[Execution Copy]
Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
RADCO INDUSTRIES, INC.
as Borrower
Dated: October 31, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS................................................ 1
SECTION 2. CREDIT FACILITIES.......................................... 10
2.1 Loans...................................................... 10
2.2 Letter of Credit Accommodations............................ 11
2.3 Availability Reserves...................................... 13
SECTION 3. INTEREST AND FEES.......................................... 13
3.1 Interest................................................... 13
3.2 Closing Fee................................................ 14
3.3 Servicing Fee.............................................. 14
3.4 Unused Line Fee............................................ 14
SECTION 4. CONDITIONS PRECEDENT....................................... 14
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations............................................. 14
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations............................................. 17
SECTION 5. GRANT OF SECURITY INTEREST................................. 17
SECTION 6. COLLECTION AND ADMINISTRATION.............................. 18
6.1 Borrower's Revolving Loan Account.......................... 18
6.2 Statements................................................. 18
6.3 Collection of Accounts..................................... 19
6.4 Payments................................................... 20
6.5 Authorization to Make Loans................................ 21
6.6 Use of Proceeds............................................ 21
SECTION 7. COLLATERAL REPORTING AND COVENANTS......................... 21
7.1 Collateral Reporting....................................... 21
7.2 Accounts Covenants......................................... 22
7.3 Inventory Covenants........................................ 23
7.4 Equipment Covenants........................................ 24
7.5 Power of Attorney.......................................... 24
7.6 Right to Cure.............................................. 25
7.7 Access to Premises......................................... 25
SECTION 8. REPRESENTATIONS AND WARRANTIES............................. 26
8.1 Corporate Existence, Power and Authority; Subsidiaries..... 26
8.2 Financial Statements; No Material Adverse Change........... 26
(i)
8.3 Chief Executive Office; Collateral Locations............... 27
8.4 Priority of Liens; Title to Properties..................... 27
8.5 Tax Returns................................................ 27
8.6 Litigation................................................. 27
8.7 Compliance with Other Agreements and Applicable Law........ 27
8.8 Employee Benefits.......................................... 28
8.9 Environmental Compliance................................... 29
8.10 Bank Accounts.............................................. 30
8.11 Acquisition of Purchased Assets............................ 30
8.12 Capitalization............................................. 30
8.13 Accuracy and Completeness of Information................... 31
8.14 Survival of Warranties; Cumulative......................... 31
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS......................... 31
9.1 Maintenance of Existence................................... 31
9.2 New Collateral Locations................................... 32
9.3 Compliance with Laws, Regulations, Etc..................... 32
9.4 Payment of Taxes and Claims................................ 33
9.5 Insurance.................................................. 33
9.6 Financial Statements and Other Information................. 34
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.... 35
9.8 Encumbrances............................................... 35
9.9 Indebtedness............................................... 36
9.10 Loans, Investments, Guarantees, Etc........................ 38
9.11 Dividends and Redemptions.................................. 38
9.12 Transactions with Affiliates............................... 39
9.13 Additional Bank Accounts................................... 39
9.14 Compliance with ERISA...................................... 40
9.15 Costs and Expenses......................................... 40
9.16 Further Assurances......................................... 40
SECTION 10. EVENTS OF DEFAULT AND REMEDIES............................... 41
10.1 Events of Default.......................................... 41
10.2 Remedies................................................... 43
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW............................ 44
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver..................................................... 44
11.2 Waiver of Notices.......................................... 45
11.3 Amendments and Waivers..................................... 46
11.4 Waiver of Counterclaims.................................... 46
11.5 Indemnification............................................ 46
(ii)
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................................ 46
12.1 Term...................................................... 46
12.2 Notices................................................... 48
12.3 Partial Invalidity........................................ 48
12.4 Successors................................................ 48
12.5 Entire Agreement.......................................... 48
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 6.3 Bank Accounts
Schedule 8.4 Existing Liens
Schedule 8.7 Permits
Schedule 8.8 Pension Matters
Schedule 8.9 Environmental Matters
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated October 31, 1997 is entered into
by and between Congress Financial Corporation, a California corporation
("Lender") and Radco Industries, Inc., a Minnesota corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, 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
All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement. All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context otherwise requires. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. For purposes of this Agreement, the following terms
shall have the respective meanings given to them below:
1
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Affiliate" shall mean, with respect to a specified person, any
other person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
person, (b) which beneficially owns or holds five (5%) percent or more of any
class of the voting stock or other equity interest of such specified person, or
(c) of which five (5%) percent or more of the voting stock or other equity
interest is beneficially owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with") when used with respect to any specified person shall mean
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.
1.3 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and revise
in good faith reducing the amount of Loans and Letter of Credit Accommodations
which would otherwise be available to Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect either (i) the
Collateral or any other property which is security for the Obligations or its
value, (ii) the assets, business or prospects of Borrower or any Obligor or
(iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.
1.4 "Blocked Accounts" shall have the meaning set forth in Section
6.3 hereof.
1.5 "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 Commonwealth of Pennsylvania, and a day
on which Lender is open for the transaction of business.
1.6 "Change of Control" shall mean the occurrence of any of the
following: (a) any Person or Persons (other than a Permitted Holder) acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d)(3) of the Securities Exchange Act, together with any Affiliates thereof,
shall beneficially own (as defined in Rule 13d-3 of the Securities Exchange Act
at least fifty (50%) percent of the aggregate voting power of all classes of
Capital
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Stock of Borrower entitled to vote generally in the election of directors of
Borrower or (b) any Person or Group (other than a Permitted Holder), together
with any Affiliates thereof, shall succeed in having sufficient of its or their
nominees elected to the Board of Directors of Borrower so that such nominees,
when added to any existing directors remaining on the Board of Directors of
Borrower after such election who is an Affiliate of such Person or Group, shall
constitute a majority of the Board of Directors of Borrower.
1.7 "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.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.9 "Consolidated Net Income" shall mean, with respect to Borrower 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 gains and extraordinary non-cash losses)
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 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 Borrower
or a wholly-owned Subsidiary of such person; (b) except to the extent included
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person's assets are acquired by such Person or by any of its wholly-owned
Subsidiaries shall be excluded; (c) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded; (d) net income shall exclude interest accruing, but not paid
on indebtedness owing to a Subsidiary or parent corporation of Borrower, which
is subordinated in right of payment to the payment in full of the Obligations,
on terms and conditions acceptable to Lender; and (e) 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
Borrower or to any other wholly-owned Subsidiary of Borrower 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 purposes of this
definition, (i) net income excludes any gain and non-cash loss (but not any cash
loss) together with any related Provision for Taxes for such gain and non-cash
loss (but not any cash 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 result of changes in accounting principles or the application
thereof to such Person, and (ii) the term "Provision for Taxes" shall mean an
amount equal to all taxes imposed on or measured by net income, whether Federal,
State, Provincial,
3
county or local, and whether foreign or domestic, that are paid or payable by
any Person in respect of any period in accordance with GAAP.
1.10 "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 after the lesser of sixty (60)
days past the original due date thereof or ninety (90) days from the date of the
original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval (except for the right of
return given to retail customers in the ordinary course of the business of
Borrower in accordance with the then current return policy of Borrower, so long
as such policy is no more favorable to the retail customer in any material
respect than the policy in effect on the date hereof), or other terms under
which payment by the account debtor may be conditional or contingent;
(e) such Accounts do not constitute the rights of Borrower to
payment from any credit card issuer, credit card processor or other third party
arising from sales of goods or rendition of services to customers who have
purchased such goods or services using a credit or debit card and such Accounts
do not constitute the rights of Borrower to payment from any credit card issuer,
credit card processor or other third party in connection with the sale or
transfer of Accounts arising pursuant to the sale of goods or rendition of
services to customers who have purchased such goods or services using a credit
card or a debit card;
(f) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America, or, at Lender's
option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Lender
and, if required by Lender, the original of such letter of credit has been
delivered to Lender or Lender's agent and the issuer thereof notified of the
assignment of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all
4
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine);
(g) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and
hold invoices or retainage invoices, except as to ▇▇▇▇ and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(h) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);
(i) 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;
(j) 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;
(k) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or other
Affiliate of Borrower;
(l) 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;
(m) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which could
reasonably be expected to result in any material adverse change in any such
account debtor's financial condition;
(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the lesser of sixty (60) days past the original due
date thereof or ninety (90) days from the date of the original invoice for them,
constituting more than fifty (50%) percent of the total Accounts of such account
debtor;
5
(o) 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 to the extent such credit limits are satisfactory to Lender
(but the portion of the Accounts not in excess of such credit limit may be
deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined in good faith by Lender.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.11 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower, raw
materials and work-in-process for such finished goods which are acceptable to
Lender based on the criteria set forth below. In general, Eligible Inventory
shall not include (a) components which are not part of finished goods; (b) spare
parts for equipment; (c) packaging and shipping materials; (d) supplies used or
consumed in Borrower's business; (e) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(f) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (g) ▇▇▇▇ and hold
goods; (h) unserviceable, obsolete or slow moving Inventory; (i) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (j) returned, damaged and/or defective Inventory; (k) returned Inventory
that is not held for resale; (l) Inventory to be returned to vendors; (m)
Inventory subject to deposits made by a customer for sales of Inventory that has
not been delivered to the extent that such Inventory has been identified to be
sold to such customer; and (n) Inventory purchased or sold on consignment.
General criteria for Eligible Inventory may be established and revised from time
to time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.12 "Environmental Laws" shall mean all Federal, State, Provincial,
county, district, local and foreign laws, rules, regulations, ordinances, and
consent decrees relating to workplace health and safety, hazardous substances,
pollution and environmental matters, as now or at any time hereafter in effect,
applicable to the business of Borrower and its facilities (whether or not owned
by any of them), including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface
6
water, ground water, land surface or subsurface strata) or otherwise relating to
the generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
1.13 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.14 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.15 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b) and 414(c) of the
Code (and Sections 414(m) or 414(o) of the Code for purposes of provisions
relating to Section 412 of the Code).
1.16 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.17 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of (i) the amount of
the Loans available to Borrower as of such time based on the applicable lending
formulas multiplied by the Net Amount of Eligible Accounts and the Value of
Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder 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 trade payables of
Borrower which are more than sixty (60) days past due as of such time.
1.18 "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, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.19 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.
7
1.20 "Hazardous Materials" any hazardous or toxic substances, materials
and wastes, including, without limitation, petroleum, flammable explosives,
asbestos, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides, industrial slag, solvents and/or any other
substances, materials or wastes that are or become regulated as hazardous or
toxic under any Environmental Law.
1.21 "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.
1.22 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.23 "JBPCO" shall mean ▇.▇. ▇▇▇▇▇▇▇▇▇▇ & Co., Inc., a Delaware
corporation, and its successors and assigns.
1.24 "Leer" shall mean Leer Acquisition Company, Inc., a Delaware
corporation, and its successors and assigns.
1.25 "Letter of Credit Accommodations" shall mean the letters of
credit, acceptances with respect to drafts issued under such letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer.
1.26 "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.
1.27 "Management Services Agreement" shall mean the Management Services
Agreement, dated February 1, 1996, by and between Borrower and Southwestern
Holdings, Inc., a Texas corporation, as the same now exists or may hereafter be
amended, modified, restated, extended, renewed, restated or replaced.
1.28 "Maximum Credit" shall mean the amount of $5,000,000.
1.29 "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.
8
1.30 "Obligations" shall mean any and all 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, 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, or secured or unsecured.
1.31 "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.
1.32 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.33 "Permitted Holder" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, his executors,
administrators or similar legal representatives, or any Person which is
controlled, directly or indirectly by any of the foregoing.
1.34 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Internal Revenue Code of 1986, as amended),
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.
1.35 "Plan" shall mean any employee benefit plan within the meaning of
Section 3(2) of ERISA that is subject to Title IV of ERISA maintained by
Borrower or any ERISA Affiliate.
1.36 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.37 "Purchase Agreements" shall mean, individually and collectively,
the Asset Purchase Agreement, dated on or about the date hereof, by and among
Borrower, Seller, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇ ▇. ▇▇▇▇▇, together with bills
of sale, quitclaim deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to therein and all side letters with
respect thereto, and all agreements, documents and instruments executed and/or
delivered in connection therewith, as all of the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced; provided, that, the term
9
"Purchase Agreements" as used herein shall not include any of the "Financing
Agreements" as such term is defined herein.
1.38 "Purchased Assets" shall mean all of the assets and properties
acquired by Borrower from Seller pursuant to the Purchase Agreements.
1.39 "Receivables" shall mean all present and future (a) Accounts; (b)
rights of Borrower to payment from any credit card issuer, credit card processor
or other third party arising from sales of goods or rendition of services to
customers who have purchased such goods or services using a credit card or a
debit card and rights of Borrower to payment from any credit card issuer, credit
card process or other third party in connection with the sale or transfer of
Accounts arising pursuant to the sale of goods or rendition of services to
customers who have purchased such goods or services using a credit card or a
debit card; (c) chattel paper, documents and instruments (i) which evidence or
relate to Accounts and Inventory and including documents of title or other
documents representing them, or (ii) which evidence or relate to instruments
evidencing indebtedness arising pursuant to Accounts or any of the other
Collateral; and (d) rights of Borrower to payment arising pursuant to loans,
advances or other financial accommodations made or provided by Borrower to any
other person.
1.40 "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).
1.41 Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.42 "Seller" shall mean Midwest Truck After Market, Inc., an Oklahoma
corporation, and its successors and assigns.
1.43 "Subsidiary" shall mean any corporation of which fifty (50%)
percent or more of the outstanding securities of any class or classes thereof,
as to which the holders thereof are ordinarily, in the absence of contingencies,
entitled to elect a majority of the directors (or Persons performing similar
functions) of such corporation, is now hereafter directly or indirectly (through
one or more intermediaries) owned by Borrower and/or any one or more of its
Subsidiaries.
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1.44 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) the lesser of (A) eighty (80%) percent of the Net
Amount of Eligible Accounts and (B) $1,000,000, plus
(ii) sixty (60%) percent of the Value of Eligible
Inventory, minus
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines in good
faith that: (A) the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate amount of reductions in Accounts other than as
a result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined in any material respect or (ii)
reduce the lending formula(s) with respect to Eligible Inventory to the extent
that Lender determines in good faith that: (A) the number of days of the
turnover of the Inventory for any period has changed in any material respect or
(B) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, or (C) the nature and quality or mix of the Inventory has
deteriorated so as to adversely affect the Value of the Inventory or the ability
of Lender to realize thereon. In determining whether to reduce the lending
formula(s), Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, (i) the aggregate amount of
the Loans and Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit and (ii) the aggregate amount of Loans outstanding at
any time based on Eligible Inventory consisting of raw materials and
work-in-process shall not exceed $100,000. In the event that the outstanding
amount of any component of the Loans, or the aggregate amount of the outstanding
Loans and Letter of Credit Accommodations, exceed the amounts available under
the lending formulas, the sublimits for Letter of Credit Accommodations set
forth in Section 2.2(d) or the Maximum
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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.
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 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 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 (2%) 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 (4%) 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. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Loans available to Borrower (subject to the Maximum Credit and any Availability
Reserves) are equal to or greater than: (i) if the proposed Letter of Credit
Accommodation is for the purpose of purchasing Eligible Inventory, the sum of
(A) the percentage equal to one hundred (100%) percent minus the then applicable
percentage set forth in Section 2.1(a)(ii) above of the Value of such Eligible
Inventory, plus (B) freight, taxes, duty and other amounts which Lender
estimates must be paid in connection with such Inventory upon arrival and for
delivery to one of Borrower's locations for Eligible Inventory within the United
States of America and (ii) if the proposed Letter of Credit Accommodation is for
any other purpose, an amount equal to one hundred (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, an Availability Reserve shall be established in the applicable
amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
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(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$500,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Loans otherwise
available to Borrower shall not be reduced as provided in Section 2.2(c) to the
extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation except as a result of the gross negligence or willful
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. The provisions of this Section
2.2(e) shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
(f) 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
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thereunder or any letters of credit included in the Collateral. Lender may take
such actions either in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Availability Reserves. All Loans otherwise available to Borrower
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves. Without limiting any other rights or
remedies of Lender under this Agreement or any of the other Financing Agreements
with respect to the establishment of Availability Reserves or otherwise, Lender
may establish and revise Availability Reserves to reflect: (a) amounts due or to
become due in respect of sales, use and/or withholding taxes; (b) any rental
payments, service charges or other amounts due to lessors of real or personal
property to the extent Inventory or Records are located in or on property or
such Records are needed to monitor or otherwise deal with the Collateral or (c)
amounts owing by Borrower to credit card issuers or credit card processors.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the rate of one and one-quarter (1 1/4%)
percent per annum in excess of the Prime Rate, except that, at Lender's option,
without notice, Borrower shall pay to Lender interest at the rate of three and
one-quarter (3 1/4%) percent per annum in excess of the Prime Rate: (i) on the
Loans for (A) the period from and after the date of termination or non-renewal
hereof until such time as Lender has received full and final payment of all such
Obligations (notwithstanding entry of any judgment against Borrower), and (B)
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 and (ii)
on the 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).
(b) 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 shall increase or decrease by an
14
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. The
increase or decrease shall be based on the Prime Rate in effect on the last day
of the month in which any such change occurs. All interest accruing hereunder on
and after an Event of Default or termination or non-renewal hereof shall be
payable on demand. 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 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 $50,000, which shall be fully earned as of the date hereof and
$16,666.66 of which shall be payable on the date hereof, $16,666.66 of which
shall be payable on the first anniversary of the date hereof, and $16,666.67 of
which shall be payable on the second anniversary of the date hereof, provided,
that, such amount shall become immediately due and payable, without notice or
demand, at Lender's option, upon the occurrence of an Event of Default or upon
the termination or non-renewal hereof.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $2,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof for the month ending November 30, 1997
and on the first day of each month thereafter commencing on December 1, 1997.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-quarter (1/4%) percent per annum of the
difference between (a) the average monthly principal balance of the outstanding
Loans and Letter of Credit Accommodations and (b) the Maximum Credit, 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.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, evidence that the Purchase Agreements have been duly
executed and delivered by and to the appropriate parties thereto and the
transactions contemplated under the terms of the Purchase Agreements have been
consummated prior to or contemporaneously with the execution of this Agreement;
15
(b) Lender shall have received, in form and substance
satisfactory to Lender, a pro-forma balance sheet of Borrower reflecting the
initial transactions contemplated hereunder, including, but not limited to, (i)
the consummation of the acquisition of the Purchased Assets by Borrower from
Seller and the other transactions contemplated by the Purchase Agreements and
(ii) the Loans and Letter of Credit Accommodations provided by Lender to
Borrower on the date hereof and the use of the proceeds of the initial Loans as
provided herein, accompanied by a certificate, dated as of the date hereof, of
the Vice President of Borrower stating that such pro-forma balance sheet
represents the reasonable, good faith opinion of such officer as to the subject
matter thereof as of the date of such certificate;
(c) Lender shall have received, in form and substance
satisfactory to Lender, the agreement of the Seller consenting to the collateral
assignment by Borrower to Lender of all of Borrower's rights and remedies and
claims for damages or other relief under the Purchase Agreements and granting
Lender such other rights as Lender may require, duly authorized, executed and
delivered by Seller;
(d) Lender shall have received, in form and substance reasonably
satisfactory to Lender, the intercreditor and subordination agreement between
Lender and Seller, as acknowledged and agreed to by Borrower, providing for,
among other things, the terms of the subordination in right of payment of all
amounts at any time owing by Borrower to Seller to the indefeasible payment and
satisfaction of the Obligations and the subordination of the security interests
of Seller in any of the assets and properties of Borrower to the security
interests of Lender in the assets and properties of Borrower, duly authorized,
executed and delivered by Seller;
(e) Lender shall have received, in form and substance
satisfactory to Lender, evidence that Lender has valid perfected and first
priority security interests in and liens upon the Collateral and any other
property which is intended to be security for the Obligations, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
(f) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(g) no material adverse change shall have occurred in the assets
or business of Borrower since the date of Lender's latest field examination 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;
16
(h) 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 Loans available to Borrower, the results of which shall
be satisfactory to Lender, not more than three (3) Business Days prior to the
date hereof;
(i) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may 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 acknowledgements by lessors,
mortgagees and warehousemen of Lender's security interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by such
persons to the Collateral and agreements permitting Lender access to, and the
right to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral;
(j) Borrower shall have established the Blocked Accounts and
Lender shall have received, in form and substance satisfactory to Lender, all
agreements with the depository banks and Borrower with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrower;
(k) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrower has (i) directed the banks at which
Borrower maintains deposit accounts for the initial receipt of cash, checks and
other items from Borrower's retail store locations to transfer all immediately
available funds deposited in such bank only to the Blocked Accounts as required
pursuant to Section 6.3 hereof or as otherwise directed by Lender and (ii)
notified such banks of the security interests of Lender in such funds and the
other Collateral;
(l) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance reasonably satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee with respect
to the Collateral ;
(m) Lender shall have received, in form and substance reasonably
satisfactory to Lender, the opinion letter of counsel(s) to Borrower with
respect to the Purchase Agreements, the Financing Agreements and the security
interests and liens of Lender with respect to the Collateral and such other
matters as Lender may request;
(n) 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 reasonably satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing
17
Letter of Credit Accommodations to Borrower, including the initial Loans and
Letter of Credit Accommodations and any future Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto except
to the extent that such representation 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); and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 To secure payment and performance of all Obligations, Borrower
hereby grants to Lender a continuing security interest in, a lien upon, and a
right of set off against, and hereby assigns to Lender as security, the
following property and interests in property of Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
(a) all Receivables;
(b) all present and future contract rights and general intangibles
(including tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims and acceptances and guarantees) in connection with or related to the
Receivables and any of the other Collateral;
(c) all right, title and interest of Borrower under the Asset Purchase
Agreement by and among Debtor, Midwest Truck After Market, Inc., ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇. and ▇▇▇▇ ▇. ▇▇▇▇▇ and related agreements, documents and instruments,
including, without limitation, all rights of Borrower to receive monies due or
to become due thereunder or in connection therewith, all rights of Borrower to
indemnification and claims for damages or other relief pursuant to such
agreement or related agreements, all rights of Borrower to perform and exercise
all remedies thereunder and to require performance by the other parties thereto,
and all proceeds, collections, recoveries and rights of subrogation with respect
to the foregoing;
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(d) all present and future monies, securities and the other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Lender or its
Affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (i) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit, banker's acceptances and
credit and other insurance related to the other Collateral, (ii) rights of
stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, (iii) goods described in
invoices, documents, contracts, instruments, credit card sales drafts, credit
card sales slips or charge slips or receipts and other forms of daily store
receipts, with respect to, or otherwise representing or evidencing, Receivables
or other Collateral, including returned, repossessed and reclaimed goods, and
(iv) deposits by and property of account debtors or other persons securing the
obligations of account debtors;
(e) all Inventory;
(f) all Records; and
(g) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
5.2 Notwithstanding anything to the contrary contained in Section 5.1
above, the types or items of Collateral shall not include any rights or
interests in any contract, lease, permit, license, charter or license agreement
covering personal property, as such, if under the terms of such contract, lease,
permit, license, charter or license agreement, or applicable law with respect
thereto, the valid grant of a security interest or lien therein to Lender is
prohibited and such prohibition has not been or is not waived or the consent of
the other party to such contract, lease, permit, license, charter or license
agreement has not been or is not otherwise obtained or under applicable law such
prohibition cannot be waived; provided, that, the foregoing exclusion shall in
no way be construed (a) to apply if such prohibition is unenforceable under
Section 9-318 of the UCC or other applicable law or (b) so as to limit, impair
or otherwise affect Lender's unconditional continuing security interests in and
liens upon any rights or interests of Borrower in or to monies due or to become
due under any such contract, lease, permit, license, charter or license
agreement (including, without limitation, any Accounts or other Receivables).
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Revolving Loan Account. Lender shall maintain one or
more loan account(s) on its books in which shall be recorded (a) all Loans,
Letter of Credit Accommodations and other Obligations and the Collateral, (b)
all payments made by or on
19
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,
deposit account arrangements and merchant payment arrangements with the banks
set forth on Schedule 6.3 hereto and after prior written notice to Lender,
subject to Section 9.13, such other banks as Borrower may hereafter select as
are acceptable to Lender. The banks set forth on Schedule 6.3 constitute all of
the banks with whom Borrower has deposit account arrangements and merchant
payment arrangements as of the date hereof and identifies each of the deposit
accounts at such banks to a retail location of Borrower or otherwise describes
the nature of the use of such deposit account by Borrower.
(i) Borrower shall deposit all proceeds from sales of
Inventory in every form, including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store receipts, from each retail store location of Borrower on each
Business Day into the deposit accounts of Borrower used solely for such purpose
and identified to each retail store location as set forth on Schedule 6.3. All
such funds deposited into the separate deposit accounts shall be sent by wire
transfer on a daily basis and all other proceeds of Collateral shall be sent by
wire transfer, to the Blocked Accounts as provided in Section 6.3(a)(ii) below.
Borrower shall irrevocably authorize and direct in writing, in form and
substance satisfactory to Lender, each of the banks into which proceeds from
sales of Inventory from each retail store location of Borrower are at any time
deposited as provided above to send all funds deposited in such account by wire
transfer on a daily basis to the Blocked Accounts. Such authorization and
direction shall not be rescinded, revoked or modified without the prior written
consent of Lender.
(ii) Borrower shall establish and maintain, at its expense,
deposit accounts with such banks as are acceptable to Lender (the "Blocked
Accounts") into which Borrower shall promptly either cause all amounts on
deposit in its deposit accounts used by each retail store
20
location to be sent as provided in Section 6.3(a)(i) above or shall itself
deposit or cause to be deposited all proceeds from sales of Inventory, all
amounts payable to Borrower from credit card issuers and credit card processors
and all other proceeds of Collateral. The banks at which the Blocked Accounts
are established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or deposited in the
Blocked Accounts are the property of Lender, that the depository bank has no
lien upon, or right of setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the Blocked
Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all amounts
deposited in such Blocked Accounts or other funds received and collected by
Lender, whether as proceeds of inventory or other Collateral or otherwise shall
be the property of Lender.
(b) For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next Business Day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) Business Day following the date of receipt of immediately available
funds by Lender in the Payment Account provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
(c) Borrower and all of its Subsidiaries, employees, agents and
other Affiliates shall, acting as trustee for Lender, receive, as the property
of Lender, any monies, checks, notes, credit card sales drafts, credit card
sales or charge slips or receipts, notes, drafts, all forms of store receipts 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.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply
21
payments received or collected from Borrower or for the account of Borrower
(including the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free and
clear of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. New York City time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when 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
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 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
22
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis or more frequently beginning five (5) days
after Lender's request, (i) perpetual inventory reports, (ii) inventory reports
by category and (iii) agings of accounts payable, (c) upon Lender's request, (i)
copies of customer statements and credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and delivery
documents for Inventory acquired by Borrower; (d) agings of accounts receivable
on a monthly basis or more frequently as Lender may request; and (e) such other
reports as to the Collateral as Lender shall request from time to time. If any
of Borrower's records or reports of the Collateral are prepared or maintained by
an accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any material
account debtor or the assertion of any material 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 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 its then
current practices and policies (so long as such practices and policies are no
more favorable to such account debtor or other person in any material respect
than those in effect on the date hereof). So long as no Event of Default exists
or has occurred and is continuing, Borrower shall settle, adjust or compromise
any claim, offset, counterclaim or dispute with any account debtor. At any time
that an Event of Default exists or has occurred and is continuing, Lender shall,
at its option, 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.
23
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $10,000 other than returns from retail customers in the
ordinary course of the business of Borrower in accordance with the then current
return policy of the Borrower (provided that such return policy shall be no more
favorable to the retail customer in any material respect than the policy in
effect as of the date hereof). At any time that Inventory is returned, reclaimed
or repossessed, the Account (or portion thereof) which arose from the sale of
such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Receivable: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
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 then current practices and policies of Borrower (so long as
such practices and policies are no more favorable to the account debtor or other
person in any material respect than those in effect on 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 State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Receivable or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments constituting part of the Collateral which Borrower
now owns or may at any time acquire immediately upon Borrower's receipt thereof,
except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Receivables have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts
24
debtors to make payment of Receivables 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
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any way
liable for payment thereof without affecting any of the Obligations, (iii)
demand, collect or enforce payment of any Receivables 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
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 Receivables 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 Receivables as Lender may require.
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 inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except (i) for sales of Inventory in the ordinary course of the business
of Borrower, (ii) for Inventory purchased by Borrower from a third party which
is in transit to a location set forth or permitted herein and is identified to
Lender as Inventory in transit, (iii) to move Inventory from time to time in the
ordinary course of business to third party processors or outside contractors in
order for such third party or outside contractor to process or otherwise work
with such Inventory; provided, that, all such Inventory is reported to Lender as
Inventory at such third party locations, and (iv) to move Inventory directly
from one location set forth or permitted herein to another such location; (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 exists or has occurred and is continuing, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Inventory in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) in the event that the amount of Inventory shown
on the books and records of Borrower is greater than the amount of Inventory
based on the physical count of Inventory by more than five (5%) percent at any
time (but at any time or times as Lender may request on or after an Event of
Default exists or has occurred and is continuing), upon Lender's request,
Borrower shall, at its expense, conduct through RGIS Inventory Specialists, Inc.
or another inventory counting service acceptable to Lender, a physical count of
the Inventory in form, scope and methodology acceptable to Lender, the results
of
25
which shall be reported directly by such inventory counting service to Lender
and Borrower shall promptly deliver confirmation in a form satisfactory to
Lender that appropriate adjustments have been made to the inventory records of
Borrower to reconcile the inventory count to Borrower's inventory records; (f)
Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (g) as between Borrower and Lender,
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 except for the right of return given to retail customers in the
ordinary course of the business of Borrower in accordance with the then current
return policy of Borrower (so long as such policy shall be no more favorable to
the retail customer in any material respect than the policy 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,
acquire or accept any Inventory on consignment or approval. The foregoing shall
not be construed to limit the existing customary practice of Borrower to accept
returns from time to time from customers in the ordinary course of the business
of Borrower.
7.4 Equipment Covenants. With respect to the Equipment: (a) Borrower
shall keep the Equipment necessary to operate the businesses of Borrower in good
order, repair, running and marketable condition (ordinary wear and tear
excepted); (b) Borrower shall use the Equipment with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; and (c) as between Borrower and Lender,
Borrower assumes all responsibility and liability arising from the use of the
Equipment.
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 or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew a Receivable, (vi) discharge and
release any Receivable, (vii) prepare, file and sign Borrower's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Lender, and open and
dispose of all mail addressed to Borrower, provided, that, Lender shall use all
reasonable efforts to only open and dispose of mail which it receives pursuant
to the exercise by Lender of its rights set forth in this Section 7.5 from
account debtors or other persons indebted to Borrower or any Obligor, or which
might relate to the Collateral or proceeds thereof, or from suppliers, vendors
or other trade creditors of Borrower or any Obligor,
26
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 or proceeds of any Collateral or other item or proceeds received in the
Blocked Accounts or otherwise remitted to Lender, (ii) have access to any
lockbox or postal box into which Borrower's mail is deposited, (iii) endorse
Borrower's name upon any items of payment or proceeds of any Collateral or other
item or proceeds received in the Blocked Accounts or otherwise remitted to
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 Receivable
or any goods pertaining thereto or any other Collateral, (v) sign Borrower's
name on any verification of Receivables and notices thereof to account debtors
and (vi) execute in Borrower's name and file any UCC financing statements or
amendments thereto, in each case to the extent not otherwise prohibited by
applicable law and in accordance with the other terms of this Agreement and the
other Financing Agreements,. 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 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 which 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 under
the other Financing Agreements; (b) discharge taxes, liens, security interests
or other encumbrances at any time levied on or existing with respect to the
Collateral and (c) pay any amount, incur any 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 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 in good faith by
Lender, at the cost and expense of Borrower, (a) Lender or its designee shall
have complete access to all of Borrower's premises during normal business hours
and after notice to Borrower, 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, and (c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may
27
be reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of Receivables 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 Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of applicable law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
or any material agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of Borrower
enforceable in accordance with their respective terms. Borrower does not have
any Subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse 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 and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no 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.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Receivables are located
only at the address set forth below and at ▇▇▇ ▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in the Information
Certificate, subject to the right of Borrower to establish new locations in
accordance with Section 9.2 below. The Information Certificate correctly
identifies any of such locations
28
which are not owned by Borrower and sets forth the owners and/or operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages on
such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to 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 any material adverse change in the assets or business of
Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrower is not in default in any material respect under, or
in violation in any respect of any of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrower is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority relating to its business,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Federal, State and local statutes, regulations,
rules and orders relating to consumer credit (including, without limitation, as
each has been amended, the
29
Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Fair Credit Reporting Act, and regulations, rules and orders
promulgated thereunder), all Federal, State and local states, regulations, rules
and orders pertaining to sales of consumer goods (including, without limitation,
the Consumer Products Safety Act of 1972, as amended, and the Federal Trade
Commission Act of 1914, as amended, and all regulations, rules and orders
promulgated thereunder and all Environmental Laws).
(b) Borrower has obtained, or has taken all action necessary to
obtain, all material permits, licenses, approvals, consents, certificates,
orders or authorizations of any governmental agency required for the lawful
conduct of its business. Schedule 8.7 hereto sets forth all material permits,
licenses, approvals, consents, certificates, orders or authorizations (the
"Permits") issued to or held by Borrower as of the date hereof by any Federal,
State or local governmental agency and any applications pending by Borrower with
such Federal, State or local governmental agency. The Permits constitute all
permits, licenses, approvals, consents, certificates, orders or authorizations
necessary for Borrower to own and operate its business as presently conducted or
proposed to be conducted where the failure to have such Permits would have a
material adverse effect on the business, performance, operations or properties
of Borrower or the legality, validity or enforceability of this Agreement or the
other Financing Agreements or the ability of Borrower to perform its obligations
under the Agreement or any of the other Financing Agreements or the rights and
remedies of Lender under this Agreement or any of the other Financing
Agreements. All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to the best of
Borrower's knowledge, threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits except for any such actions,
claims or proceedings disclosed in the Information Certificate or arising after
the date hereof, in each case, which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, so long as
such Permit remains in effect during the pendency of such action, claim or
proceeding.
8.8 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection
with which Borrower or any ERISA Affiliate could reasonably be expected to be
subject to either a civil penalty assessed pursuant to ERISA or a tax imposed
pursuant to the Code with respect to a Plan in excess of $100,000.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrower to be incurred with respect to any Plan. There
has been no reportable event (within the meaning of ERISA) or any other event or
condition with respect to any Plan which presents a material risk of termination
of any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or
any ERISA Affiliate is required under ERISA and the Code to have paid under the
terms of each Plan as contributions to such Plan as of the last day of the most
recent fiscal year of such plan ended
30
prior to the date hereof, and no accumulated funding deficiency (as defined in
ERISA and the Code), whether or not waived, exists with respect to any Plan.
(d) The current value of all vested accrued benefits under the
Plans does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits by more than $350,000 as to any one Plan and
$650,000 in the aggregate as to all Plans. The terms "current value" and
"accrued benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any ERISA Affiliate has any liability or
potential liability with respect to any "multiemployer plan" (as such term is
defined in ERISA) that is subject to Title IV of ERISA (other than any liability
arising in the ordinary course of the business of Borrower or any ERISA
Affiliate for contributions to such plan in accordance with the collective
bargaining agreement of Borrower), except as set forth in Schedule 8.8 hereto.
8.9 Environmental Compliance.
(a) Except as set forth on Schedule 8.9 hereto, (i) Borrower has
not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which violates any applicable Environmental
Law or any license, permit, certificate, approval or similar authorization
thereunder and (ii) the operations of Borrower complies in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.9 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other third party nor is any pending
or to the best of Borrower's knowledge threatened, with respect to any material
non-compliance with or material violation of the requirements of any
Environmental Law by Borrower 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.
(c) Borrower has no material liability (contingent or otherwise)
in connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of Borrower under any Environmental Law.
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
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forth on Schedule 6.3 hereto, subject to the right of Borrower to establish new
accounts in accordance with Section 9.13 below.
8.11 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including
fulfillment (not merely the waiver, except as may be disclosed to Lender and
consented to in writing by Lender) of all conditions precedent set forth therein
and giving effect to the terms of the Purchase Agreements and the assignments to
be executed and delivered by Seller (or any of its Affiliates or Subsidiaries)
thereunder, Borrower acquired and has good and marketable title to the Purchased
Assets, free and clear of all claims, liens, pledges and encumbrances of any
kind, except as permitted hereunder.
(b) All actions and proceedings required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ AntiTrust Improvements Act of 1976, as
amended, but not including for this purpose applicable bulk sales statutes) have
been taken and the transactions required thereunder have been duly and validly
taken and consummated (except for those transactions required by the Purchase
Agreements to be taken after the closing of the acquisition).
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Purchase Agreements.
8.12 Capitalization.
(a) All of the issued and outstanding shares of capital stock of
Borrower are directly and beneficially owned and held by Leer Acquisition
Company, Inc. and 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.
(b) 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, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present fair salable value are, and will be, greater than
the indebtedness of Borrower, and
32
including subordinated and contingent liabilities computed at the amount which,
to the best of Borrower's knowledge, represents an amount which can reasonably
be expected to become an actual or matured liability.
8.13 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which could reasonably be expected to have a material
adverse affect on the business or assets of Borrower, which has not been fully
and accurately disclosed to Lender in writing.
8.14 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. Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Lender thirty (30)
days prior written notice 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 reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
33
(a) Borrower shall at all times comply in all material respects
with all applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders and duly observe all material requirements, of any foreign,
Federal, State or local governmental authority, including, without limitation,
the Occupational Safety and Health Act of 1970, as amended, the Code, the Fair
Labor Standards Act of 1938, as amended, and the rules and regulations
thereunder, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit Reporting Act, and regulations, rules and
orders promulgated thereunder), all Federal, State and local statutes,
regulations, rules and orders pertaining to sales of consumer goods (including,
without limitation, the Consumer Products Safety Act of 1972, as amended, and
the Federal Trade Commission Act of 1914, as amended, and all regulations, rules
and orders promulgated thereunder) and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including, without limitation, all Environmental Laws.
(b) Borrower shall establish and maintain, at its expense,
reasonable procedures to assure and monitor its continued compliance with all
Environmental Laws in all of its operations. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations disclosing material environmental conditions obtained by Borrower
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.
(c) Borrower shall give both oral and written notice to Lender
promptly upon the receipt by Borrower, of any written notice of, or its
otherwise obtaining reliable knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material which results in any material non-compliance with or material
violation of applicable Environmental Laws or which has a reasonable likelihood
of resulting in any material liability to any third party, or (ii) any third
party investigation, proceeding, complaint, order, directive, claims, citation
or notice of violation involving actual or potential material liability with
respect to: (A) any material non-compliance with or material violation of any
Environmental Law by Borrower or (B) the release, spill or discharge, threatened
or actual, of any Hazardous Material or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or (D) any other environmental, health or safety matter,
which affects Borrower or its business, operations or assets or any properties
at which it transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is any occurrence, event or condition
which has a reasonable likelihood of resulting in any material non-compliance
with any Environmental Law, or any occurrence, event or condition which requires
any action by or on behalf of Borrower, in order to avoid the reasonable
likelihood of any material non-compliance with any Environmental Law, Borrower
shall, at Lender's request and the expense of Borrower: (i) to prepare and
deliver to Lender a report as to such occurrence, event or condition setting
forth the results of its review, a proposed plan for responding to such
occurrence, event or condition and an estimate of the costs thereof
34
and (ii) provide to Lender a supplemental report whenever the scope of such
occurrence, event or condition, or the response of Borrower thereto or the
estimated costs thereof shall change in any material respect. At any time after
the receipt by Lender of such report or reports (so long as it is prepared and
delivered to Lender in a timely manner, otherwise at any time), upon Lender's
reasonable request, at the expense of Borrower, Borrower shall cause an
independent environmental engineer to prepare and deliver a report, in form and
scope acceptable to Lender, as to such occurrence, event or condition reviewing
the proposed plan for responding thereto and the estimated costs thereof.
Borrower shall have the right to review, comment on and approve all such
reports, which review, comment and approval shall not be unreasonably withheld,
conditioned or delayed, provided, that, such review, comment and approval shall
not in any manner delay the receipt by Lender of such reports.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, representatives, successors and assigns
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including 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 in connection with the business, operations,
assets or properties of Borrower, including, without limitation, 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 representations, warranties, covenants and
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 duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be 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
35
such insurance, and, if Borrower fails to do so, Lender is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies with
respect to the Collateral 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 with respect to the Collateral 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.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its Subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within thirty (30) days after the end of each fiscal month (other
than December of any year) and within forty-five (45) days after the end of
December of each year, monthly unaudited consolidated financial statements, and,
if Borrower has any Subsidiaries, unaudited consolidating financial statements
(including in each case balance sheets, statements of income and loss and
statements of cash flow) 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 and (ii) within
ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and, unaudited consolidating financial statements of JBPCO
and its Subsidiaries, so long as Borrower shall be one of such Subsidiaries, and
if not, then audited financial statements of Borrower (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 JBPCO 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 consolidated
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.
36
(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 or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all public 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 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 government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. 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, 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 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 or Equipment no longer
used in the business of Borrower so long as such sales do not involve Equipment
having an aggregate fair market value in excess of $50,000 for all such
Equipment disposed of in any fiscal year of Borrower, (iii) after written notice
to Lender, the disposition through the abandonment, cancellation or other
failure to maintain any trademark or other intellectual property (A) which is no
longer used or useful in the business of Borrower has not been used in the
business of Borrower for a period of not less than six (6) months, is not
otherwise material to the business of Borrower in any respect and has little or
no value or (B) which pursuant to applicable law may not be renewed or extended
and (iv) sales or other dispositions by Borrower of assets in connection with
the closing or sale of a retail store location of Borrower which consist of
leasehold interests in the premises of such store, the Equipment located at such
premises and the books and records relating exclusively and directly to the
operations of such store; provided, that, (A) the aggregate amount of all of the
37
assets so sold by Borrower in all such transactions shall not exceed $50,000,
(B) as of the date of such sale or other disposition and after giving effect
thereto, no Event of Default, or act, condition or event which with notice or
passage of time would constitute an Event of Default, shall exist or have
occurred, and (C) such sale shall be on commercially reasonable prices and terms
in a bona fide arm's length transaction, (c) form or acquire any Subsidiaries,
or (d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) liens and security interests of Lender; (b) liens
securing the payment of taxes, assessments and governmental charges or levies
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the payment of
taxes, assessments and governmental charges or levies) arising in the ordinary
course of Borrower's business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure indebtedness relating to claims
or liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, rights-of-way, servitudes, licenses, covenants
and other restrictions affecting the use of real property which do not interfere
in any material respect with the use of such real property or ordinary conduct
of the business of Borrower as presently conducted thereon or materially impair
the value of the real property which may be subject thereto; (e) purchase money
security interests in Equipment (including capital leases) and purchase money
mortgages on real estate arising after the date hereof not to exceed $500,000 in
the aggregate so long as such security interests and mortgages do not apply to
any property of Borrower other than the Equipment or real estate so acquired,
and the indebtedness secured thereby does not exceed the cost of the Equipment
or real estate so acquired, as the case may be; (f) the liens and security
interests of Seller to secure the indebtedness of Borrower to Seller permitted
under Section 9.9(d), which liens and security interests are, in all respects,
subject and subordinate in priority to the liens and security interests of
Lender pursuant to the intercreditor and subordination agreement between Lender
and Seller; (g) liens on, or rights of setoff against deposits of cash with the
owner or lessor of premises leased and operated by Borrower in the ordinary
course of the business of Borrower to secure the performance by Borrower of its
obligations under the terms of the lease for such premises; (h) liens incurred
(other than on Collateral) or deposits made by Borrower in the ordinary course
of the business of Borrower in connection with worker's compensation,
unemployment insurance or other types of social security benefits consistent
with the current practices of Borrower as of the date hereof, or to secure the
performance of bids, tenders, sales, contracts (other than for the repayment of
indebtedness), surety, appeal, customs and performance bonds consistent with the
current practices of Borrower as of the date hereof; provided, that, such liens
or deposits shall not
38
interfere in any material respect with the use of any property or the ordinary
conduct of the business of Borrower or impair the value of the assets and
properties of Borrower in any material respect; (i) encumbrances constituting
the filing of notice financing statements of a lessor's rights in and to
personal property leased to Borrower in the ordinary course of the business of
Borrower; (j) non-consensual statutory or common law liens on, or rights of
setoff against, cash of Borrower on deposit with any depositary bank listed on
Schedule 6.3 hereto, or any other banks with whom Borrower maintains deposit
accounts to the extent permitted under Section 6.3 hereof, in favor of the banks
in possession of such cash (other than the banks at which the Blocked Accounts
are maintained as to cash in the Blocked Accounts); provided, that, (i) such
liens shall not secure any indebtedness and (ii) there shall not be any
restrictions on the ability or right of Borrower to withdraw or use any such
cash; and (k) the security interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
(b) trade obligations, operating leases and normal accruals in
the ordinary course of business not yet due and payable, or with respect to
which the Borrower is contesting in good faith the amount or validity thereof by
appropriate proceedings diligently pursued and available to Borrower, and with
respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) indebtedness of Borrower to Seller (or to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇., as assignee of Seller after the date hereof) evidenced by or arising under
the Secured Subordinated Promissory Note, dated on or about the date hereof,
issued by Borrower payable to Seller, which indebtedness is subject and
subordinate in right of payment to the right of Lender to receive the prior
payment in full of all of the Obligations; provided, that, (i) the principal
amount of such Indebtedness shall not exceed $500,000 (or such other amount as
may be determined pursuant to the terms of the Purchase Agreements as a result
of the post-closing adjustment to the purchase price in accordance with the
terms thereof as in effect on the date hereof), less the aggregate amount of all
payments, optional or mandatory, of principal in respect thereof, plus interest
thereon at the rate provided for in such Note, as in effect on the date hereof,
(ii) Borrower shall not, directly, or indirectly, make any payments in respect
of such Indebtedness, including, but not limited to, any prepayments or other
non-mandatory payments, except that Borrower may make regularly scheduled
payments of principal and interest, on an unaccelerated basis, in respect of
such indebtedness in accordance with the terms of such Note as in effect on the
date hereof, provided, that, each of the following conditions is satisfied: (A)
as of the date of each such payment and after giving effect thereto, no Event of
Default, or act, condition or event which
39
with notice or passage of time or both would constitute an Event of Default,
shall exist or have occurred and (B) as of the date of each such payment and
after giving effect thereto, Excess Availability shall not be less than
$100,000, (iii) Borrower shall not, directly or indirectly, (A) amend, modify,
alter or change any terms of such indebtedness or any agreement, document or
instrument related thereto in any material respect, or (B) redeem or set aside
or otherwise deposit or invest any sums for such purpose, and (iv) Borrower
shall furnish to Lender all notices, demands or other materials in connection
with such indebtedness either received by Borrower or on its behalf, promptly
after receipt thereof or sent by Borrower or in its behalf, concurrently with
the sending thereof, as the case may be;
(e) unsecured indebtedness of Borrower to Seller arising pursuant
to the Non- Competition Agreement, dated on or about the date hereof, between
Borrower and Seller, which indebtedness is subject to and subordinate in right
of payment to the right of Lender to receive the prior payment in full of all of
the Obligations; provided, that: (i) the principal amount of such indebtedness
shall not in the aggregate exceed $500,000, less the aggregate amount of all
payments, optional or mandatory, in respect thereof, (ii) Borrower shall not,
directly or indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments or other non-mandatory payments,
except that Borrower may make the regularly scheduled quarterly installments of
$25,000 each year, on an unaccelerated basis, in respect of such indebtedness in
accordance with the terms of such Non-Competition Agreement as in effect on the
date hereof, and (iii) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto in any material respect, or (B) redeem or
set aside or otherwise deposit or invest any sums for such purpose, and (iv)
Borrower shall furnish to Lender all notices, demands or other materials in
connection with such indebtedness either received by Borrower or on its behalf,
promptly after receipt thereof or sent by Borrower or in its behalf,
concurrently with the sending thereof, as the case may be;
(f) unsecured indebtedness of Borrower to Leer arising after the
date hereof pursuant to loans by Leer to Borrower in cash or other immediately
available funds, provided, that, (i) such indebtedness is subject to, and
subordinate in right of payment to, the right of Lender to receive the prior
payment in full of all of the Obligations on terms and conditions acceptable to
Lender, (ii) Lender shall have received, in form and substance satisfactory to
Lender, a subordination agreement providing for the terms of the subordination
in right of payment of such indebtedness of Borrower to the payment of the
Obligations, duly authorized, executed and delivered by Leer and Borrower, (iii)
Borrower shall not, directly or indirectly, make or be required to make any
payments in respect of such indebtedness, except to the extent permitted under
Section 9.11(c) below, (iv) Borrower shall not, directly or indirectly, (A)
amend, modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, 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 (v) Borrower shall furnish to Lender all
notices, demands or other materials concerning such indebtedness either received
by
40
Borrower or on its behalf, promptly after 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 hereto; 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, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrower shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person, or
invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the assets
or property of any person, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the foregoing,
except: (a) the endorsement of instruments for collection or deposit in the
ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing investments to the extent
constituting Collateral, unless waived in writing by Lender, Borrower shall take
such actions as are deemed necessary by Lender to perfect the security interest
of Lender in such investments; (c) loans by Borrower to Leer permitted under
Section 9.11(b) below; and (d) the loans, advances and guarantees set forth on
Schedule 9.10 hereto; provided, that, as to such loans, advances and guarantees,
(i) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such loans, advances or guarantees or any agreement,
document or instrument related thereto, or (B) as to such guarantees, redeem,
retire, defease, purchase or otherwise acquire the obligations arising pursuant
to such guarantees, or set aside or otherwise deposit or invest any sums for
such purpose, and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such loans, advances or guarantees or other indebtedness
subject to such guarantees either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Restricted Payments.
(a) Borrower shall not, directly or indirectly, declare or pay
any dividends on account of any shares of class of capital stock of Borrower now
or hereafter outstanding, or set
41
aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
capital stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than common stock or apply or set apart any
sum, or make any other distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing.
(b) Borrower may pay dividends on account of any shares of common
stock of Borrower now outstanding, or make any loans or advance money or
property to Leer, provided, that, in each case as to any of the foregoing, each
of the following conditions is satisfied as determined by Lender: (i) as of the
date of the payment of such dividend or making such loan, and after giving
effect thereto, no Event of Default, or 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) any dividends or other
distributions shall be out of funds legally available therefor, (iii)
immediately after giving effect to the payment of such dividend or making of
such loan, as the case may be, the aggregate amount of all such dividends and
loans in any fiscal year of Borrower shall not exceed the amount equal to fifty
(50%) percent of the positive Consolidated Net Income of Borrower in the
immediately preceding fiscal year calculated based on the annual audited
financial statements of JBPCO, Inc. for such fiscal year delivered to Lender in
accordance with Section 9.6(a)(ii) hereof, (iv) as of the date of the payment of
such dividend or making such loan, the daily average of the Excess Availability
for the immediately preceding thirty (30) consecutive day period shall be not
less than the amount equal to two (2) times the amount of the trade payables and
other current liabilities of Borrower as of the last day of the preceding month
for which Lender has received monthly financial statements pursuant to Section
9.6(a)(i) above, as set forth in such monthly financial statements and as of the
date of such dividend or loan, and after giving effect thereto, the Excess
Availability shall not be less than such amount and (v) no Loans shall have been
outstanding on each of the sixty (60) days immediately prior to the payment of
such dividend or making of such loan.
(c) Borrower may repay the indebtedness of Borrower to Leer arising
after the date hereof permitted under Section 9.9(f) above, provided, that, as
to any such payment each of the following conditions is satisfied: (i) as of the
date of such repayment and after giving effect thereto, no Event of Default, or
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
and (ii) as of the date of such repayment, the daily average of the Excess
Availability for the immediately preceding thirty (30) consecutive day period
shall not be less than the amount equal to two (2) times the amount of the trade
payables and other current liabilities of Borrower as of the last day of the
preceding month for which Lender has received monthly financial statements
pursuant to Section 9.6(a)(i) above, as set forth in such monthly financial
statements and as of the date of such repayment, and after giving effect
thereto, the Excess Availability shall not be less than such amount.
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,
42
agent or other Affiliate, 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 a person who is not an Affiliate 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) payments for management fees
and reimbursements for costs, charges or expenses by Borrower to Southwestern
Holdings, Inc. in accordance with the terms of the Management Services Agreement
(as in effect on the date hereof or as amended after date hereof to increase the
amount payable by Borrower thereunder by up to $100,000 each year), (iii)
payments by Borrower to JBPCO pursuant to the tax sharing arrangements between
Borrower (as in effect on the date hereof); provided, that, (A) Borrower is
included in the consolidated federal income tax return filed by JBPCO as to
which Borrower is making such payments, (B) the payments in any year shall not
exceed the federal income tax liability that Borrower would have been liable for
if Borrower had filed its tax returns on a stand-alone basis, (C) such payments
shall be made by Borrower no earlier than five (5) days prior to the date on
which JBPCO would be required to make its payments to the Internal Revenue
Service, and (D) in the event that Borrower also joins with JBPCO in filing any
combined or consolidated (or similar) state or local income tax returns, then
the making of payments to JBPCO shall be allowed in a manner as similar as
possible to that provided herein with respect to federal income taxes and (iv)
payments by Borrower to Leer in respect of indebtedness owing by Borrower to
Leer to the extent permitted under Section 9.11(c) hereof.
9.13 Additional Bank Accounts. Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 6.3 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.
9.14 Compliance with ERISA. Borrower shall not with respect to any
Plan: (a) terminate any such Plan so as to incur any liability to the Pension
Benefit Guaranty Corporation under Section 4041(c) of ERISA; (b) allow or suffer
to exist any non-exempt prohibited transaction involving any of such Plan or any
trust created thereunder which would subject Borrower or any ERISA Affiliate to
a tax or penalty or other material liability on prohibited transactions imposed
under Section 4975 of the Code or under ERISA; (c) fail to pay to any such Plan
any contribution which it is obligated to pay under ERISA, the Code or the terms
of such Plan; (d) allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; (e) 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
43
Corporation of any such Plan under Section 4042 of ERISA or (f) incur any
withdrawal liability with respect to any multiemployer pension plan in excess of
$500,000.
9.15 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, 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) all insurance premiums,
appraisal fees and search fees; (c) costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Lender's customary charges and
fees with respect thereto; (d) charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations; (e) costs and
expenses of preserving and protecting the Collateral; (f) 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); (g) 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 $600 per person per day for Lender's examiners in the field and
office; and (h) the fees and disbursements of counsel (including legal
assistants) to Lender in connection with any of the foregoing.
9.16 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 Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender with respect to the Collateral.
44
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower or any Obligor fails to pay when due any of the
Obligations or (ii) Borrower or any Obligor fails to perform any of covenants
contained in Sections 9.1, 9.2, 9.3, 9.4, 9.6 and 9.14 hereof, and such failure
shall continue for ten (10) days, provided, that, such ten (10) day period shall
not apply in the case of: (A) any failure to observe any such covenant or
agreement which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure within the immediately
preceding six (6) months or (B) an intentional breach by Borrower or any Obligor
of any such covenant or agreement or (iii) Borrower or any Obligor fails to
perform any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements to which it is a party other
than those described in Sections 10.1(a)(i) or 10.1(a)(ii);
(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 (other than a judgment for which Borrower or such
Obligor is fully insured and for which the insurer has acknowledged its
liability therefor in writing) in excess of $50,000 in any one case or in excess
of $100,000 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) 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 in connection with any deferral or moratorium with respect to payments
on, or compromise of, or settlement or reduction in indebtedness owing to such
creditors;
45
(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 date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender (including, without limitation, the Secured
Subordinated Promissory Note issued by Borrower payable to Seller, the
Non-Competition Agreement between Borrower and Seller and the Asset Purchase
Agreement between Borrower and Seller), or any capitalized lease obligations,
contingent indebtedness in connection with any guarantee, letter of credit,
indemnity or similar type of instrument in favor of any person other than
Lender, in any case in an amount in excess of $80,000, 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, lease, license
or other obligation to any person other than Lender, which default continues for
more than the applicable cure period, if any, with respect thereto;
(j) any Change of Control;
(k) the indictment or threatened indictment of Borrower or any
Obligor (as Lender may reasonably and in good faith determine) under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against Borrower or any Obligor, pursuant to which statute or
proceeding the penalties or remedies sought or available include forfeiture of
any material portion of the property of Borrower or such Obligor;
(l) after the date hereof any act, condition or event shall exist
or have occurred which has a material adverse affect upon the assets of Borrower
or any Obligor, or the Collateral or the value thereof, or the ability of Lender
to realize thereon, or the rights and remedies of Lender under this Agreement or
the other Financing Agreements or the ability of Borrower or any Obligor to
repay the Obligations or of Borrower or any Obligor to perform its obligations
under this Agreement or any of the other Financing Agreements; or
46
(m) there shall have occurred and be continuing 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 Uniform Commercial Code 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 Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be
47
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default and for so long as the same is continuing, Lender
may, at its option, without notice, (i) cease making Loans or arranging for
Letter of Credit Accommodations or reduce the lending formulas or amounts of
Loans and Letter of Credit Accommodations available to Borrower and/or (ii)
suspend the effectiveness of any provision of this Agreement providing for any
future Loans or Letter of Credit Accommodations to be made by Lender to
Borrower.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York in New
York County and the United States District Court for the Southern District of
New York 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
48
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 on
the signature pages hereof and service so made shall be deemed to be completed
ten (10) 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 TO THE FULLEST EXTENT
PERMITTED BY LAW ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE. BORROWER 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. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein.
49
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.
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
reasonable expenses of counsel except for any loss, claim, damage, liability,
costs or expense resulting from the gross negligence or willful misconduct of
Lender as determined pursuant to a final non-appealable order of a court
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to Lender in satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term
50
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 (3rd) 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. Upon the effective date of termination or non-renewal
of the Financing Agreements, Borrower shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Lender
in such amounts as Lender determines are reasonably necessary to secure Lender
from loss, cost, damage or expense, including reasonable attorneys' fees and
legal expenses, in connection with any contingent Obligations, including issued
and outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not yet
received final and indefeasible payment. Such payments in respect of the
Obligations and cash collateral shall be remitted by wire transfer in Federal
funds to such bank account of Lender, as Lender may, in its discretion,
designate in writing to Borrower 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 City 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. Upon the receipt by Lender of payment in
full in cash or other immediately available funds of all of the outstanding and
unpaid Obligations and cash collateral as provided for in Section 12.1(a), upon
Borrower's request and at Borrower's expense, except as otherwise required by
applicable law, Lender shall execute and deliver to Borrower UCC-3 termination
statements and such other release documents with respect to the Collateral as
may be reasonably requested by Borrower, in form and substance satisfactory to
Lender, to effectuate the termination of the security interests granted by
Borrower or any Obligor to Lender herein and in the other Financing Agreements.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement at the request of
Borrower or by Lender as the result of an Event of Default, 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 equal
to: (i) three (3%) percent of the Maximum Credit if such termination occurs on
or prior to the first anniversary of the date hereof;
51
(ii) two (2%) percent of the Maximum Credit if such termination occurs after the
first anniversary of the date hereof, but prior to or on the second anniversary
of the date hereof; and (iii) one (1%) percent of the Maximum Credit if such
termination occurs after the second anniversary date, but prior to the third
anniversary of the date hereof, or if Lender exercises its option to extend the
Renewal Date pursuant to Section 12.1 of this Agreement, prior to the fourth
anniversary of the date hereof; provided, that, in the event of the termination
by Borrower of the financing arrangements provided for herein upon the amendment
of the existing financing arrangements of JBPCO with Lender pursuant to the Loan
and Security Agreement, dated June 28, 1996, by and among Lender, JBPCO and
certain of its Subsidiaries to add Borrower as a guarantor thereunder, together
with such other agreements, documents and instruments in connection therewith as
Lender may require (including, without limitation, agreements relating to
intercompany lending arrangements between Borrower and JBPCO, and the assignment
thereof to Lender), Borrower shall not be required to pay the early termination
fee provided for above. Nothing contained herein or otherwise shall be construed
to require Lender to agree to any such amendment to the existing financing
arrangements of Lender with JBPCO and certain of its Subsidiaries. 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 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below (with a copy to ▇.▇. ▇▇▇▇▇▇▇▇▇▇ &
Co., Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇), or to such other address as either party may designate by written notice
to the other in accordance with this provision, and (b) deemed to have been
given or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be
52
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, after notice to Borrower,
assign, or sell participations in, all or any part of the Loans, the Letter of
Credit Accommodations or any other interest herein to another financial
institution or other person, in which event, the assignee or participant shall
have, to the extent of such assignment or participation, the same rights and
benefits as it would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or participation.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep confidential,
in accordance with its customary procedures for handling confidential
information and safe and sound lending practices, any non-public information
supplied to it by Borrower pursuant to this Agreement which is clearly and
conspicuously marked as confidential at the time such information is furnished
by Borrower to Lender, provided, that, nothing contained herein shall limit the
disclosure of any such information: (i) to the extent required by statute, rule,
regulation, subpoena or court order, (ii) to bank examiners and other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Lender is a party, (iv) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) shall have first agreed in writing to treat such
information as confidential in accordance with this Section 12.5, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).
(b) In no event shall this Section 12.5 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party without breach of this Section 12.5 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender on a non-confidential basis from a person other than
Borrower, (iii) require Lender to return any materials furnished by Borrower to
Lender or (iv) prevent Lender from responding to routine informational requests
in accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates or other applicable industry
standards relating to the exchange of credit information. The obligations of
Lender under this Section 12.5 shall supersede and replace the obligations of
Lender under any confidentiality letter signed prior to the date hereof.
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
53
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
54
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 RADCO INDUSTRIES, INC.
By: By:
Title: Title:
Address: Chief Executive Office:
1133 Avenue of the Americas ▇▇▇ ▇▇▇▇▇▇▇ ▇▇, ▇.▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
=============================== =========================
55
[10/30/97]
INTERCREDITOR AND SUBORDINATION AGREEMENT
THIS INTERCREDITOR AND SUBORDINATION AGREEMENT ("Intercreditor
Agreement") dated as of October 31, 1997, is by and between CONGRESS FINANCIAL
CORPORATION, a California corporation ("Senior Creditor" as hereinafter further
defined) and MIDWEST TRUCK AFTER MARKET, INC., an Oklahoma corporation ("Junior
Creditor" as hereinafter further defined). Senior Creditor and Junior Creditor
are sometimes individually referred to herein as a "Creditor" and collectively
as "Creditors."
W I T N E S S E T H:
WHEREAS, Junior Creditor has sold to Radco Industries, Inc., a
Minnesota corporation ("Debtor" as hereinafter further defined) substantially
all of its business, assets and properties and in connection with such
acquisition, Debtor has incurred certain indebtedness in favor of Junior
Creditor, which indebtedness is secured by certain assets and properties of
Debtor; and
WHEREAS, Senior Creditor has entered or is about to enter into
financing arrangements with Debtor, pursuant to which Senior Creditor may, upon
certain terms and conditions, make loans and provide other financial
accommodations to Debtor secured by certain assets and properties of Debtor; and
WHEREAS, Creditors desire to enter into this Intercreditor Agreement to
(i) confirm the relative priority of the security interests of each Creditor in
the assets and properties of Debtor, (ii) provide for the orderly sharing among
Creditors, in accordance with such priorities, of proceeds of such assets and
properties upon any foreclosure thereon or other disposition thereof, and (iii)
agree upon the terms of the subordination of the obligations of Debtor to Junior
Creditor and related matters;
NOW THEREFORE, in consideration of the mutual benefits accruing to
Creditors hereunder and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. DEFINITIONS
As used above and in this Intercreditor Agreement, the following terms
shall have the meanings ascribed to them below:
1.1 "Agreements" shall mean, collectively, the Senior Creditor
Agreements and the Junior Creditor Agreements.
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1.2 "Collateral" shall mean all of the property and interests in
property, real or personal, tangible or intangible, now owned or hereafter
acquired by Debtor in or upon which either or both of Creditors at any time has
a Lien, and including, without limitation, all proceeds of such property and
interests in property.
1.3 "Creditors" shall mean, collectively, Senior Creditor and Junior
Creditor and their respective successors and assigns.
1.4 "Debtor" shall mean Radco Industries, Inc., a Minnesota corporation
and its successors and assigns, including, without limitation, a receiver,
trustee or debtor-in-possession on behalf of such person or on behalf of any
such successor or assign.
1.5 "Junior Creditor" shall mean Midwest Truck After Market, Inc., an
Oklahoma corporation and its successors and assigns.
1.6 "Junior Creditor Agreements" shall mean, collectively, the Secured
Subordinated Promissory Note, dated of even date herewith, issued by Debtor
payable to Junior Creditor in the original principal amount of $500,000, the
Security Agreement, dated of even date herewith, by Debtor in favor of Junior
Creditor, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.7 "Junior Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Junior
Creditor, including principal, interest, charges, fees, premiums, indemnities
and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under the Junior Creditor Agreements, whether
now existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Junior Creditor Agreements or after the
commencement of any case with respect to Debtor under the U.S. Bankruptcy Code
or any similar statute (and including, without limitation, any principal,
interest, fees, costs, expenses and other amounts, whether or not such amounts
are allowable in whole or in part, in any such case or similar proceeding),
whether direct or indirect, absolute or contingent, joint or several, due or not
due, primary or secondary, liquidated or unliquidated, secured or unsecured,
provided, that, the term "Junior Debt" shall not include indebtedness of Debtor
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. pursuant to the Non-Competition Agreement, dated of
even date herewith, by and between Debtor and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
1.8 "Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security interest, encumbrance
(including, but not limited to, easements, rights of way and the like), lien
(statutory or other), security agreement or transfer intended as security,
including without limitation, any conditional sale or other title retention
agreement, the interest of a lessor under a capital lease or any financing lease
having substantially the same economic effect as any of the foregoing.
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1.9 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without imitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), limited liability company, limited liability partnership,
business trust, unincorporated association, joint stock company, trust, joint
venture, or other entity or any government or any agency or instrumentality or
political subdivision thereof.
1.10 "Senior Creditor" shall mean Congress Financial Corporation, a
California corporation, and its successors and assigns (and including any other
lender or group of lenders that at any time refinances, replaces or succeeds to
all or any portion of the Senior Debt or is otherwise party to the Senior
Creditor Agreements).
1.11 "Senior Creditor Agreements" shall mean, collectively, the Loan
and Security Agreement, dated of even date herewith, by and between Senior
Creditor and Debtor and all agreements, documents and instruments at any time
executed and/or delivered by Debtor or any other person to, with or in favor of
Senior Creditor in connection therewith or related thereto, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated, refinanced, replaced or restructured (in whole or
in part and including any agreements with, to or in favor of any other lender or
group of lenders that at any time refinances, replaces or succeeds to all or any
portion of the Senior Debt).
1.12 "Senior Debt" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Senior
Creditor and/or its affiliates or participants, including principal, interest,
charges, fees, premiums, indemnities and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, arising under Senior
Creditor Agreements, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of the Senior Creditor
Agreements or after the commencement of any case with respect to Debtor under
the U.S. Bankruptcy Code or any state insolvency law or similar statute (and
including, without limitation, any principal, interest, fees, costs, expenses
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 any 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.
1.13 All terms defined in the Uniform Commercial Code as in effect in
the State of New York, unless otherwise defined herein shall have the meanings
set forth therein. All references to any term in the plural shall include the
singular and all references to any term in the singular shall include the
plural.
2. SECURITY INTERESTS; PRIORITIES; REMEDIES
2.1 Each Creditor hereby acknowledges that the other Creditor has been
granted a Lien upon the Collateral.
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2.2 Notwithstanding the order or time of attachment, or the order, time
or manner of perfection, or the order or time of filing or recordation of any
document or instrument, or other method of perfecting a security interest in
favor of each Creditor in any Collateral, and notwithstanding any conflicting
terms or conditions which may be contained in any of the Agreements, the Liens
upon the Collateral of Senior Creditor have and shall have priority over the
Liens upon the Collateral of Junior Creditor and such Liens of Junior Creditor
are and shall be, in all respects, subject and subordinate to the Liens of
Senior Creditor therein to the full extent of the Senior Debt.
2.3 The lien priorities provided in Section 2.2 shall not be altered or
otherwise affected by any amendment, modification, supplement, extension,
renewal, restatement or refinancing of either the Senior Debt or the Junior
Debt, nor by any action or inaction which any Creditor may take or fail to take
in respect of the Collateral.
2.4 Each Creditor shall be solely responsible for perfecting and
maintaining the perfection of its Lien in and to each item constituting the
Collateral in which such Creditor has been granted a Lien. The foregoing
provisions of this Agreement are intended solely to govern the respective lien
priorities as between the Creditors and shall not impose on Senior Creditor any
obligations in respect of the disposition of proceeds of foreclosure on any
Collateral which would conflict with prior perfected claims therein in favor of
any other person or any order or decree of any court or other governmental
authority or any applicable law. Each Creditor agrees that it will not contest
the validity, perfection, priority or enforceability of the Liens upon the
Collateral of the other Creditor and that as between Senior Creditor and Junior
Creditor, the terms of this Intercreditor Agreement shall govern even if part or
all of the Senior Debt or the Liens securing payment and performance thereof are
not perfected or are avoided, disallowed, set aside or otherwise invalidated in
any judicial proceeding or otherwise.
2.5 Senior Creditor shall have the exclusive right to manage, perform
and enforce the terms of the Senior Creditor Agreements with respect to the
Collateral on which it has a Lien, to exercise and enforce all privileges and
rights thereunder according to its discretion and the exercise of its business
judgment, including, without limitation, the exclusive right to take or retake
control or possession of such Collateral and to hold, prepare for sale, process,
sell, lease, dispose of, or liquidate such Collateral.
2.6 Notwithstanding anything to the contrary contained in any of the
Agreements, only Senior Creditor shall have the right to restrict or permit, or
approve or disapprove, the sale, transfer or other disposition of Collateral in
which it has a Lien. Junior Creditor shall (a) immediately upon the request of
Senior Creditor, release or otherwise terminate its Liens on the Collateral to
the extent such Collateral is sold or otherwise disposed of either by Senior
Creditor, its agents, or Debtor with the consent of Senior Creditor and Junior
Creditor shall immediately deliver such release documents as Senior Creditor may
require in connection therewith, provided, that such release by Junior Creditor
shall not extend to or otherwise affect any of the rights, if any, of Junior
Creditor to the proceeds from any such sale or other disposition of Collateral
and
-4-
(b) be deemed to have consented under the Junior Creditor Agreements to such
sale or other disposition.
2.7 Notwithstanding any rights or remedies available to a Creditor
under any of the Agreements, applicable law or otherwise, Junior Creditor shall
not, directly or indirectly, (a) seek to collect from Debtor (including, without
limitation, from or by way of any Collateral) any of the Junior Debt or exercise
any of its rights or remedies upon a default or event of default by Debtor under
the Junior Creditor Agreements or otherwise, or (b) seek to foreclose or realize
upon (judicially or non-judicially) its Lien on any Collateral or assert any
claims or interests therein (including, without limitation, by setoff or
notification of account debtors), or (c) commence any action or proceeding
against Debtor or its properties under the U.S. Bankruptcy Code or any state
insolvency law or similar present or future statute, law or regulation or any
proceedings for voluntary liquidation, dissolution or other winding up of
Debtor's business, or the appointment of any trustee, receiver or liquidator for
Debtor or any part of its properties or any assignment for the benefit of
creditors or any marshalling of assets of Debtor, or (d) take any other action
against Debtor and the Collateral. The foregoing shall not in any way limit or
impair the right of Junior Creditor from bidding for and purchasing Collateral
at any private or judicial foreclosure upon such Collateral initiated by Senior
Creditor.
3. SUBORDINATION OF JUNIOR DEBT
3.1 Subordination. Except as specifically set forth in Section 3.2
below, Junior Creditor hereby subordinates its right to payment and satisfaction
of the Junior Debt and the payment thereof, directly or indirectly, by any means
whatsoever, is deferred, to the indefeasible payment and satisfaction in full of
all Senior Debt.
3.2 Permitted Payments. Senior Creditor hereby agrees that,
notwithstanding anything to the contrary contained in Section 3.1, unless and
until the occurrence of an Event of Default (as such term is defined in the
Senior Creditor Agreements), Debtor may make and Junior Creditor may receive and
retain from Debtor regularly scheduled payments of principal and interest, on an
unaccelerated basis, in respect of the Junior Debt in accordance with the terms
of the Junior Creditor Agreements as in effect on the date hereof (but not any
prepayments, non-mandatory payments or any payments pursuant to acceleration or
claims of breach or to acquire any Junior Debt or otherwise); provided, that, as
of the date of each such payment and after giving effect thereto, Excess
Availability (as such term is defined in the Senior Creditor Agreements) shall
be not less than $100,000.
3.3 Distributions.
(a) In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Debtor or the proceeds thereof
to the creditors of Debtor or readjustment of the obligations and indebtedness
of Debtor, whether by reason of liquidation, bankruptcy, arrangement,
receivership,
-5-
assignment for the benefit of creditors, marshalling of assets of Debtor or any
other action or proceeding involving the readjustment of all or any part of the
indebtedness or other obligations of Debtor or the application of the assets of
Debtor to the payment or liquidation thereof, or upon the dissolution or other
winding up of Debtor's business, or upon the sale of all or substantially all of
Debtor's assets, then, and in any such event, (i) Senior Creditor shall first
receive indefeasible payment in full in cash of all of the Senior Debt prior to
the payment of all or any part of the Junior Debt, and (ii) Senior Creditor
shall be entitled to receive any payment or distribution of any kind or
character, whether in cash, securities or other property, which be payable or
deliverable in respect of any or all of the Junior Debt.
(b) In order to enable Senior Creditor to enforce its rights
under Section 3.3(a) above, Senior Creditor is hereby irrevocably authorized and
empowered (in its own name or in the name of Junior Creditor or otherwise), but
shall have no obligation to, enforce claims comprising any of the Junior Debt by
proof of debt, proof of claim, suit or otherwise and take generally any action
which Junior Creditor might otherwise be entitled to take, as Senior Creditor
may deem necessary or advisable for the enforcement of its rights or interests
hereunder.
(c) To the extent necessary for Senior Creditor to realize the
benefits of the subordination of the Junior Debt provided for herein (including
the right to receive any payment and distributions which might otherwise be
payable or deliverable in respect of the Junior Debt in any proceeding described
in Section 3.3(a) or otherwise), Junior Creditor shall execute and deliver to
Senior Creditor such instruments or documents (together with such assignments or
endorsements as Senior Creditor shall deem necessary), as may be requested by
Senior Creditor.
3.4 Payments Received by Junior Creditor. Except for payments received
by Junior Creditor as provided in Section 3.2 above, should any payment or
distribution or security or instrument or proceeds thereof be received by Junior
Creditor in respect of the Junior Debt, Junior Creditor shall receive and hold
the same in trust, as trustee, for the benefit of Senior Creditor, segregated
from other funds and property of Junior Creditor and shall forthwith deliver the
same to Senior Creditor (together with any endorsement or assignment of Junior
Creditor where necessary), for application to any of the Senior Debt. In the
event of the failure of the Junior Creditor to make any such endorsement or
assignment to Senior Creditor, Senior Creditor, or any of its officers or
employees, are hereby irrevocably authorized on behalf of Junior Creditor to
make the same.
3.5 Instrument Legend and Notation. Any instrument at any time
evidencing the Junior Debt, or any portion thereof, shall be permanently marked
on its face with a legend conspicuously indicating that payment thereof is
subordinate in right of payment to the Senior Debt and subject to the terms and
conditions of this Intercreditor Agreement, and (a) after being so marked
certified copies thereof shall be delivered to Senior Creditor and (b) the
original of any such instrument shall be immediately delivered to Senior
Creditor upon Senior Creditor's request, at any time on or after the occurrence
of an Event of Default as such term is defined in the Senior Creditor
Agreements. In the event any legend or endorsement is omitted, Senior
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Creditor or any of its officers or employees, are hereby irrevocably authorized
on behalf of Junior Creditor to make the same. No specific legend, further
assignment or endorsement or delivery of notes, guarantees or instruments shall
be necessary to subject any Junior Debt to the subordination thereof contained
in this Agreement.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES
4.1 Additional Covenants of Junior Creditor and Debtor. Junior Creditor
and Debtor agree in favor of Senior Creditor that:
(a) except as specifically set forth in Section 3.2 above,
Debtor shall not, directly or indirectly, make and Junior Creditor shall not,
directly or indirectly, accept or receive any payment of principal or interest
or any prepayment or non-mandatory payment or any payment pursuant to
acceleration or claims of breach or any payment to acquire Junior Debt or
otherwise in respect of any Junior Debt;
(b) Junior Creditor and Debtor shall not amend, modify, alter
or change in any material respect the terms of any of the Junior Creditor
Agreements or any other arrangements related to the Junior Debt;
(c) Junior Creditor and Debtor shall, at any time or times
upon the request of Senior Creditor, promptly furnish to Senior Creditor a true,
correct and complete statement of the outstanding Junior Debt;
(d) Junior Creditor and Debtor shall execute and deliver to
Senior Creditor such additional agreements, documents and instruments and take
such further actions as may be reasonably necessary or desirable in the opinion
of Senior Creditor to effectuate the provisions and purposes of this
Intercreditor Agreement.
4.2 Additional Covenant of Junior Creditor. Junior Creditor agrees in
favor of Senior Creditor that Junior Creditor shall not sell, assign, pledge,
encumber or otherwise dispose of any of the Junior Debt, except, that, Junior
Creditor may assign all of the Junior Debt to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. so long as
on or prior to such assignment, Senior Creditor shall have received from such
assignee a written acknowledgment of receipt of a copy of this Intercreditor
Agreement together with the written agreement of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., in form
and substance satisfactory to Senior Creditor, to be bound by the terms and
conditions of this Intercreditor Agreement.
4.3 Additional Representations and Warranties of Junior Creditor and
Debtor. Junior Creditor and Debtor represent and warrant to Senior Creditor
that:
(a) as of the date hereof, the total principal amount of the Junior
Debt is $500,000; and
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(b) as of the date hereof, no default or event of default, or event
which with notice or passage of time or both would constitute an event of
default exists or has occurred under the Junior Creditor Agreements.
4.4 Additional Representations and Warranties of Junior Creditor.
Junior Creditor agrees in favor of Senior Creditor that:
(a) Junior Creditor is the exclusive legal and beneficial owner of all
of the Junior Debt;
(b) none of the Junior Debt is subject to any lien, security interest,
financing statements or assignment;
(c) this Intercreditor Agreement constitutes the legal, valid and
binding obligations of Junior Creditor, enforceable in accordance with its
terms.
4.5 Additional Representation of Senior Creditor. Senior Creditor
represents to Junior Creditor that, as of the date hereof, the maximum amount of
loans available to Debtor under the Senior Creditor Agreements is $5,000,000.
4.6 Waivers. Notice of acceptance hereof, the making of loans, advances
and extensions of credit or other financial accommodations to, and the incurring
of any expenses by or in respect of, Debtor by Senior Creditor, and presentment,
demand, protest, notice of protest, notice of nonpayment or default and all
other notices to which Junior Creditor and Debtor are or may be entitled are
hereby waived (except as expressly provided for herein or as to Debtor, in the
Senior Creditor Agreements). Junior Creditor also waives notice of, and hereby
consents to, (a) any amendment, modification, supplement, renewal, restatement
or extensions of time of payment of or increase or decrease in the amount of any
of the Senior Debt or to the Senior Creditor Agreements or any Collateral, (b)
the taking, exchange, surrender and releasing of Collateral or guarantees now or
at any time held by or available to Senior Creditor for the Senior Debt or any
other person at any time liable for or in respect of the Senior Debt, (c) the
exercise of, or refraining from the exercise of any rights against Debtor or any
other obligor or any Collateral, (d) the settlement, compromise or release of,
or the waiver of any default with respect to, any of the Senior Debt, and/or (e)
Senior Creditor's election, in any proceeding instituted under the U.S.
Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy
Code. Any of the foregoing shall not, in any manner, affect the terms hereof or
impair the obligations of Junior Creditor hereunder. All of the Senior Debt
shall be deemed to have been made or incurred in reliance upon this
Intercreditor Agreement.
4.7 Subrogation; Marshalling. Junior Creditor shall not be subrogated
to, or be entitled to any assignment of any Senior Debt or Junior Debt or of any
Collateral or guarantees or evidence of any thereof until all of the Senior Debt
is indefeasibly paid and satisfied in full. Junior Creditor hereby waives any
and all rights to have any Collateral or any part thereof
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granted to Senior Creditor marshalled upon any foreclosure or other disposition
of such collateral by Senior Creditor or Debtor.
4.8 No Offset. In the event Junior Creditor at any time incurs any
obligation to pay money to Debtor, Junior Creditor hereby irrevocably agrees
that it shall pay such obligation in cash or cash equivalents in accordance with
the terms of the contract governing such obligation and shall not deduct from or
setoff against any amounts owed by the Junior Creditor to Debtor in connection
with any such transaction any amounts such of Junior Creditor claims are due to
it with respect to the Junior Debt.
5. MISCELLANEOUS
5.1 Amendments. Any waiver, permit, consent or approval by any Creditor
of or under any provision, condition or covenant to this Intercreditor Agreement
must be in writing and shall be effective only to the extent it is set forth in
writing and as to the specific facts or circumstances covered thereby. Any
amendment of this Intercreditor Agreement must be in writing and signed by each
of the parties to be bound thereby.
5.2 Successors and Assigns.
(a) This Intercreditor Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of each of Creditors and its respective successors, participants and
assigns.
(b) Senior Creditor reserves the right to grant participations
in, or otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, the Senior Debt and the Collateral securing same; provided, that,
Junior Creditor shall not be obligated to give any notices to or otherwise in
any manner deal directly with any participant in the Senior Debt and no
participant shall be entitled to any rights or benefits under this Intercreditor
Agreement except through Senior Creditor. In connection with any participation
or other transfer or assignment, Senior Creditor (i) may disclose to such
assignee, participant or other transferee or assignee all documents and
information which Senior Creditor now or hereafter may have relating to the
Senior Debt or the Collateral and (ii) shall disclose to such participant or
other transferee or assignee the existence and terms and conditions of this
Intercreditor Agreement.
(c) In connection with any assignment or transfer of any or
all of the Senior Debt, or any or all rights of Senior Creditor in the property
of Debtor (other than pursuant to a participation), Junior Creditor agrees to
execute and deliver an agreement containing terms substantially identical to
those contained herein in favor of any such assignee or transferee and, in
addition, will execute and deliver an agreement containing terms substantially
identical to those contained herein in favor of any third person who refinances
or succeeds to or replaces any or all of Senior Creditor's financing of Debtor,
whether such successor financing or replacement occurs by transfer, assignment,
"takeout" or any other means or vehicle.
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5.3 Insolvency. This Intercreditor Agreement shall be applicable both
before and after the filing of any petition by or against Debtor under the U.S.
Bankruptcy Code and all converted or succeeding cases in respect thereof, and
all references herein to Debtor shall be deemed to apply to a trustee for Debtor
and Debtor as debtor-in-possession. The relative rights of Senior Creditor and
Junior Creditor to repayment of the Senior Debt and the Junior Debt,
respectively, and in or to any distributions from or in respect of Debtor or any
Collateral or proceeds of Collateral, shall continue after the filing thereof on
the same basis as prior to the date of the petition, subject to any court order
approving the financing of, or use of cash collateral by, Debtor as
debtor-in-possession.
5.4 Bankruptcy Financing. If Debtor shall become subject to a
proceeding under the U.S. Bankruptcy Code and if Senior Creditor desires to
permit the use of cash collateral or to provide financing to Debtor under either
Section 363 or Section 364 of the U.S. Bankruptcy Code, Junior Creditor agrees
as follows: (a) adequate notice to Junior Creditor shall have been provided for
such financing or use of cash collateral if Junior Creditor receives notice two
(2) business days prior to the entry of the order approving such financing or
use of cash collateral and (b) no objection will be raised by Junior Creditor to
any such financing or use of cash collateral on the ground of a failure to
provide "adequate protection" for Junior Creditor's junior Liens on the
Collateral or any other grounds, provided Junior Creditor retains a Lien on the
post-petition Collateral with the same priority as existed prior to the
commencement of the proceeding under the U.S. Bankruptcy Code. For purposes of
this Section, notice of a proposed financing or use of cash collateral shall be
deemed given when given, in the manner prescribed by Section 5.5 hereof, to
Junior Creditor.
5.5 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed duly given,
made or received: 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 mailed by certified mail, return receipt requested, five (5)
days after mailing to the parties at their addresses set forth below (or to such
other addresses as the parties may designate in accordance with the provisions
of this Section):
To Senior Creditor: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
To Junior Creditor: Midwest Truck After Market, Inc.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
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Either Creditor may change the address(es) to which all notices, requests and
other communications are to be sent by giving written notice of such address
change to the other Creditor in conformity with this Section 5.5, but such
change shall not be effective until notice of such change has been received by
the other Creditors.
5.6 Counterparts. This Intercreditor Agreement may be executed in any
number of counterparts, each of which shall be an original with the same force
and effect as if the signatures thereto and hereto were upon the same
instrument.
5.7 Governing Law. The validity, construction and effect of this
Intercreditor Agreement shall be governed by the internal laws of the State of
New York (without giving effect to principles of conflicts of law).
5.8 Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties
hereto hereby irrevocably consents to the non-exclusive jurisdiction of the
Supreme Court of the State of New York in New York County and the United States
District Court for the Southern District of New York and waives trial by jury in
any action or proceeding with respect to this Intercreditor Agreement.
5.9 Complete Agreement. This written Intercreditor Agreement is
intended by the parties as a final expression of their agreement and is intended
as a complete statement of the terms and conditions of their agreement.
5.10 No Third Parties Benefitted. Except as expressly provided in
Section 5.2, this Intercreditor Agreement is solely for the benefit of the
Creditors and their respective successors, participants and assigns, and no
other person shall have any right, benefit, priority or interest under, or
because of the existence of, this Intercreditor Agreement.
5.11 Disclosures; Non-Reliance. Each Creditor has the means to, and
shall in the future remain, fully informed as to the financial condition and
other affairs of Debtor and no Creditor shall have any obligation or duty to
disclose any such information to any other Creditor. Except as expressly set
forth in this Intercreditor Agreement, the parties hereto have not otherwise
made to each other nor do they hereby make to each other any warranties, express
or implied, nor do they assume any liability to each other with respect to: (a)
the enforceability, validity, value or collectability of any of the Junior Debt
or Senior Debt or any guarantee or security which may have been granted to any
of them in connection therewith, (b) Debtor's title to or right to transfer any
of the Collateral, or (c) any other matter except as expressly set forth in this
Intercreditor Agreement.
5.12 Term. This Intercreditor Agreement is a continuing agreement and
shall remain in full force and effect until the indefeasible satisfaction in
full of all Senior Debt and the termination of the financing arrangements
between Senior Creditor and Debtor.
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IN WITNESS WHEREOF, the parties have caused this Intercreditor
Agreement to be duly executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION
By:
Title:
MIDWEST TRUCK AFTER MARKET, INC.
By:
Title:
The undersigned hereby acknowledges and agrees to the foregoing terms
and provisions. By its signature below, the undersigned agrees that it will,
together with its successors and assigns, be bound by the provisions hereof.
The undersigned agrees that any Creditor holding Collateral which is
also subject to a Lien in favor of the other Creditor does so as bailee (under
the UCC) for the other and is hereby authorized to and may turn over to such
other Creditor upon request therefor any such Collateral, after all obligations
and indebtedness of the undersigned to the bailee Creditor have been fully paid
and performed.
The undersigned acknowledges and agrees that: (i) although it may sign
this Intercreditor Agreement it is not a party hereto and does not and will not
receive any right, benefit, priority or interest under or because of the
existence of the foregoing Intercreditor Agreement, (ii) in the event of a
breach by the undersigned or Junior Creditor of any of the terms and provisions
contained in the foregoing Intercreditor Agreement, such a breach shall
constitute an "Event of Default" as defined in and under the Senior Creditor
Agreements and (iii) it will execute and deliver such additional documents and
take such additional action as may be necessary or desirable in the opinion of
any Creditor to effectuate the provisions and purposes of the foregoing
Intercreditor Agreement.
RADCO INDUSTRIES, INC.
By:
Title:
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