Borrower
shall, at all times be equal to or greater than $3,000,000.
9.19 Capital Expenditures. Borrower and its Subsidiaries shall not,
directly or indirectly, make any Capital Expenditures in excess of $15,000,000
in any fiscal year.
9.20 License Agreements.
(a) Borrower shall (i) promptly and faithfully observe and perform
all of the material terms, covenants, conditions and provisions of the material
License Agreements to be observed and performed by it, at the times set forth
therein, if any, (ii) not do, permit, suffer or refrain from doing anything that
could reasonably be expected to result in a default under or breach of any of
the terms of any material License Agreement, (iii) not cancel, surrender,
modify, amend, waive or release any material License Agreement in any material
respect or any term, provision or right of the licensee thereunder in any
material respect, or consent to or permit to occur any of the foregoing; except,
that, subject to Section 9.20(b) below, Borrower may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
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Borrower; provided, that, Borrower shall give Lender not less than fifteen (15)
days prior written notice of its intention to so cancel, surrender and release
any such material License Agreement, (iv) give Lender prompt written notice of
any material License Agreement entered into by Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Lender may request, (v) give Lender prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Lender (promptly upon
the receipt thereof by Borrower in the case of a notice to Borrower, and
concurrently with the sending thereof in the case of a notice from Borrower) a
copy of each notice of default and every other notice and other communication
received or delivered by Borrower in connection with any material License
Agreement which relates to the right of Borrower to continue to use the property
subject to such License Agreement, and (vi) furnish to Lender, promptly upon the
request of Lender, such information and evidence as Lender may require from time
to time concerning the observance, performance and compliance by Borrower or the
other party or parties thereto with the terms, covenants or provisions of any
material License Agreement.
(b) Borrower will either exercise any option to renew or extend the
term of each material License Agreement in such manner as will cause the term of
such material License Agreement to be effectively renewed or extended for the
period provided by such option and give prompt written notice thereof to Lender
or give Lender prior written notice that Borrower does not intend to renew or
extend the term of any such material License Agreement or that the term thereof
shall otherwise be expiring, not less than sixty (60) days prior to the date of
any such non-renewal or expiration. In the event of the failure of any Borrower
to extend or renew any material License Agreement, Lender shall have, and is
hereby granted, the irrevocable right and authority, at its option, to renew or
extend the term of such material License Agreement, whether in its own name and
behalf, or in the name and behalf of a designee or nominee of Lender or in the
name and behalf of Borrower, as Lender shall determine at any time that an Event
of Default shall exist or have occurred and be continuing. Lender may, but shall
not be required to, perform any or all of such obligations of Borrower under any
of the License Agreements, including, but not limited to, the payment of any or
all sums due from Borrower thereunder. Any sums so paid by Lender shall
constitute part of the Obligations.
9.21 Costs and Expenses. Borrower shall pay to Lender on demand all
reasonable costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Lender's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees, costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with
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respect thereto; (c) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (d) costs and expenses of
preserving and protecting the Collateral; (e) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower's operations, plus a per diem charge at the rate of $750
per person per day for Lender's examiners in the field and office; and (g) the
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.22 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Revolving
Loans and providing Letter of Credit Accommodations contained herein are
satisfied. In the event of such request by Lender, Lender may, at its option,
cease to make any further Revolving Loans or provide any further Letter of
Credit Accommodations until Lender has received such certificate and, in
addition, Lender has determined that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
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(a)(i) Borrower fails to pay when due any of the Obligations or (ii)
Borrower or any Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.6, 9.13, 9.14 or 9.16, of this Agreement and such failure
shall continue for twenty (20) days; provided, that, such twenty (20) day period
shall not apply in the case of: (A) any failure to observe any such covenant
which is not capable of being cured at all or within such twenty (20) day period
or which has been the subject of a prior failure within the immediately
preceding six (6) month period or (B) an intentional breach by Borrower or any
Obligor of any such covenant or (iii) Borrower fails to perform any covenant
contained in Section 7.1 hereof and such failure continues for one (1) day, or
(iv) Borrower or any Obligor fails to perform, or otherwise breaches or
violates, any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements (or any other default
under any of the other Financing Agreements shall occur, subject to the
expiration of any applicable grace period with respect thereto), other than
those described in Sections 10.1(a)(i), 10.1(a)(ii) and 10.1(a)(iii) above;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $500,000 in any one case or in excess of
$750,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the
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date of its filing or Borrower or any Obligor shall file any answer admitting or
not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor in respect of any
Indebtedness (other than Indebtedness owing to Lender), in any case in an amount
in excess of $1,000,000, which default continues for more than the applicable
cure period, if any, with respect thereto, or any default by Borrower or any
Obligor under any Material Contract, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any bank at which any deposit account of Borrower is maintained
shall fail to comply with any of the terms of any Deposit Account Control
Agreement to which such bank is a party;
(k) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Lender) in accordance with
its terms, or any such party shall challenge the enforceability hereof or
thereof, or shall assert in writing, or take any action or fail to take any
action based on the assertion that any provision hereof or of any of the other
Financing Agreements has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms, or any security interest provided for
herein or in any of the other Financing Agreements shall cease to be a valid and
perfected first priority security interest in any of the Collateral purported to
be subject thereto (except as otherwise permitted herein or therein);
(l) an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of Borrower in an aggregate amount in excess
of $1,000,000;
(m) any Change of Control;
(n) the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower, any Obligor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in excess of $500,000 or (ii) any other
property of Borrower which is necessary or material to the conduct of its
business;
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(o) there shall be a material adverse change in the business or
assets of Borrower or any Obligor after the date hereof; or
(p) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
Borrower or any Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements, the
UCC or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to any Obligor or any of the
Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and,
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In
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the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required. At any time an Event of
Default exists or has occurred and is continuing, upon Lender's request,
Borrower will either, as Lender shall specify, furnish cash collateral to the
issuer to be used to secure and fund Lender's reimbursement obligations to the
issuer in connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations. Such cash
collateral shall be in the amount equal to one hundred and ten (110%) percent of
the amount of the Letter of Credit Accommodations plus the amount of any fees
and expenses payable in connection therewith through the end of the expiration
of such Letter of Credit Accommodations.
(c) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, enforce Borrower's rights against any account
debtor, secondary obligor or other obligor in respect of any of the Accounts.
Without limiting the generality of the foregoing, Lender may at such time or
times (i) notify any or all account debtors, secondary obligors or other
obligors in respect thereof that the Accounts have been assigned to Lender and
that Lender has a security interest therein and Lender may direct any or all
account debtors, secondary obligors and other obligors to make payment of
Accounts directly to Lender, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may, in good faith, deem necessary or desirable for
the protection of its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all invoices and statements
sent to any account debtor shall state that the Accounts and such other
obligations have been assigned to Lender and are payable directly and only to
Lender and Borrower shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may require. In the event any account debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrower shall, upon Lender's request, hold the returned Inventory
in trust for Lender, segregate all returned Inventory from all of its other
property, dispose of the returned Inventory solely according to Lender's
instructions, and not issue any credits, discounts or allowances with respect
thereto without Lender's prior written consent.
(d) To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrower acknowledges and agrees that it is not
commercially unreasonable for Lender (i) to fail to incur expenses reasonably
deemed significant by Lender to prepare Collateral for disposition or otherwise
to complete raw material or work in process into finished goods or other
finished products for disposition, (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required by
other law, to fail to obtain consents of any Governmental Authority or other
third party for the collection or disposition of Collateral to be
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collected or disposed of, (iii) to fail to exercise collection remedies against
account debtors, secondary obligors or other persons obligated on Collateral or
to remove liens or encumbrances on or any adverse claims against Collateral,
(iv) to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether or
not in the same business as Borrower for expressions of interest in acquiring
all or any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Borrower
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Lender would not be commercially
unreasonable in Lender's exercise of remedies against the Collateral and that
other actions or omissions by Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without
limitation of the foregoing, nothing contained in this Section shall be
construed to grant any rights to Borrower or to impose any duties on Lender that
would not have been granted or imposed by this Agreement or by applicable law in
the absence of this Section.
(e) Solely for the purpose of enabling Lender to exercise the rights
and remedies hereunder, Borrower hereby grants to Lender, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other
compensation to Borrower) to use, and to license to others to use any of the
Intellectual Property and general intangibles now owned or hereafter acquired by
Borrower, wherever the same maybe located. In furtherance of the foregoing grant
of license, Borrower shall provide Lender with reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof. Any exercise by Lender or
any sublicensee of Lender of the foregoing license with respect to any
trademark, service ▇▇▇▇, trade name, business name, trade style, design, logo or
other business identifier shall be subject to reasonable marking and other
quality control requirements as in effect immediately prior to the exercise of
Lender's rights hereunder.
(f) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including reasonable attorneys' fees and legal expenses.
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(g) Without limiting the foregoing, upon the occurrence of a Default
or Event of Default, Lender may, at its option, without notice, (i) cease making
Revolving Loans or arranging for Letter of Credit Accommodations or reduce the
lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Revolving Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
without regard to any principles of conflicts of laws or other rule of law that
would result in the application of the law of any jurisdiction other than the
State of New York.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York, New
York County and the United States District Court for the Southern District of
New York, whichever Lender may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth herein and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING
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AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct of Lender. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement. Borrower: (i) certifies that neither Lender nor any representative,
agent or attorney acting for or on behalf of Lender has represented, expressly
or otherwise, that Lender would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Lender is relying upon, among other things, the
waivers and certifications set forth in this Section 11.1 and elsewhere herein
and therein.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
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11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel except to the extent that such losses, liabilities and
damages are a direct result of Lender's gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. To the extent permitted by applicable law, Borrower
shall not assert, and Borrower hereby waives, any claim against Lender, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any of the other Financing Agreements or any
undertaking or transaction contemplated hereby. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof provided, that, Lender may, at
its option, extend the Renewal Date to the date four (4) years from the date
hereof by giving Borrower notice at least sixty (60) days prior to the third
anniversary of this Agreement. Lender or Borrower (subject to Lender's right to
extend the Renewal Date as provided above) may terminate this Agreement and the
other Financing Agreements effective on the Renewal Date or on the anniversary
of the Renewal Date in any year by giving to the other party at least sixty (60)
days prior written notice; provided, that, this Agreement and all other
Financing Agreements must be terminated simultaneously. In addition, Borrower
may terminate this Agreement at any time upon ten (10) days prior written notice
to Lender (which notice shall be irrevocable) and Lender may terminate this
Agreement at any time after an Event of Default and during the continuance
thereof upon five (5) days prior written notice to Borrower. Upon the effective
date of termination or non-renewal of this Agreement, Borrower shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender (or at Lender's option, a letter of credit issued for the
account of Borrower and at Borrower's expense, in form and substance
satisfactory to Lender, by an issuer acceptable to Lender and payable to Lender
as beneficiary) in such amounts as Lender determines are reasonably necessary to
secure (or reimburse) Lender from loss, cost, damage or expense, including
reasonable attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, Borrower waives any rights
which it may have under the UCC to demand the filing of termination statements
with respect to the Collateral, and Lender shall not be required to send such
termination statements to Borrower, or to file them with any filing office,
unless and until this Agreement is terminated in accordance with its terms and
all of the Obligations are paid and satisfied in full in immediately available
funds.
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(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
(i) three (3%) percent of From the date hereof to and
the Maximum Credit including December 10, 2002
(ii) two (2%) percent of From December 11, 2002 to and
the Maximum Credit including December 10, 2003
(iii) one (1%) of the Maximum From December 11, 2003 to and
Credit including December 9, 2004 or if
the term of this Agreement is
extended, at any time prior
to the end of the then current
term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1 or Article
9 of the UCC shall have the meanings given therein unless otherwise defined in
this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
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(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower shall have the burden of proving any lack of good faith on
the part of Lender alleged by Borrower at any time.
(g) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Lender, if such Event of Default is capable of
being cured as determined by Lender.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Lender prior to the date hereof.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
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12.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to Borrower: Congoleum Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.:▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.:▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
If to Lender: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Portfolio Manager
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
12.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in,
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all or any part of the Revolving Loans, the Letter of Credit Accommodations or
any other interest herein to another financial institution or other person, in
which event, the assignee or participant shall have, to the extent of such
assignment or participation, the same rights and benefits as it would have if it
were the Lender hereunder, except as otherwise provided by the terms of such
assignment or participation.
12.6 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
12.7 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
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IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION CONGOLEUM CORPORATION
By: By:
------------------------------ -------------------------------
Title: Title:
--------------------------- ----------------------------
Address: Chief Executive Office:
-------- ----------------------
1133 Avenue of the Americas ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
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