LOAN AND SECURITY AGREEMENT
DATED AS OF AUGUST 30, 2001
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION
AS LENDER
AND
BALLANTYNE OF OMAHA, INC.,
DESIGN & MANUFACTURING, INC.,
XENOTECH RENTAL CORP., AND
XENOTECH STRONG, INC.
AS BORROWERS
INDEX OF EXHIBITS AND SCHEDULES
Schedule A - Definitions
Schedule B - Lender's and Borrowers' Addresses for Notices
Schedule C - Letters of Credit (NOT USED)
Schedule D - Cash Management System
Schedule E - Fees and Expenses
Schedule F - Schedule of Documents
Schedule G - Financial Covenants
Disclosure Schedule (3.2) - Places of Business; Corporate Names
Disclosure Schedule (3.6) - Real Estate
Disclosure Schedule (3.7) - Stock; Affiliates
Disclosure Schedule (3.9) - Taxes
Disclosure Schedule (3.11) - ERISA
Disclosure Schedule (3.12) - Litigation
Disclosure Schedule (3.13) - Intellectual Property
Disclosure Schedule (3.15) - Environmental Matters
Disclosure Schedule (3.16) - Insurance
Disclosure Schedule (3.18) - Contracts (Offset Risk)
Disclosure Schedule (5(b)) - Indebtedness
Disclosure Schedule (5(e)) - Liens
Disclosure Schedule (6.1) - Actions to Perfect Liens
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Other Reports and Information
Exhibit C-1 - Form of Domestic Borrowing Base Certificate
Exhibit C-2 - Form of Foreign Borrowing Base Certificate
Exhibit C-3 - Inventory Rollforward and Reconciliation
Exhibit D - Form of Accounts Payable Analysis
Exhibit E - Form of Accounts Receivable Rollforward Analysis
Exhibit F-1 - Form of Domestic Revolving Credit Note
Exhibit F-2 - Form of Foreign Revolving Credit Note
Exhibit G - Form of Term Note
Exhibit H - Form of Secretarial Certificate
Exhibit I - Form of Power of Attorney
Exhibit J - Form of Certificate of Compliance
Exhibit K - [Intentionally Omitted]
Exhibit L - Form of Landlord's Waiver and Consent
Exhibit M - Form of Pledge Agreement
Exhibit N - Form of Guarantee
Exhibit O - Form of Opinion of Counsel to Borrower
Exhibit P - Form of Intercompany Note
Exhibit Q - Form of Standard Payoff Letter
Exhibit R - [Intentionally Omitted]
Exhibit S - Form of Payment of Proceeds Letter
Exhibit T - Form of Authorized Borrowers' Representative Letter
Exhibit U - Form of Trademark Security Agreement
Exhibit V - Form of Patent Security Agreement
Exhibit W-1 - Form of Nebraska Deed of Trust
Exhibit W-2 - Form of Illinois Mortgage
Exhibit X - Form of Letter to Account Debtors
Exhibit Y - Form of Borrower Agreement
GE CAPITAL
TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT
DOMESTIC REVOLVING CREDIT LOAN
BORROWERS: Ballantyne of Omaha, Inc., Design &
Manufacturing, Inc., and Xenotech Strong,
Inc.
DOMESTIC MAXIMUM AMOUNT: $6,000,000
TERM: 2 years, plus two optional 1-year renewal
periods
DOMESTIC REVOLVING CREDIT RATE: Index Rate plus 3.375%
LETTER OF CREDIT SUBFACILITY: n/a
DOMESTIC BORROWING BASE: 70% of the value (as determined by Lender)
of each Borrower's Eligible Domestic
Accounts (PROVIDED that Lender shall reduce
the foregoing percentage by one percentage
point for each percentage point that the
dilution of such Borrower's Accounts
(calculated by Lender as the average
dilution over the most recent three months)
exceeds 20%); PLUS, solely with respect to
the Domestic Borrowing Base of Leading
Borrower, the lesser of (i) $2,200,000 or
(ii) the sum of (A) the lesser of
$1,600,000 or 50% of the value of Leading
Borrower's Eligible Domestic Inventory
consisting of lenses, (B) the lesser of
$500,000 or 40% of the value of Leading
Borrower's Eligible Domestic Inventory
consisting of finished platters, theatre
equipment, and spotlights, and (C) the
lesser of $100,000 or 25% of the value of
Leading Borrower's Eligible Domestic
Inventory consisting of finished restaurant
equipment, in each case as determined by
Lender, valued on a first-in, first-out
basis (at the lower of cost or market);
PROVIDED that the Domestic Borrowing Base
of Leading Borrower shall be reduced by the
Foreign Revolver Reserve, the Inventory
Reserve, the Lens Reserve, and the Domestic
Environmental Reserve.
FOREIGN REVOLVING CREDIT LOAN
BORROWER: Ballantyne of Omaha, Inc.
FOREIGN MAXIMUM AMOUNT: $2,000,000
TERM: 2 years, plus two optional 1-year renewal
periods
FOREIGN REVOLVING CREDIT RATE: Index Rate plus 3.375%
FOREIGN BORROWING BASE: 70% of the value (as determined by Lender)
of Leading Borrower's Eligible Foreign
Accounts (PROVIDED that Lender shall reduce
the foregoing percentage by one percentage
point for each percentage point that the
dilution of Leading Borrower's Accounts
(calculated by Lender as the average
dilution over the most recent three months)
exceeds 20%); PLUS the sum of (i) 45% of
the value of Leading Borrower's Eligible
Export-Related Inventory consisting of
theatre finished goods (other than lenses)
and (ii) 15% of the value of Leading
Borrower's Eligible Export-Related
Inventory consisting of (X) theatre raw
materials and theatre work in process
(other than lenses), and (Y) bulbs, in each
case as determined by Lender, valued on a
first-in, first-out basis (at the lower of
cost or market) in each case as determined
by Lender; PROVIDED that the portion of the
Foreign Borrowing Base attributable to
Eligible Export-Related Inventory at any
one time shall not exceed the lesser of (i)
60% of the aggregate outstanding amount of
the Foreign Revolving Credit Loan at such
time, (ii) the sum of the Export Order
Backlog at such time plus $700,000, or
(iii) the sum of the Export Order Backlog
at such time plus 50% of the Foreign
Borrowing Base which otherwise would
consist of Eligible Export-Related
Inventory in excess of the Export Order
Backlog; PROVIDED that the Foreign
Borrowing Base of Leading Borrower shall be
reduced by the Foreign Environmental
Reserve.
TERM LOAN
BORROWERS: Ballantyne of Omaha, Inc., and Design &
Manufacturing, Inc.
ORIGINAL PRINCIPAL AMOUNT: $1,875,000
TERM: 2 years
AMORTIZATION: Equal monthly principal installments of
$31,250 payable on the first day of each
month, with a balloon payment on the
Commitment Termination Date.
TERM LOAN RATE: Index Rate plus 3.625%
FEES
CLOSING FEE: $49,375
FOREIGN FACILITY FEE $5,000 payable on the Closing Date and on
each annual anniversary thereof.
UNUSED LINE FEE: 0.25%
LETTER OF CREDIT FEE: n/a
PREPAYMENT FEE: 2% in year one and 1% in year two (or
during any renewal period).
THE LOANS DESCRIBED GENERALLY HERE ARE ESTABLISHED AND GOVERNED BY THE TERMS AND
CONDITIONS SET FORTH BELOW IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
IF THERE IS ANY CONFLICT BETWEEN THIS GENERAL DESCRIPTION AND THE EXPRESS TERMS
AND CONDITIONS BELOW OR ELSEWHERE IN THE LOAN DOCUMENTS, SUCH OTHER EXPRESS
TERMS AND CONDITIONS SHALL CONTROL.
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This
LOAN AND SECURITY AGREEMENT is dated as of August 30, 2001, and agreed to
by and among BALLANTYNE OF OMAHA, INC., a Delaware corporation ("LEADING
BORROWER"), DESIGN & MANUFACTURING, INC., a
Nebraska corporation, XENOTECH
RENTAL CORP., a
Nebraska corporation, and XENOTECH STRONG, INC., a
Nebraska
corporation ("OTHER BORROWERS"; Leading Borrower and the Other Borrowers being
collectively referred to as "BORROWERS" and each a "BORROWER"), any other Credit
Party executing this Agreement, and GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation ("LENDER").
RECITALS
A. Borrowers desire to obtain the Loans and other financial accommodations
from Lender and Lender is willing to provide the Loans and accommodations all in
accordance with the terms of this Agreement.
B. Capitalized terms used herein shall have the meanings assigned to them
in SCHEDULE A and, for purposes of this Agreement and the other Loan Documents,
the rules of construction set forth in SCHEDULE A shall govern. All schedules,
attachments, addenda and exhibits hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, constitute but a single agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 LOANS. (a) Subject to the terms and conditions of this Agreement, from
the Closing Date and until the Commitment Termination Date (i) Lender agrees (A)
to make available advances (each, a "DOMESTIC REVOLVING CREDIT ADVANCE") and (B)
to incur Letter of Credit Obligations, in an aggregate outstanding amount for
any Borrower not to exceed the Domestic Borrowing Availability of such Borrower,
and (ii) any Borrower may at the request of Leading Borrower as agent for such
Borrower from time to time borrow, repay and reborrow Domestic Revolving Credit
Advances, and may cause Lender to incur Letter of Credit Obligations, under this
SECTION 1.1(a).
(b) Subject to the terms and conditions of this Agreement, from
the Closing Date and until the Commitment Termination Date, (i) Lender agrees to
make available to Leading Borrower only additional advances (each, a "FOREIGN
REVOLVING CREDIT ADVANCE"), in an aggregate outstanding amount not to exceed the
Foreign Borrowing Availability, and (ii) Leading Borrower (but not any Other
Borrower) may from time to time borrow, repay and reborrow the Foreign Revolving
Credit Advances, under this SECTION 1.1(b). Any Other Borrower may repay Foreign
Revolving Credit Advances made to Leading Borrower to the extent such repayments
also constitute repayments of outstanding Permitted Intercompany Loans from
Leading Borrower to such Other Borrower.
(c) Leading Borrower, as agent for each Borrower, shall request
each Domestic Revolving Credit Advance, and Leading Borrower, for itself, shall
request each Foreign Revolving Credit Advance, by written notice to Lender
substantially in the form of EXHIBIT A (each a "NOTICE OF REVOLVING CREDIT
ADVANCE") given no later than 12:00 P.M. (Chicago time) on the Business Day of
the proposed advance Revolving Credit Advance. Lender shall be fully protected
under this Agreement in relying upon, and shall be entitled to rely upon, (i)
any Notice of Revolving Credit Advance believed by Lender to be genuine, and
(ii) the assumption that the Persons making electronic requests or executing and
delivering a Notice of Revolving Credit Advance were duly authorized, unless the
responsible individual acting thereon for Lender shall have actual knowledge to
the contrary. As an accommodation to Borrowers, Lender may permit telephonic,
electronic, or facsimile requests for a Revolving Credit Advance and electronic
or facsimile transmittal of instructions, authorizations, agreements or reports
to Lender by any Borrower. Unless Borrowers specifically direct Lender in
writing not to accept or act upon telephonic, facsimile or electronic
communications from any Borrower, Lender shall have no liability to any Borrower
for any loss or damage suffered by any Borrower as a result of Lender's honoring
of any requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it telephonically, by facsimile or
electronically and purporting to have been sent to Lender by any Borrower and
Lender shall have no duty to verify the origin of any such communication or the
identity or authority of the Person sending it. The Domestic Revolving Credit
Loan shall be evidenced by, and be repayable in accordance with the terms of,
the Domestic Revolving Credit Notes and this Agreement. The Foreign Revolving
Credit Loan shall be evidenced by, and be repayable in accordance with the terms
of, the Foreign Revolving Credit Note and this Agreement.
(d) In making any Loan hereunder Lender shall be entitled to rely
upon the most recent Borrowing Base Certificates delivered to Lender by such
Borrower and other information available to Lender. Lender shall be under no
obligation to make any further Revolving Credit Advance to any Borrower or incur
any other Obligation if any Borrower shall have failed to deliver any Borrowing
Base Certificate to Lender by the time specified in SECTION 4.1(b).
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(e) TERM LOAN. Subject to the terms and conditions of this
Agreement, Lender agrees to make the Term Loan to the Term Loan Borrowers on the
Closing Date in the original principal amount specified in the Term Note. The
Term Loan shall be evidenced by, and be repayable in accordance with the terms
of, the Term Note and this Agreement.
(f) LETTERS OF CREDIT. Notwithstanding anything to the contrary
contained in this Agreement, including SCHEDULE C, Lender shall have no
obligations to incur Letter of Credit Obligations for the account of any
Borrower.
1.2 TERM AND PREPAYMENT. (a) Upon the Commitment Termination Date the
obligation of Lender to make Revolving Credit Advances and extend other credit
hereunder shall immediately terminate and Borrowers shall pay to Lender in full,
in cash: (i) all outstanding Revolving Credit Advances and all accrued but
unpaid interest thereon; (ii) an amount sufficient to enable Lender to hold cash
collateral as specified in SCHEDULE C; (iii) all principal and accrued but
unpaid interest on the Term Loan; and (iv) all other non-contingent Obligations
due to or incurred by Lender.
(b) If the Domestic Revolving Credit Loan attributable to any
Borrower shall at any time exceed such Borrower's Domestic Borrowing
Availability, then such Borrower shall immediately repay the Domestic Revolving
Credit Loan attributable to such Borrower in the amount of such excess. If the
Foreign Revolving Credit Loan shall at any time exceed the Foreign Borrowing
Availability, then Leading Borrower shall immediately repay the Foreign
Revolving Credit Loan in the amount of such excess.
(c) Each Borrower shall have the right, at any time upon 30 days
prior written notice to Lender to (i) terminate voluntarily Borrowers' right to
receive or benefit from, and Lender's obligation to make and to incur, Revolving
Credit Advances and Letter of Credit Obligations, (ii) prepay all or a portion
of the Term Loan, provided that any prepayment of less than all of the
outstanding balance of the Term Loan shall be applied to the remaining
installments of the Term Loan in the inverse order of their maturity, and (iii)
prepay all of the Obligations. The effective date of termination of the Domestic
Revolving Credit Loan, the Foreign Revolving Credit Loan, and the Term Loan
specified in such notice shall be the Commitment Termination Date. If any
Borrower exercises the right of termination and prepayment, or if Lender's
obligation to make Loans is terminated for any reason prior to the Stated Expiry
Date then in effect (including as a result of the occurrence of a Default),
Borrowers shall pay to Lender the applicable Prepayment Fee.
(d) If the Net Borrowing Availability for all Borrowers combined
shall be less than $1,000,000 at any time, then one or more Borrowers shall
immediately repay Revolving Credit Advances in the amount of such shortfall,
PROVIDED that the foregoing shall not apply from and after the date upon which
Lender first receives the financial statements required by SECTION 4.1(a)
demonstrating to Lender's satisfaction that Borrowers have complied with Fixed
Charge Coverage Ratio covenant set forth in PARAGRAPH 1 of SCHEDULE G.
1.3 USE OF PROCEEDS. Borrowers shall use the proceeds of the Loans to
refinance on the Closing Date certain outstanding Indebtedness as provided in
SECTION 2.1(b) and for working capital and other general corporate purposes.
1.4 SINGLE LOAN. The Loans and all of the other Obligations of any
Borrower to Lender shall constitute one general obligation of such Borrower
secured by all of the Collateral.
1.5 INTEREST (a) Each Borrower shall pay interest to Lender on the
aggregate outstanding Revolving Credit Advances attributable to such Borrower at
a floating rate per annum equal to the Index Rate plus three and three hundred
seventy-five thousandths percent (3.375 %) per annum (the "REVOLVING CREDIT
RATE") and the Term Loan Borrowers shall pay interest to Lender on the
outstanding balance of the Term Loan at a floating rate equal to the Index Rate
plus three and six hundred twenty-five thousandths percent (3.625%) per annum
(the "TERM LOAN Rate"). All computations of interest, and all calculations of
the Letter of Credit Fee, shall be made by Lender on the basis of a three
hundred and sixty (360) day year, in each case for the actual number of days
occurring in the period for which such interest or fee is payable. Each
determination by Lender of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error. In no event will Lender charge
interest at a rate that exceeds the highest rate of interest permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable.
(b) Interest shall be payable on the outstanding Revolving Credit
Advances and balance of the Term Loan (i) in arrears for the preceding calendar
month on the first day of each calendar month, (ii) on the Commitment
Termination Date, and (iii) if any interest accrues or remains payable after the
Commitment Termination Date, upon demand by Lender.
(c) Effective upon the occurrence of any Event of Default and for
so long as any Event of Default shall be continuing, the Revolving Credit Rate,
the Term Loan Rate and the Letter of Credit Fee shall automatically be increased
by two percentage points (2%) per annum (such increased rate, the "DEFAULT
RATE"), and all outstanding Obligations, including unpaid
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interest and Letter of Credit Fees, shall continue to accrue interest from the
date of such Event of Default at the Default Rate applicable to such
Obligations.
(d) If any interest or any other payment (including Unused Line
Fees and Foreign Facility Fees) to Lender under this Agreement becomes due and
payable on a day other than a Business Day, such payment date shall be extended
to the next succeeding Business Day and interest thereon shall be payable at the
then applicable rate during such extension.
1.6 CASH MANAGEMENT SYSTEM. On or prior to the Closing Date and until the
Termination Date, each Borrower will establish and maintain the cash management
system described in SCHEDULE D. All payments in respect of the Collateral shall
be made to or deposited in the blocked or lockbox accounts described in SCHEDULE
D in accordance with the terms thereof.
1.7 FEES. Each Borrower agrees to pay to Lender the Fees set forth in
SCHEDULE E.
1.8 RECEIPT OF PAYMENTS. Each Borrower shall make each payment under this
Agreement (not otherwise made pursuant to SECTION 1.9) without set-off,
counterclaim or deduction and free and clear of all Taxes not later than 11:00
A.M. (Chicago time) on the day when due in lawful money of the United States of
America in immediately available funds to the Collection Account. If any
Borrower shall be required by law to deduct any Taxes from any payment to Lender
under any Loan Document, then the amount payable to Lender shall be increased so
that, after making all required deductions, Lender receives an amount equal to
that which it would have received had no such deductions been made. For purposes
of computing interest and Fees, all payments shall be deemed received by Lender
1 Business Day following receipt of immediately available funds in the
Collection Account. For purposes of determining the Domestic Borrowing
Availability and Foreign Borrowing Availability, payments shall be deemed
received by Lender upon receipt of immediately available funds in the Collection
Account
1.9 APPLICATION AND ALLOCATION OF PAYMENTS. Each Borrower irrevocably
agrees that Lender shall have the continuing and exclusive right to apply any
and all payments against the then due and payable Obligations in such order as
Lender may deem advisable. Lender is authorized to, and at its option may
(without prior notice or precondition and at any time or times), but shall not
be obligated to, make or cause to be made Revolving Credit Advances on behalf of
any Borrower for: (a) payment of all Fees, expenses, indemnities, charges,
costs, principal, interest, or other Obligations owing by such Borrower under
this Agreement or any of the other Loan Documents, (b) the payment, performance
or satisfaction of any of such Borrower's obligations with respect to
preservation of the Collateral, or (c) any premium in whole or in part required
in respect of any of the policies of insurance required by this Agreement, even
if the making of any such Revolving Credit Advance causes the outstanding
balance of the Domestic Revolving Credit Loan attributable to any Borrower to
exceed such Borrower's Domestic Borrowing Availability or the Foreign Revolving
Credit Loan to exceed Leading Borrower's Foreign Borrowing Availability, and
each Borrower agrees to repay immediately, in cash, any amount by which such
Borrower's Domestic Revolving Credit Loan exceeds such Borrower's Domestic
Borrowing Availability, and Leading Borrower agrees to repay immediately, in
cash, any amount by which Foreign Revolving Credit Loan exceeds Leading
Borrower's Foreign Borrowing Availability.
1.10 ACCOUNTING. Lender is authorized to record on its books and records
the date and amount of each Loan and each payment of principal thereof and such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Lender shall provide Borrowers on a monthly basis a
statement and accounting of such recordations but any failure on the part of the
Lender to keep any such recordation (or any errors therein) or to send a
statement thereof to any Borrower shall not in any manner affect the obligation
of any Borrower to repay any of the Obligations. Except to the extent that any
Borrower shall, within 60 days after such statement and accounting is sent,
notify Lender in writing of any objection such Borrower may have thereto
(stating with particularity the basis for such objection), such statement and
accounting shall be deemed final, binding and conclusive upon such Borrower,
absent manifest error.
1.11 INDEMNITY. Each Borrower and each other Credit Party executing this
Agreement jointly and severally agree to indemnify and hold Lender and its
Affiliates, and their respective employees, attorneys and agents (each, an
"INDEMNIFIED PERSON"), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind or
nature whatsoever (including attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement and the other Loan Documents or
any other documents or transactions contemplated by or referred to herein or
therein and any actions or failures to act with respect to any of the foregoing,
including any and all product liabilities, Environmental Liabilities, Taxes and
legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
"INDEMNIFIED LIABILITIES"), except to the extent that any such Indemnified
Liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT
PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS
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DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT UNDER ANY POWER
OF ATTORNEY FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY
BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
1.12 BORROWING BASE; RESERVES. The Domestic Borrowing Base and the Foreign
Borrowing Base of each Borrower shall be determined by Lender (including the
eligibility of Accounts and Inventory) based on the most recent Borrowing Base
Certificates delivered to Lender in accordance with SECTION 4.1(b) and such
other information available to Lender. The Domestic Revolving Credit Loan and
the Foreign Revolving Credit Loan shall be subject to Lender's continuing right
to withhold from any Borrower's Domestic Borrowing Availability or Leading
Borrower's Foreign Borrowing Availability, as applicable, reserves, and to
increase and decrease such reserves from time to time, if and to the extent that
in Lender's good faith credit judgment such reserves are necessary, including to
protect Lender's interest in the Collateral or to protect Lender against
possible non-payment of Accounts for any reason by Account Debtors or possible
diminution of the value of any Collateral or possible non-payment of any of the
Obligations or for any Taxes or in respect of any state of facts which could
constitute a Default. Lender may, at its option, implement reserves by
designating as ineligible a sufficient amount of Accounts or Inventory which
would otherwise be Eligible Domestic Accounts, Eligible Foreign Accounts,
Eligible Domestic Inventory, or Eligible Export-Related Inventory, as the case
may be, so as to reduce any Borrower's Domestic Borrowing Base or Foreign
Borrowing Base (as the case may be) by the amount of the intended reserves.
Without limiting the generality of the foregoing, Lender shall withhold from
Leading Borrower's Domestic Revolving Credit Availability the Foreign Revolver
Reserve, the Inventory Reserve, the Lens Reserve, and the Domestic Environmental
Reserve, and Lender shall withhold from Leading Borrower's Foreign Revolving
Credit Availability the Foreign Environmental Reserve.
2. CONDITIONS PRECEDENT
2.1 CONDITIONS TO THE INITIAL LOANS. Lender shall not be obligated to make
any of the Loans or to perform any other action hereunder, until the following
conditions have been satisfied in a manner satisfactory to Lender in its sole
discretion, or waived in writing by Lender:
(a) the Loan Documents to be delivered on or before the Closing
Date shall have been duly executed and delivered by the appropriate parties, all
as set forth in the Schedule of Documents (SCHEDULE F);
(b) all of the obligations of Borrowers to ▇▇▇▇▇ Fargo Bank N.A.
under their financing documentation as in effect immediately prior to the
Closing Date will be performed and paid in full from the proceeds of the initial
Loans and all Liens upon any of the property of any Borrower or any other Credit
Party in respect thereof shall have been terminated immediately upon such
payment;
(c) the insurance policies provided for in SECTION 3.16 are in
full force and effect, together with appropriate evidence showing loss payable
or additional insured clauses or endorsements in favor of Lender as required
under such Section;
(d) as of the Closing Date, Net Borrowing Availability for all
Borrowers combined shall be not less than $2,000,000 after giving effect to the
initial Revolving Credit Advances and Letter of Credit Obligations (on a pro
forma basis, with trade payables being paid currently, and expenses and
liabilities being paid in the ordinary course of business and without
acceleration of sales);
(e) Lender shall have received the Ex-Im Bank Guarantee duly
executed by Ex-Im Bank on terms acceptable to Lender, together such waivers duly
executed by Ex-Im Bank as Lender deems necessary in its sole discretion, and
Leading Borrower shall have entered into the Borrower Agreement (and consented
to by each Other Borrower and each Guarantor) with Ex-Im Bank in accordance with
the Ex-Im Bank Guarantee; and
(f) Lender shall have received an opinion of counsel to Borrowers
with respect to the Loan Documents in form and substance satisfactory to Lender.
2.2 FURTHER CONDITIONS TO THE LOANS. Lender shall not be obligated to fund
any Loan (including the initial Loans), if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect as of
such date, except to the extent that any such representation or warranty is
expressly stated to relate to a specific earlier date, in which case, such
representation and warranty shall be true and correct as of such earlier date;
or
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(b) any event or circumstance which has had or reasonably could be
expected to have a Material Adverse Effect shall have occurred since the Closing
Date; or
(c) any Default shall have occurred and be continuing or would
result after giving effect to such Loan; or
(d) after giving effect to such Loan, the Domestic Revolving
Credit Loan attributable to any Borrower would exceed the Domestic Borrowing
Availability of such Borrower or the Foreign Revolving Credit Loan would exceed
Leading Borrower's Foreign Borrowing Availability.
2.3 AGENT. The request and acceptance by Leading Borrower, as agent for
each Borrower, of the proceeds of any Loan, and the request by Leading Borrower,
as agent for each Borrower, for the incurrence by Lender of any Letter of Credit
Obligations, as the case may be, shall be deemed to constitute, as of the date
of such request and the date of such acceptance, (i) a representation and
warranty by each Borrower that the conditions in SECTION 2.2 have been satisfied
and (ii) a restatement by each Borrower of each of the representations and
warranties made by such Borrower in any Loan Document and a reaffirmation by
each Borrower of the granting and continuance of Lender's Liens pursuant to the
Loan Documents.
3. REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
To induce Lender to enter into this Agreement and to make the Loans, each
Borrower and each other Credit Party executing this Agreement represent and
warrant to Lender (each of which representations and warranties shall survive
the execution and delivery of this Agreement), and promise to and agree with
Lender until the Termination Date as follows:
3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Corporate Credit Party:
(a) is, as of the Closing Date, and will continue to be (i) a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, (ii) duly qualified to do
business and in good standing in each other jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect, and (iii) in compliance with all Requirements of
Law and Contractual Obligations, except to the extent failure to comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and (b) has and will continue to have (i) the
requisite corporate power and authority and the legal right to execute, deliver
and perform its obligations under the Loan Documents, and to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore or
proposed to be conducted, and (ii) all licenses, permits, franchises, rights,
powers, consents or approvals from or by all Persons or Governmental Authorities
having jurisdiction over such Corporate Credit Party which are necessary or
appropriate for the conduct of its business.
3.2 EXECUTIVE OFFICES; CORPORATE OR OTHER NAMES. The location of each
Corporate Credit Party's chief executive office, corporate offices, warehouses,
other locations of Collateral and locations where records with respect to
Collateral are kept (including in each case the county of such locations) are as
set forth in DISCLOSURE SCHEDULE (3.2) and, except as set forth in such
Disclosure Schedule, such locations have not changed during the preceding twelve
months. As of the Closing Date, during the prior five years, except as set forth
in DISCLOSURE SCHEDULE (3.2), no Corporate Credit Party has been known as or
conducted business in any other name (including trade names).
3.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by each Credit Party of the Loan Documents to which it
is a party, and the creation of all Liens provided for herein and therein: (a)
are and will continue to be within such Credit Party's power and authority; (b)
have been and will continue to be duly authorized by all necessary or proper
action; (c) are not and will not be in violation of any Requirement of Law or
Contractual Obligation of such Credit Party; (d) do not and will not result in
the creation or imposition of any Lien (other than Permitted Encumbrances) upon
any of the Collateral; and (e) do not and will not require the consent or
approval of any Governmental Authority or any other Person. As of the Closing
Date, each Loan Document shall have been duly executed and delivered on behalf
of each Credit Party party thereto, and each such Loan Document upon such
execution and delivery shall be and will continue to be a legal, valid and
binding obligation of such Credit Party, enforceable against it in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.
3.4 FINANCIAL STATEMENTS AND PROJECTIONS; BOOKS AND RECORDS. (a) The
Financial Statements delivered by each Borrower to Lender for its most recently
ended Fiscal Year and Fiscal Month, are true, correct and complete and reflect
fairly and accurately the financial condition of such Borrower as of the date of
each such Financial Statement in accordance with GAAP. The Projections most
recently delivered by each Borrower to Lender have been prepared in good faith,
with care and diligence and use assumptions that are reasonable under the
circumstances at the time such Projections were prepared and as of the date
delivered to Lender and all such assumptions are disclosed in the Projections.
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(b) Each Borrower and each other Corporate Credit Party shall keep
adequate Books and Records with respect to the Collateral and its business
activities in which proper entries, reflecting all consolidated and
consolidating financial transactions, and payments and credits received on, and
all other dealings with, the Collateral, will be made in accordance with GAAP
and all Requirements of Law and on a basis consistent with the Financial
Statements.
3.5 MATERIAL ADVERSE CHANGE. Between the date of each Borrower's most
recently audited Financial Statements delivered to Lender and the Closing Date:
(a) no Corporate Credit Party has incurred any obligations, contingent or
non-contingent liabilities, or liabilities for Charges, long-term leases (other
than the renewal or extension of Xenotech Strong, Inc.'s California real estate
lease on substantially the same terms as its existing lease of such premises) or
unusual forward or long-term commitments which are not reflected in the
Projections delivered on the Closing Date and which could, alone or in the
aggregate, reasonably be expected to have a Material Adverse Effect; (b) there
has been no material deviation from such Projections; and (c) no events have
occurred which alone or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect. No Requirement of Law or Contractual
Obligation of any Credit Party has or have had or could reasonably be expected
to have a Material Adverse Effect. No Credit Party is in default, and to such
Credit Party's knowledge no third party is in default, under or with respect to
any of its Contractual Obligations, which alone or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.
3.6 REAL ESTATE; PROPERTY. The real estate listed in DISCLOSURE SCHEDULE
(3.6) constitutes all of the real property owned, leased, or used by each
Corporate Credit Party in its business, and such Credit Party will not execute
any material agreement or contract in respect of such real estate after the date
of this Agreement without giving Lender prompt prior written notice thereof.
Each Corporate Credit Party holds and will continue to hold good and marketable
fee simple title to all of its owned real estate, and good and marketable title
to all of its other properties and assets, and valid and insurable leasehold
interests in all of its leases (both as lessor and lessee, sublessee or
assignee), and none of the properties and assets of any Corporate Credit Party
are or will be subject to any Liens, except Permitted Encumbrances. With respect
to each of the premises identified in DISCLOSURE SCHEDULE (3.2) on or prior the
Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender has
been obtained.
3.7 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND
INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.7), as of the
Closing Date no Corporate Credit Party has any Subsidiaries, is engaged in any
joint venture or partnership with any other Person, or is an Affiliate of any
other Person. The Leading Borrower has provided Lender with a true, correct and
complete list (as of the date on such list) of all of its Stockholders who have
no objection to the disclosure of their identity as Stockholders of Leading
Borrower. All outstanding Indebtedness of each Corporate Credit Party as of the
Closing Date is described in DISCLOSURE SCHEDULE (5(b)), subject to any
exceptions shown on such schedule.
3.8 GOVERNMENT REGULATION; MARGIN REGULATIONS. No Corporate Credit Party
is subject to or regulated under any Federal or state statute, rule or
regulation that restricts or limits such Person's ability to incur Indebtedness,
pledge its assets, or to perform its obligations under the Loan Documents. The
making of the Loans, the application of the proceeds and repayment thereof, and
the consummation of the transactions contemplated by the Loan Documents do not
and will not violate any Requirement of Law. No Corporate Credit Party is
engaged, nor will it engage in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin security" as such terms are defined in
Regulation U of the Federal Reserve Board as now and hereafter in effect (such
securities being referred to herein as "MARGIN STOCK"). No Corporate Credit
Party owns any Margin Stock, and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly,
for the purpose of purchasing or carrying any Margin Stock or reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
Margin Stock. No Corporate Credit Party will take or permit to be taken any
action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
3.9 TAXES; CHARGES. Except as disclosed on DISCLOSURE SCHEDULE (3.9) all
tax returns, reports and statements required by any Governmental Authority to be
filed by Borrower or any other Credit Party have, as of the Closing Date, been
filed and will, until the Termination Date, be filed with the appropriate
Governmental Authority and no tax Lien has been filed against any Credit Party
or any Credit Party's property. Proper and accurate amounts have been and will
be withheld by Borrower and each other Credit Party from their respective
employees for all periods in complete compliance with all Requirements of Law
and such withholdings have and will be timely paid to the appropriate
Governmental Authorities. DISCLOSURE SCHEDULE (3.9) sets forth as of the Closing
Date those taxable years for which any Credit Party's tax returns are currently
being audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described on DISCLOSURE SCHEDULE
(3.9), none of the Credit Parties and their respective predecessors are liable
for any Charges: (a) under any agreement (including any tax sharing agreements
or agreement extending the period of assessment of any Charges) or (b) to each
Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit
Party has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, which could
reasonably be expected to have a Material Adverse Effect.
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3.10 PAYMENT OF OBLIGATIONS. Each Credit Party will pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all of its Charges and other obligations of whatever nature, except
where either (i) the amount or validity thereof is currently being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of such Credit Party and none of
the Collateral is or could reasonably be expected to become subject to any Lien
or forfeiture or loss as a result of such contest or (ii) the aggregate amount
of all such matured or delinquent Charges and other obligations does not exceed
$25,000 at any one time.
3.11 ERISA. All Plans of each Borrower are listed on DISCLOSURE SCHEDULE
(3.11). No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other existing ERISA Events, could reasonably be
expected to result in a liability of any Credit Party of more than the Minimum
Actionable Amount. The present value of all accumulated benefit obligations of
the Credit Parties under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent Financial Statements reflecting such amounts, exceed the fair
market value of the assets of such Plan by more than the Minimum Actionable
Amount, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Account Standards No. 87) did not, as of the date of the most recent
Financial Statements reflecting such amounts, exceed the fair market value of
the assets of such underfunded Plans by more than the Minimum Actionable Amount.
No Credit Party or ERISA Affiliate has incurred or reasonably expects to incur
any Withdrawal Liability in excess of the Minimum Actionable Amount.
3.12 LITIGATION. No Litigation is pending or, to the knowledge of any Credit
Party, threatened by or against any Credit Party or against any Credit Party's
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect. Except as set forth on DISCLOSURE
SCHEDULE (3.12), as of the Closing Date there is no Litigation pending or
threatened against any Credit Party which seeks damages in excess of $50,000 or
injunctive relief or alleges criminal misconduct of any Credit Party. Each
Credit Party shall notify Lender promptly in writing upon learning of the
existence, threat or commencement of any Litigation against any Credit Party,
any ERISA Affiliate or any Plan or any allegation of criminal misconduct against
any Credit Party.
3.13 INTELLECTUAL PROPERTY. As of the Closing Date, all material
Intellectual Property owned or used by any Corporate Credit Party is listed,
together with application or registration numbers, where applicable, in
DISCLOSURE SCHEDULE (3.13). Each Corporate Credit Party owns, or is licensed to
use, all Intellectual Property necessary to conduct its business as currently
conducted except for such Intellectual Property the failure of which to own or
license could not reasonably be expected to have a Material Adverse Effect. Each
Corporate Credit Party will maintain the patenting and registration of all
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office, or other appropriate Governmental Authority and
each Corporate Credit Party will promptly patent or register, as the case may
be, all new Intellectual Property and notify Lender in writing five (5) Business
Days prior to filing any such new patent or registration.
3.14 FULL DISCLOSURE. No information contained in any Loan Document, the
Financial Statements or any written statement furnished by or on behalf of any
Credit Party under any Loan Document, or to induce Lender to execute the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
3.15 HAZARDOUS MATERIALS. Except as set forth on DISCLOSURE SCHEDULE (3.15),
as of the Closing Date, (a) each real property location owned, leased or
occupied by each Corporate Credit Party (the "REAL PROPERTY") is maintained free
of contamination from any Hazardous Material, (b) no Corporate Credit Party is
subject to any Environmental Liabilities or, to any Credit Party's knowledge,
potential Environmental Liabilities, in excess of $50,000 in the aggregate, (c)
no notice has been received by any Corporate Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of any Credit Party, there are no
facts, circumstances or conditions that may result in any Corporate Credit Party
being identified as a "potentially responsible party" under CERCLA or analogous
state statutes; and (d) each Corporate Credit Party has provided to Lender
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in each
case relating to any Corporate Credit Party. Each Corporate Credit Party: (i)
shall comply in all material respects with all applicable Environmental Laws and
environmental permits; (ii) shall notify Lender in writing within seven days if
and when it becomes aware of any Release, on, at, in, under, above, to, from or
about any of its Real Property; and (iii) shall promptly forward to Lender a
copy of any order, notice, permit, application, or any communication or report
received by it or any other Credit Party in connection with any such Release.
3.16 INSURANCE. As of the Closing Date, DISCLOSURE SCHEDULE (3.16) lists all
insurance of any nature maintained for current occurrences by Borrowers and each
other Corporate Credit Party, as well as a summary of the terms of such
insurance. Each Corporate Credit Party shall deliver to Lender certified copies
and endorsements to all of its and those of its Subsidiaries (a) "All Risk" and
business interruption insurance policies naming Lender loss payee, and (b)
general liability and other liability policies naming Lender as an additional
insured, but Lender will no longer be such loss payee and additional insured
from and after the Termination Date. All policies of insurance on real and
personal property will contain an endorsement, in form and substance
8
acceptable to Lender, showing loss payable to Lender (Form 438 BFU or
equivalent) and extra expense and business interruption endorsements. Such
endorsement, or an independent instrument furnished to Lender, will provide that
the insurance companies will give Lender at least 30 days prior written notice
before any such policy or policies of insurance shall be altered or canceled and
that no act or default of any Borrower or any other Person shall affect the
right of Lender to recover under such policy or policies of insurance in case of
loss or damage. Each Corporate Credit Party shall direct all present and future
insurers under its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Lender. If any insurance proceeds are paid by check,
draft or other instrument payable to any Credit Party and Lender jointly, Lender
may endorse such Credit Party's name thereon and do such other things as Lender
may deem advisable to reduce the same to cash. Lender reserves the right at any
time, upon review of each Credit Party's risk profile, to require additional
forms and limits of insurance. Each Corporate Credit Party shall, on each
anniversary of the Closing Date and from time to time at Lender's request,
deliver to Lender a report by a reputable insurance broker, satisfactory to
Lender, with respect to such Person's insurance policies.
3.17 DEPOSIT AND DISBURSEMENT ACCOUNTS. ATTACHMENT I to SCHEDULE D lists
all banks and other financial institutions at which any Borrower or any other
Corporate Credit Party, maintains deposits and/or other accounts, including the
Disbursement Accounts, and such Attachment correctly identifies the name,
address and telephone number of each such depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.
3.18 ACCOUNTS AND INVENTORY. As of the date of each Borrowing Base
Certificate delivered to Lender, (i) each Account listed thereon as an Eligible
Domestic Account shall be an Eligible Domestic Account, (ii) each Account listed
thereon as an Eligible Foreign Account shall be an Eligible Foreign Account,
(iii) all Inventory listed thereon as Eligible Domestic Inventory shall be
Eligible Domestic Inventory, (iv) and all Inventory listed thereon as Eligible
Export-Related Inventory shall be Eligible Export-Related Inventory. No Borrower
has made, nor will any Borrower make, any agreement with any Account Debtor for
any extension of time for the payment of any Account, any compromise or
settlement for less than the full amount thereof, any release of any Account
Debtor from liability therefor, or any deduction therefrom except a discount or
allowance for prompt or early payment allowed by Borrower in the ordinary course
of its business consistent with historical practice and as previously disclosed
to Lender in writing, and except, solely with respect to Accounts that are not
Eligible Domestic Accounts or Eligible Foreign Accounts, (a) to the extent such
extension affects an individual Account of less than $50,000 and aggregate
Accounts of less than $250,000 in any Fiscal Year, and (b) to the extent such
compromises, settlements, releases, and deductions are less than $50,000 with
respect any one Account and less than $250,000 in the aggregate for all Accounts
in any Fiscal Year (and these exceptions shall be in addition to the exceptions
provided in Section 5(b)). DISCLOSURE SCHEDULE (3.18) sets forth each Contract
of any Borrower with any Account Debtor which gives such Account Debtor the
right (under such Contract, under common law or otherwise) to offset any
Accounts for such Borrower's failure to perform under such Contract and such
Borrower has obtained an offset waiver for each such contract in form and
substance satisfactory to Lender. With respect to the Accounts pledged as
collateral pursuant to any Loan Document (x) the amounts shown on all invoices,
statements and reports which may be delivered to the Lender with respect thereto
are actually and absolutely owing to the relevant Credit Party as indicated
thereon and are not in any way contingent; (y) no payments have been or shall be
made thereon except payments immediately delivered to the applicable accounts
described in PARAGRAPH 1 to SCHEDULE D or the Lender as required hereunder; and
(z) to each Borrower's knowledge all Account Debtors have the capacity to
contract. Each Borrower shall notify Lender promptly of any event or
circumstance which to such Borrower's knowledge would cause Lender to consider
any then existing Account or Inventory as no longer constituting an Eligible
Domestic Account, Eligible Foreign Account, Eligible Domestic Inventory, or
Eligible Export-Related Inventory, as the case may be.
3.19 CONDUCT OF BUSINESS. Each Corporate Credit Party (a) shall conduct its
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain, preserve and protect all of the Collateral and
such Credit Party's other property, used or useful in the conduct of its
business and keep the same in good repair, working order and condition and make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices.
3.20 FURTHER ASSURANCES. At any time and from time to time, upon the written
request of Lender and at the sole expense of Borrowers, Borrowers and each other
Credit Party shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable (a) to obtain the full benefits of this Agreement and
the other Loan Documents, (b) to protect, preserve and maintain Lender's rights
in any Collateral, or (c) to enable Lender to exercise all or any of the rights
and powers herein granted.
4. FINANCIAL MATTERS; REPORTS
4.1 REPORTS AND NOTICES. From the Closing Date until the Termination Date,
each Borrower shall deliver to Lender:
(a) within 15 days following the end of each Fiscal Month, an aged
trial balance by Account Debtor and an Inventory Perpetual or Physical (as
requested by Lender) and as soon as available but in no event later than 30 days
following the
9
end of each Fiscal Month, a reconciliation of the aged trial balance and the
Inventory Perpetual or Physical (as the case may be) to such Borrower's general
ledger and from the general ledger to the Financial Statements for such Fiscal
Month accompanied by supporting detail and documentation as Lender may request;
(b) as frequently as Lender may request and in any event no later
than 15 days following the end of each Fiscal Month, a Domestic Borrowing Base
Certificate in the form of EXHIBIT C-1 and Foreign Borrowing Base Certificate in
the form of EXHIBIT C-2 as of the last day of the previous Fiscal Month
detailing ineligible Accounts and Inventory for adjustment to the Borrowing
Base, certified as true and correct by the Chief Financial Officer of such
Borrower or such other officer as is acceptable to Lender, and each Foreign
Borrowing Base Certificate shall be accompanied by a written report of Leading
Borrower's Export Order Backlog as of the last day of the previous Fiscal Month;
(c) within 15 days following the end of each Fiscal Month, an
Accounts Payable Analysis in the form of EXHIBIT D (together with an accounts
payable aging) and an Accounts Receivable Roll Forward Analysis in the form of
EXHIBIT E, each certified as true and correct by the Chief Financial Officer of
such Borrower or such other officer as is acceptable to Lender;
(d) within 30 days following the end of each Fiscal Month, the
Financial Statements for such Fiscal Month, which shall provide comparisons to
budget and actual results for the corresponding period during the prior Fiscal
Year, both on a monthly and year-to-date basis, and accompanied by a
certification in the form of EXHIBIT J by the Chief Executive Officer or Chief
Financial Officer of such Borrower that such Financial Statements are complete
and correct, that there was no Default (or specifying those Defaults of which he
or she was aware), and showing in reasonable detail the calculations used in
determining compliance with the financial covenants hereunder;
(e) within 90 days following the close of each Fiscal Year, the
Financial Statements for such Fiscal Year certified without qualification by an
independent certified accounting firm acceptable to Lender, which shall provide
comparisons to the prior Fiscal Year, and shall be accompanied by (i) a
statement in reasonable detail showing the calculations used in determining
compliance with the financial covenants hereunder, (ii) a report from such
Borrower's accountants to the effect that in connection with their audit
examination nothing has come to their attention to cause them to believe that a
Default has occurred or specifying those Defaults of which they are aware, and
(iii) any management letter that may be issued;
(f) not less than 30 days prior to the close of each Fiscal Year,
the Projections, which will be prepared by such Borrower in good faith, with
care and diligence, and using assumptions which are reasonable under the
circumstances at the time such Projections are delivered to Lender and disclosed
therein when delivered;
(g) within 30 days following the end of each Fiscal Quarter, a
report of Leading Borrower's Export Sale Percentage for the period of twelve
(12) consecutive Fiscal Months ending with such Fiscal Quarter, which report
shall be certified as true and correct by the Chief Financial Officer of such
Borrower or such other officer as is acceptable to Lender;
(h) promptly upon their becoming available, copies of: (i) all
Financial Statements, reports, notices and proxy statements made publicly
available by any Borrower to its security holders; (ii) all regular and periodic
reports and all registration statements and prospectuses, if any, filed by any
Credit Party with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority; and (iii) all
press releases and other statements made available by any Credit Party to the
public concerning material changes or developments in the business of any such
Person; and
(i) all the reports and other information set forth on EXHIBIT B
in the time frames set forth therein.
4.2 FINANCIAL COVENANTS. Each Borrower shall not breach any of the
financial covenants set forth in SCHEDULE G.
4.3 OTHER REPORTS AND INFORMATION. Each Borrower shall advise Lender
promptly, in reasonable detail, of: (a) any Lien, other than Permitted
Encumbrances, attaching to or asserted against any of the Collateral or any
occurrence causing a material loss or decline in value of any Collateral and the
estimated (or actual, if available) amount of such loss or decline; (b) any
material change in the composition of the Collateral; and (c) the occurrence of
any Default or other event which has had or could reasonably be expected to have
a Material Adverse Effect. Each Borrower shall, upon request of Lender, furnish
to Lender such other reports and information in connection with the affairs,
business, financial condition, operations, prospects or management of such
Borrower or any other Credit Party or the Collateral as Lender may request, all
in reasonable detail.
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5. NEGATIVE COVENANTS
Each Borrower and each Credit Party executing this Agreement covenants and
agrees (for itself and each other Credit Party) that, without Lender's prior
written consent, from the Closing Date until the Termination Date, neither any
Borrower nor any other Corporate Credit Party shall, directly or indirectly, by
operation of law or otherwise:
(a) form any Subsidiary or merge with, consolidate with, acquire
all or substantially all of the assets or capital stock of, or otherwise combine
with or make any investment in or, except as provided in clause 5(c) below, loan
or advance to, any Person; PROVIDED, that Leading Borrower may form a Subsidiary
if (1) such Subsidiary is formed under the laws of a state located in the United
States, (2) such Subsidiary is a wholly-owned Subsidiary of the Borrower (it is
contemplated that Borrowers may from time to time request that Lender consent to
a Corporate Credit Party's forming a Subsidiary that is not a wholly-owned
Subsidiary, but Lender shall not be under any obligation to grant such consent),
(3) Leading Borrower gives Lender at least 30 days prior written notice thereof,
and (4) effective immediately upon the formation of such Subsidiary, (i) all
Stock of such Subsidiary is pledged to Lender as security for the Obligations
and Lender has control of such Stock, (ii) such Subsidiary guarantees all of the
Obligations, and (iii) Lender has first-priority Lien on all of assets of such
Subsidiary (subject only to Permitted Encumbrances), in each case to sole
satisfaction of Lender;
(b) cancel any debt owing to it (provided that the Borrowers may
cancel up to $25,000 of such debt in aggregate from the date hereof until the
Termination Date, and this exception shall be in addition to the exception
provided in the second sentence of SECTION 3.18), or create, incur, assume or
permit to exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness
existing as of the Closing Date set forth on DISCLOSURE SCHEDULE 5(b), (iii)
deferred taxes, (iv) by endorsement of instruments or items of payment for
deposit to the general account of such Credit Party, (v) for Guaranteed
Indebtedness incurred for the benefit of any Borrower if the primary obligation
is permitted by this Agreement; (vi) Permitted Intercompany Loans by any
Borrower to any other Borrower; (vii) Subordinated Debt in an amount not to
exceed $4,000,000 in the aggregate any time owing by any or all Borrowers, and
(viii) additional Indebtedness (including Purchase Money Indebtedness) incurred
after the Closing Date in an aggregate outstanding amount for all such Corporate
Credit Parties combined not exceeding $300,000;
(c) enter into any lending, borrowing or other commercial
transaction with any of its employees, directors, Affiliates or any other Credit
Party (including upstreaming and downstreaming of cash and intercompany advances
and payments by a Credit Party on behalf of another Credit Party which are not
otherwise permitted hereunder) other than loans or advances to employees in the
ordinary course of business in an aggregate outstanding amount not exceeding
$50,000;
(d) (i) make any changes in any of its business objectives,
purposes, or operations which could reasonably be expected to adversely affect
repayment of the Obligations or could reasonably be expected to have a Material
Adverse Effect (ii) or engage in any business other than that presently engaged
in or proposed to be engaged in the Projections delivered to Lender on the
Closing Date (it being acknowledged that Borrowers propose to engage in the
production, sale, and/or distribution of digital projectors, or other lines of
business that are complementary to Borrowers' existing lines of business, but
there shall be no obligation on Lender's part to consent to any Borrower's
engaging in any of such proposed or other lines of business), or (iii) amend its
charter or by-laws or other organizational documents which could reasonably be
expected to adversely affect repayment of the Obligations or could reasonably be
expected to have a Material Adverse Effect;
(e) create or permit any Lien on any of its properties or assets,
except for Permitted Encumbrances (it is contemplated that Borrowers may request
from time to time that Lender consent to the grant of subordinated Liens on
Borrowers' assets to secure Subordinated Debt, but Lender shall be under no
obligation to grant any such consent);
(f) sell, transfer, issue, convey, assign or otherwise dispose of
any of its assets or properties, including its Accounts or any shares of its
Stock (except sales of common stock of Leading Borrower) or engage in any
sale-leaseback, synthetic lease or similar transaction (provided, that the
foregoing shall not prohibit the sale of Inventory or obsolete or unnecessary
Equipment in the ordinary course of its business);
(g) change its name, jurisdiction of organization, form of
organization, chief executive office, corporate offices, warehouses or other
Collateral locations, or location of its records concerning the Collateral, or
acquire, lease or use any real estate after the Closing Date without such
Person, in each instance, giving thirty (30) days prior written notice thereof
to Lender and taking all actions deemed necessary or appropriate by Lender to
continuously protect and perfect Lender's Liens upon the Collateral;
(h) establish any depository or other bank account of any kind
with any financial institution (other than the accounts set forth on ATTACHMENT
1 to SCHEDULE D) without Lender's prior written consent; or
11
(i) make or permit any Restricted Payment.
6. SECURITY INTEREST
6.1 GRANT OF SECURITY INTEREST. (a) As collateral security for the prompt
and complete payment and performance of the Obligations, each of the Borrowers
and each other Credit Party executing this Agreement hereby grants to the Lender
a security interest in and Lien upon all of its property and assets, whether
real or personal, tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future may acquire any
right, title, or interest, including all of the following property in which it
now has or at any time in the future may acquire any right, title or interest:
all Accounts; all bank and deposit accounts and all funds on deposit therein;
all cash and cash equivalents; all commodity contracts; all investments, Stock
and Investment Property; all Inventory and Equipment; all Goods; all Chattel
Paper, Documents and Instruments; all Books and Records; all General
Intangibles; all Letter-of-Credit Rights; all Supporting Obligations; and to the
extent not otherwise included, all Proceeds and products of all and any of the
foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing, but excluding in all events Hazardous Waste
(all of the foregoing, together with any other collateral pledged to the Lender
pursuant to any other Loan Document, collectively, the "COLLATERAL").
(b) Each Borrower, Lender and each other Credit Party executing
this Agreement agree that this Agreement creates, and is intended to create,
valid and continuing Liens upon the Collateral in favor of Lender. Each Borrower
and each other Credit Party executing this Agreement represents, warrants and
promises to Lender that: (i) each Borrower and each other Credit Party granting
a Lien in Collateral is the sole owner of each item of the Collateral upon which
it purports to ▇▇▇▇▇ ▇ ▇▇▇▇ pursuant to the Loan Documents, and has good and
marketable title thereto free and clear of any and all Liens or claims of
others, other than Permitted Encumbrances; (ii) the security interests granted
pursuant to this Agreement, upon completion of the filings and other actions
listed on DISCLOSURE SCHEDULE 6.1 (which, in the case of all filings and other
documents referred to in said Schedule, have been delivered to the Lender in
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Lender as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from any Credit
Party (other than purchasers of Inventory in the ordinary course of business)
and such security interests are prior to all other Liens on the Collateral in
existence on the date hereof except for Permitted Encumbrances which have
priority by operation of law; and (iii) no effective security agreement,
financing statement, equivalent security or Lien instrument or continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those relating to Permitted Encumbrances.
Each Borrower and each other Credit Party executing this Agreement promise to
defend the right, title and interest of Lender in and to the Collateral against
the claims and demands of all Persons whomsoever, and each shall take such
actions, including (x) the prompt delivery of all original Instruments, Chattel
Paper and certificated Stock owned by such Borrower and each other Credit Party
granting a Lien on Collateral to Lender, (y) notification of Lender's interest
in Collateral at Lender's request, and (z) the institution of litigation against
third parties as shall be prudent in order to protect and preserve each Credit
Party's and Lender's respective and several interests in the Collateral. Each
Borrower (and any other Credit Party granting a Lien in Collateral) shall ▇▇▇▇
its Books and Records pertaining to the Collateral to evidence the Loan
Documents and the Liens granted under the Loan Documents. All Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation."
6.2 LENDER'S RIGHTS. (a) Lender may, (i) at any time in Lender's own name
or in the name of any Borrower, communicate with Account Debtors, parties to
Contracts, and obligors in respect of Instruments, Chattel Paper or other
Collateral to verify to Lender's satisfaction, the existence, amount and terms
of any such Accounts, Contracts, Instruments or Chattel Paper or other
Collateral, and (ii) at any time and without prior notice to any Borrower or any
other Credit Party, notify Account Debtors, parties to Contracts, and obligors
in respect of Chattel Paper, Instruments, or other Collateral that the
Collateral has been assigned to Lender and that payments shall be made directly
to Lender. Lender shall endeavor to notify the Leading Borrower if Lender
communicates with or gives any such notice to any such Account Debtor, party or
obligor, but such notice may be given after such communication is made or notice
is given and Lender's failure for any reason to give any such notice to the
Leading Borrower shall not result in either (A) any liability on the part of
Lender to any Borrower or (B) the creation of any defense, claim, counterclaim
or right of set-off or recoupment on the part of any Borrower against Lender.
Upon the request of Lender, each Borrower shall so notify such Account Debtors,
parties to Contracts, and obligors in respect of Instruments, Chattel Paper or
other Collateral. Each Borrower hereby constitutes Lender or Lender's designee
as such Borrower's attorney with power to endorse such Borrower's name upon any
notes, acceptance drafts, money orders or other evidences of payment or
Collateral.
(b) Each Borrower shall remain liable under each Contract,
Instrument and License to observe and perform all the conditions and obligations
to be observed and performed by it thereunder, and Lender shall have no
obligation or liability whatsoever to any Person under any Contract, Instrument
or License (between any Borrower or any other Credit Party and any Person other
than Lender) by reason of or arising out of the execution, delivery or
performance of this Agreement, and Lender shall not be required or obligated in
any manner (i) to perform or fulfill any of the obligations of any Borrower,
(ii) to make any payment or inquiry, or (iii) to take any action of any kind to
collect, compromise or enforce any performance or the payment of
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any amounts which may have been assigned to it or to which it may be entitled at
any time or times under or pursuant to any Contract, Instrument or License.
(c) Each Borrower and each other Credit Party shall, with respect
to each owned, leased, or controlled property, during normal business hours and
upon reasonable advance notice (unless a Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times): (i) provide access to such property to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate; (ii) permit Lender and any of its officers, employees and agents
to inspect, audit and make extracts and copies (or take originals if reasonably
necessary) from all of such Borrower's and such Credit Party's Books and
Records; and (iii) permit Lender to inspect, review, evaluate and make physical
verifications and appraisals of the Inventory and other Collateral in any manner
and through any medium that Lender considers advisable, and each Borrower and
such Credit Party agree to render to Lender, at such Borrower's and such Credit
Party's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto.
(d) After the occurrence and during the continuance of a Default,
each Borrower at its own expense, shall cause the certified public accountant
then engaged by such Borrower to prepare and deliver to Lender at any time and
from time to time, promptly upon Lender's request, the following reports: (i) a
reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial
balances; and (iv) test verifications of such Accounts as Lender may request.
Each Borrower, at its own expense, shall cause its certified independent public
accountants to deliver to Lender the results of any physical verifications of
all or any portion of the Inventory made or observed by such accountants when
and if such verification is conducted. Lender shall be permitted to observe and
consult with each Borrower's accountants in the performance of these tasks.
6.3 LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT. On the Closing Date, each
Borrower and each other Credit Party executing this Agreement shall execute and
deliver a Power of Attorney in the form attached as EXHIBIT I. The power of
attorney granted pursuant to the Power of Attorney and all powers granted under
any Loan Document are powers coupled with an interest and shall be irrevocable
until the Termination Date. The powers conferred on Lender under the Power of
Attorney are solely to protect Lender's interests in the Collateral and shall
not impose any duty upon it to exercise any such powers. Lender agrees not to
exercise any power or authority granted under the Power of Attorney unless an
Event of Default has occurred and is continuing. Each Borrower and each other
Credit Party executing this Agreement authorizes Lender to file any financing or
continuation statement without the signature of such Borrower or such Credit
Party to the extent permitted by applicable law.
6.4 GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY COLLATERAL. Each Borrower
and each other Credit Party executing this Agreement hereby grants to Lender an
irrevocable, non-exclusive license (exercisable upon the occurrence and during
the continuance of an Event of Default without payment of royalty or other
compensation to any Borrower or such Credit Party) to use, transfer, license or
sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by such Borrower or such Credit Party, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer software and
programs used for the compilation or printout thereof, and represents, promises
and agrees that any such license or sublicense is not and will not be in
conflict with the contractual or commercial rights of any third Person;
PROVIDED, that such license will terminate on the Termination Date, and
provided, further, that such license shall not be deemed granted hereunder if
the applicable Borrower has notified Lender in writing that such grant would
cause (and such grant would in fact cause) such Borrower to be in breach of a
contractual obligation with respect to such Intellectual Property.
7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "EVENT OF
DEFAULT" hereunder which shall be deemed to be continuing until waived in
writing by Lender in accordance with SECTION 10.3:
(a) any Borrower shall fail to make any payment in respect of any
Obligations when due and payable or declared due and payable; or
(b) any Borrower or any other Credit Party (whether or not such
Credit Party has signed this Agreement) shall fail or neglect to perform, keep
or observe any of the covenants, promises, agreements, requirements, conditions
or other terms or provisions contained in this Agreement or any of the other
Loan Documents; or
(c) an event of default shall occur under any Contractual
Obligation of any Borrower or any other Credit Party (other than this Agreement
and the other Loan Documents), and such event of default (i) involves the
failure to make any payment (whether or not such payment is blocked pursuant to
the terms of an intercreditor agreement or otherwise), whether of principal,
interest or otherwise, and whether due by scheduled maturity, required
prepayment, acceleration, demand or otherwise, in respect
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of any Indebtedness (other than the Obligations) of such Person in an aggregate
amount exceeding the Minimum Actionable Amount, or (ii) causes (or permits any
holder of such Indebtedness or a trustee to cause) such Indebtedness, or a
portion thereof, in an aggregate amount exceeding the Minimum Actionable Amount
to become due prior to its stated maturity or prior to its regularly scheduled
date of payment; or
(d) any representation or warranty in this Agreement or any other
Loan Document, or in any written statement pursuant hereto or thereto, or in any
report, financial statement or certificate made or delivered to Lender by any
Borrower or any other Credit Party shall be untrue or incorrect as of the date
when made or deemed made, regardless of whether such breach involves a
representation or warranty with respect to a Credit Party that has not signed
this Agreement; or
(e) there shall be commenced against any Borrower or any other
Credit Party any Litigation seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
remains unstayed or undismissed for thirty (30) consecutive days; or any
Borrower or any other Credit Party shall have concealed, removed or permitted to
be concealed or removed, any part of its property with intent to hinder, delay
or defraud any of its creditors or made or suffered a transfer of any of its
property or the incurring of an obligation which may be fraudulent under any
bankruptcy, fraudulent transfer or other similar law; or
(f) a case or proceeding shall have been commenced involuntarily
against any Borrower or any other Credit Party in a court having competent
jurisdiction seeking a decree or order: (i) under the United States Bankruptcy
Code or any other applicable Federal, state or foreign bankruptcy or other
similar law, and seeking either (x) the appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for such
Person or of any substantial part of its properties, or (y) the reorganization
or winding up or liquidation of the affairs of any such Person, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding; or (ii) invalidating or denying any Person's right, power,
or competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this
Agreement or any other Loan Document or any action taken hereunder or
thereunder; or
(g) any Borrower or any other Credit Party shall (i) commence any
case, proceeding or other action under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it or seeking appointment of a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for it or any substantial part of its properties, (ii) make a general assignment
for the benefit of creditors, (iii) consent to or take any action in furtherance
of, or, indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in PARAGRAPHS (e) or (f) of this SECTION 7.1 or CLAUSES (i) and
(ii) of this PARAGRAPH (g), or (iv) shall admit in writing its inability to, or
shall be generally unable to, pay its debts as such debts become due; or
(h) a final judgment or judgments for the payment of money in
excess of the Minimum Actionable Amount in the aggregate shall be rendered
against any Borrower or any other Credit Party, unless the same shall be (i)
fully covered by insurance and the issuer(s) of the applicable policies shall
have acknowledged full coverage in writing within fifteen (30) days of judgment,
or (ii) vacated, stayed, bonded, paid or discharged within a period of fifteen
(30) days from the date of such judgment; or
(i) any other event shall have occurred which has had or could
reasonably be expected to have a Material Adverse Effect; or
(j) any provision of any Loan Document shall for any reason cease
to be valid, binding and enforceable in accordance with its terms, or any Lien
granted, or intended by the Loan Documents to be granted, to Lender shall cease
to be a valid and perfected Lien having the first priority (or a lesser priority
if expressly permitted in the Loan Documents) in any of the Collateral if the
aggregate fair market or book value of all such Collateral exceeds $25,000 (or
any Credit Party shall so assert any of the foregoing); or
(k) a Change of Control shall have occurred with respect to any
Corporate Credit Party; or
(l) an ERISA Event shall have occurred that, in the opinion of
the Lender, when taken together with all other ERISA Events that have occurred
and are then continuing, could reasonably be expected to result in liability of
any Credit Party in an aggregate amount exceeding the Minimum Actionable Amount.
7.2 REMEDIES. (a) If any Default shall have occurred and be continuing,
then Lender may terminate or suspend its obligation to make further Revolving
Credit Advances and to incur additional Letter of Credit Obligations. In
addition, if any Event of Default shall have occurred and be continuing, Lender
may, without notice, take any one or more of the following actions: (i) declare
all or any portion of the Obligations to be forthwith due and payable, including
contingent liabilities with respect to
14
Letter of Credit Obligations, whereupon such Obligations shall become and be due
and payable; (ii) require that all Letter of Credit Obligations be fully cash
collateralized pursuant to SCHEDULE C; or (iii) exercise any rights and remedies
provided to Lender under the Loan Documents or at law or equity, including all
remedies provided under the Code; PROVIDED, that upon the occurrence of any
Event of Default specified in SECTIONS 7.1 (e), (f) or (g), the Obligations
shall become immediately due and payable (and any obligation of Lender to make
further Loans, if not previously terminated, shall immediately be terminated)
without declaration, notice or demand by Lender.
(b) Without limiting the generality of the foregoing, each
Borrower and each other Credit Party executing this Agreement expressly agrees
that upon the occurrence of any Event of Default, Lender may collect, receive,
assemble, process, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, give an option or options to
purchase or otherwise dispose of and deliver said Collateral (or contract to do
so), or any part thereof, in one or more parcels at public or private sale or
sales, at any exchange at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. Lender shall have
the right upon any such public sale, to the extent permitted by law, to purchase
for the benefit of Lender the whole or any part of said Collateral so sold, free
of any right of equity of redemption, which right each Borrower and each other
Credit Party executing this Agreement hereby releases. Such sales may be
adjourned, or continued from time to time with or without notice. Lender shall
have the right to conduct such sales on any Credit Party's premises or elsewhere
and shall have the right to use any Credit Party's premises without rent or
other charge for such sales or other action with respect to the Collateral for
such time as Lender deems necessary or advisable.
(c) Upon the occurrence and during the continuance of an Event of
Default and at Lender's request, each Borrower and each other Credit Party
executing this Agreement agrees to assemble the Collateral and make it available
to Lender at places which Lender shall reasonably select, whether at its
premises or elsewhere. Until Lender is able to effect a sale, lease, or other
disposition of the Collateral, Lender shall have the right to complete,
assemble, use or operate the Collateral or any part thereof, to the extent that
Lender deems appropriate, for the purpose of preserving such Collateral or its
value or for any other purpose. Lender shall have no obligation to any Credit
Party to maintain or preserve the rights of such Credit Party as against third
parties with respect to any Collateral while such Collateral is in the
possession of Lender. Lender may, if it so elects, seek the appointment of a
receiver or keeper to take possession of any Collateral and to enforce any of
Lender's remedies with respect thereto without prior notice or hearing. To the
maximum extent permitted by applicable law, each Borrower and each other Credit
Party executing this Agreement waives all claims, damages, and demands against
Lender, its Affiliates, agents, and the officers and employees of any of them
arising out of the repossession, retention or sale of any Collateral except such
as are determined in a final judgment by a court of competent jurisdiction to
have arisen solely out of the gross negligence or willful misconduct of such
Person. Each Borrower and each other Credit Party executing this Agreement
agrees that ten (10) days prior notice by Lender to such Credit Party of the
time and place of any public sale or of the time after which a private sale may
take place is reasonable notification of such matters. Each Borrower and each
other Credit Party shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all amounts to
which Lender is entitled.
(d) Lender's rights and remedies under this Agreement shall be
cumulative and nonexclusive of any other rights and remedies which Lender may
have under any Loan Document or at law or in equity. Recourse to the Collateral
shall not be required. All provisions of this Agreement are intended to be
subject to all applicable mandatory provisions of law that may be controlling
and to be limited, to the extent necessary, so that they do not render this
Agreement invalid or unenforceable, in whole or in part.
7.3 WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in this
Agreement and to the fullest extent permitted by applicable law, each Borrower
and each other Credit Party executing this Agreement waives: (a) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, the Notes or any
other notes, commercial paper, Accounts, Contracts, Documents, Instruments,
Chattel Paper and guaranties at any time held by Lender on which such Credit
Party may in any way be liable, and hereby ratifies and confirms whatever Lender
may do in this regard; (b) all rights to notice and a hearing prior to Lender's
taking possession or control of, or to Lender's replevy, attachment or levy
upon, any Collateral or any bond or security which might be required by any
court prior to allowing Lender to exercise any of its remedies; and (c) the
benefit of all valuation, appraisal and exemption laws. Each Borrower and each
other Credit Party executing this Agreement acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Loan Documents and the transactions evidenced hereby and thereby.
7.4 PROCEEDS. The Proceeds of any sale, disposition or other realization
upon any Collateral shall be applied by Lender upon receipt to the Obligations
in such order as Lender may deem advisable in its sole discretion (including the
cash collateralization of any Letter of Credit Obligations), and after the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law, including Section 9-504(1)(c) of the Code (but only after Lender has
received what Lender considers reasonable proof of a subordinate party's
security interest), the surplus, if
15
any, shall be paid to Borrowers or their representatives or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent jurisdiction
may direct.
8. SUCCESSORS AND ASSIGNS
Each Loan Document shall be binding on and shall inure to the benefit of each
Borrower and each other Credit Party executing such Loan Document, Lender, and
their respective successors and assigns, except as otherwise provided herein or
therein. Neither any Borrower nor any other Credit Party may assign, transfer,
hypothecate, delegate or otherwise convey its rights, benefits, obligations or
duties under any Loan Document without the prior express written consent of
Lender. Any such purported conveyance by such Borrower or such Credit Party
without the prior express written consent of Lender shall be void. There shall
be no third party beneficiaries of any of the terms and provisions of any of the
Loan Documents. Lender reserves the right at any time to create and sell
participations in the Loans and the Loan Documents and to sell, transfer or
assign any or all of its rights in the Loans and under the Loan Documents (but
Lender shall bear its own expenses of such transfer or assignment if no Event of
Default is then in existence)
9. GUARANTOR WAIVERS BY BORROWERS
IF AND TO THE EXTENT THAT ANY OBLIGATION OF ANY BORROWER TO LENDER SHALL BE
CONSIDERED AN OBLIGATION OF GUARANTY OR SURETYSHIP, THEN THE FOLLOWING
PROVISIONS OF THIS SECTION 9 SHALL APPLY WITH RESPECT TO EACH SUCH BORROWER
SOLELY TO THE EXTENT THAT SUCH BORROWER IS DEEMED TO ACT IN THE CAPACITY OF A
GUARANTOR AND SHALL NOT EFFECT A WAIVER OF RIGHTS IN SUCH PERSON'S CAPACITY AS A
BORROWER:
(a) SUCH BORROWER EXPRESSLY WAIVES THE RIGHT TO REQUIRE LENDER
FIRST TO PURSUE ANY OTHER PERSON, THE COLLATERAL, OR ANY OTHER SECURITY OR
GUARANTY THAT MAY BE HELD FOR THE OBLIGATIONS, OR TO APPLY ANY SUCH SECURITY OR
GUARANTY TO THE OBLIGATIONS BEFORE SEEKING FROM SUCH BORROWER PAYMENT IN FULL OF
ITS LIABILITIES TO LENDER OR PROCEEDING AGAINST SUCH BORROWER FOR SAME.
(b) SUCH BORROWER ACKNOWLEDGES THAT IF LENDER MAY, UNDER
APPLICABLE LAW, PROCEED TO REALIZE ITS BENEFITS UNDER ANY OF THE LOAN DOCUMENTS
GIVING LENDER A LIEN UPON ANY COLLATERAL, WHETHER OWNED BY ANY BORROWER OR BY
ANY OTHER PERSON, EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR
ENFORCEMENT, LENDER MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF ITS REMEDIES OR
RIGHTS IT MAY PURSUE WITHOUT AFFECTING ANY OF ITS RIGHTS AND REMEDIES. IF, IN
THE EXERCISE OF ANY OF ITS RIGHTS AND REMEDIES, LENDER SHALL FORFEIT ANY OF ITS
RIGHTS OR REMEDIES, INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST
ANY BORROWER OR ANY OTHER PERSON, WHETHER BECAUSE OF ANY APPLICABLE LAWS
PERTAINING TO "ELECTION OF REMEDIES" OR THE LIKE, SUCH BORROWER HEREBY CONSENTS
TO SUCH ACTION BY LENDER AND WAIVES ANY CLAIM BASED UPON SUCH ACTION, EVEN IF
SUCH ACTION BY LENDER SHALL RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF
SUBROGATION WHICH SUCH BORROWER MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY
LENDER. ANY ELECTION OF REMEDIES WHICH RESULTS IN THE DENIAL OR IMPAIRMENT OF
THE RIGHT OF LENDER TO SEEK A DEFICIENCY JUDGMENT AGAINST ANY BORROWER SHALL NOT
IMPAIR ANY OTHER BORROWER'S OBLIGATION TO PAY THE FULL AMOUNT OF THE
OBLIGATIONS. IN THE EVENT LENDER SHALL BID AT ANY FORECLOSURE OR TRUSTEE'S SALE
OR AT ANY PRIVATE SALE PERMITTED BY LAW OR THE LOAN DOCUMENTS, LENDER MAY BID
ALL OR LESS THAN THE AMOUNT OF THE OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED
NOT BE PAID BY LENDER BUT SHALL BE CREDITED AGAINST THE OBLIGATIONS. THE AMOUNT
OF THE SUCCESSFUL BID AT ANY SUCH SALE, WHETHER LENDER OR ANY OTHER PARTY IS THE
SUCCESSFUL BIDDER, SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF
THE COLLATERAL AND THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING
BALANCE OF THE OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE
OBLIGATIONS GUARANTEED BY SUCH BORROWER, NOTWITHSTANDING THAT ANY PRESENT OR
FUTURE LAW OR COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE
AMOUNT OF ANY DEFICIENCY CLAIM TO WHICH LENDER MIGHT OTHERWISE BE ENTITLED BUT
FOR SUCH BIDDING AT ANY SUCH SALE.
(c) SUCH BORROWER AGREES THAT LENDER SHALL BE UNDER NO OBLIGATION
TO (I) MARSHAL ANY ASSETS IN FAVOR OF SUCH BORROWER, (II) PROCEED FIRST AGAINST
ANY OTHER BORROWER OR PERSON OR ANY PROPERTY OF ANY OTHER BORROWER OR PERSON OR
AGAINST ANY COLLATERAL, (III) ENFORCE FIRST ANY OTHER GUARANTY OBLIGATIONS WITH
RESPECT TO, OR SECURITY FOR, THE OBLIGATIONS, OR (IV) PURSUE ANY OTHER REMEDY IN
LENDER'S POWER THAT SUCH BORROWER MAY NOT
16
BE ABLE TO PURSUE ITSELF AND THAT MAY LIGHTEN SUCH BORROWER'S BURDEN, ANY RIGHT
TO WHICH SUCH BORROWER HEREBY EXPRESSLY WAIVES.
(d) EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A
MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS
RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER.
EACH BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS
WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10. MISCELLANEOUS
10.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. This Agreement and the
other Loan Documents constitute the complete agreement among the parties with
respect to the subject matter hereof and thereof, supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied). No Loan Document may be modified, altered or amended
except by a written agreement signed by Lender, and each other Credit Party a
party to such Loan Document. Each Borrower and each other Credit Party executing
this Agreement or any other Loan Document shall have all duties and obligations
under this Agreement and such other Loan Document from the date of its execution
and delivery, regardless of whether the initial Loan has been funded at that
time.
10.2 EXPENSES. Borrower agrees to pay or reimburse Lender for all costs and
expenses (including the fees and expenses of all counsel, advisors, consultants
(including environmental and management consultants) and auditors retained in
connection therewith), incurred in connection with: (a) the preparation,
negotiation, execution, delivery, performance and enforcement of the Loan
Documents and the preservation of any rights thereunder; (b) collection,
including deficiency collections; (c) the forwarding to Borrower or any other
Person on behalf of Borrower by Lender of the proceeds of any Loan (including a
wire transfer fee of $25 per wire transfer); (d) any amendment, waiver or other
modification with respect to any Loan Document or advice in connection with the
administration of the Loans or the rights thereunder; (e) any litigation,
dispute, suit, proceeding or action (whether instituted by or between any
combination of Lender, Borrower or any other Person), and an appeal or review
thereof, in any way relating to the Collateral, any Loan Document, or any action
taken or any other agreements to be executed or delivered in connection
therewith, whether as a party, witness or otherwise; and (f) any effort (i) to
monitor the Loans, (ii) to evaluate, observe or assess Borrower or any other
Credit Party or the affairs of such Person, and (iii) to verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.
10.3 NO WAIVER. Neither Lender's failure, at any time, to require strict
performance by any Borrower or any other Credit Party of any provision of any
Loan Document, nor Lender's failure to exercise, nor any delay in exercising,
any right, power or privilege hereunder, shall operate as a waiver thereof or
waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. Any suspension
or waiver of a Default or other provision under the Loan Documents shall not
suspend, waive or affect any other Default or other provision under any Loan
Document, and shall not be construed as a bar to any right or remedy which
Lender would otherwise have had on any future occasion. None of the
undertakings, indemnities, agreements, warranties, covenants and representations
of any Borrower or any other Credit Party to Lender contained in any Loan
Document and no Default by any Borrower or any other Credit Party under any Loan
Document shall be deemed to have been suspended or waived by Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer or
other authorized employee of Lender and directed to such Borrower specifying
such suspension or waiver (and then such waiver shall be effective only to the
extent therein expressly set forth), and Lender shall not, by any act (other
than execution of a formal written waiver), delay, omission or otherwise, be
deemed to have waived any of its rights or remedies hereunder.
10.4 SEVERABILITY; SECTION TITLES. Wherever possible, each provision of the
Loan Documents shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of any Loan Document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of such
Loan Document. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under the Loan Documents shall in any way affect or impair
the Obligations, duties, covenants, representations and warranties, indemnities,
and liabilities of any Borrower or any other Credit Party or the rights of
Lender relating to any unpaid Obligation (due or not due, liquidated, contingent
or unliquidated), or any transaction or event occurring prior to such
termination, or any transaction or event, the performance of which is not
required until after the Commitment Termination Date, all of which shall not
terminate or expire, but rather shall survive such termination or cancellation
and shall continue in full force and effect until the Termination Date;
provided, that all indemnity obligations of the Credit Parties under the Loan
Documents shall survive the Termination Date. The
17
Section titles contained in any Loan Document are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
10.5 AUTHORIZED SIGNATURE. Until Lender shall be notified in writing by any
Borrower or any other Credit Party to the contrary, the signature upon any
document or instrument delivered pursuant hereto and believed by Lender or any
of Lender's officers, agents, or employees to be that of an officer of such
Borrower or such other Credit Party shall bind such Borrower and such other
Credit Party and be deemed to be the act of such Borrower or such other Credit
Party affixed pursuant to and in accordance with resolutions duly adopted by
such Borrower's or such other Credit Party's Board of Directors, and Lender
shall be entitled to assume the authority of each signature and authority of the
person whose signature it is or appears to be unless the person acting in
reliance thereon shall have actual knowledge to the contrary.
10.6 NOTICES. Except as otherwise provided herein, whenever any notice,
demand, request or other communication shall or may be given to or served upon
any party by any other party, or whenever any party desires to give or serve
upon any other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this SECTION 10.6), (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when hand-delivered, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in SCHEDULE B or to such other address (or facsimile number) as may be
substituted by notice given as herein provided. Failure or delay in delivering
copies of any communication to any Person (other than any Borrower or Lender)
designated in SCHEDULE B to receive copies shall in no way adversely affect the
effectiveness of such communication.
10.7 COUNTERPARTS. Any Loan Document may be executed in any number of
separate counterparts by one or more of the parties thereto, and all of said
counterparts taken together shall constitute one and the same instrument.
10.8 TIME OF THE ESSENCE. Time is of the essence for performance of the
Obligations under the Loan Documents.
10.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICTS OF LAWS.
10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (a) EACH BORROWER AND
EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY CONSENT AND AGREE THAT
THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN SUCH
BORROWER AND SUCH CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, SUCH
BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇;
AND FURTHER PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF LENDER. SUCH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING
THIS AGREEMENT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND SUCH BORROWER AND SUCH
CREDIT PARTY HEREBY WAIVE ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH BORROWER AND
EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY WAIVE PERSONAL SERVICE
OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER OR SUCH CREDIT PARTY
AT THE ADDRESS SET FORTH IN SCHEDULE B OF THIS AGREEMENT AND THAT SERVICE SO
MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S OR SUCH
CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
(b) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN
CONTRACT, TORT, OR OTHERWISE
18
BETWEEN LENDER, ANY BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
10.11 PRESS RELEASES. Neither any Credit Party nor any of its Affiliates will
in the future issue any press release or other public disclosure using the name
of General Electric Capital Corporation or its affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days'
prior notice to Lender and without the prior written consent of Lender unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate shall use
its best efforts to consult with Lender before issuing such press release or
other public disclosure.
10.12 REINSTATEMENT. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any other Credit Party, or otherwise, all as though such
payments had not been made.
11. CROSS-GUARANTY
11.1 CROSS-GUARANTY. Each Borrower hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Obligations owed or hereafter owing to Lender by each other Borrower,
including that portion of the Revolving Credit Loan attributable to each other
Borrower. Each Borrower agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this SECTION 11 shall be absolute and unconditional,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which any Borrower is or may
become a party;
(b) the absence of any action to enforce this Agreement (including
this SECTION 11) or any other Loan Document or the waiver or consent by Lender
with respect to any of the provisions hereof or thereof;
(c) the existence, value or condition of, or failure to perfect
its Lien against, any security for the Obligations or any action, or the absence
of any action, by Lender in respect thereof (including the release of any such
security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being agreed by each Borrower that its obligations under this SECTION 11
shall not be discharged until the payment and performance, in full, of the
Obligations has occurred. Each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder.
11.2 WAIVERS BY BORROWERS. Each Borrower expressly waives all rights it may
have now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Lender to marshal assets or to proceed in
respect of the Obligations guaranteed hereunder against any other Credit Party,
any other party or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding against,
such Borrower. It is agreed among each Borrower and Lender that the foregoing
waivers are of the essence of the transactions contemplated by this Agreement
and the other Loan Documents and that, but for the provisions of this SECTION 11
and such waivers, Lender would decline to enter into this Agreement.
11.3 BENEFIT OF GUARANTY. Each Borrower agrees that the provisions of this
SECTION 11 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Lender, the obligations of such other Borrower under the Loan
Documents.
11.4 SUBORDINATION OF SUBROGATION. Notwithstanding anything to the contrary
in this Agreement or in any other Loan Document, and except as set forth in
SECTION 11.7, each Borrower hereby expressly and irrevocably subordinates to
payment of the Obligations any and all rights at law or in equity to
subrogation, reimbursement, exoneration, contribution, indemnification or set
off and any and all defenses available to a surety, guarantor or accommodation
co-obligor until the Obligations are indefeasibly paid in full in cash. Each
Borrower acknowledges and agrees that this waiver is intended to benefit Lender
and shall not limit or
19
otherwise affect such Borrower's liability hereunder or the enforceability of
this SECTION 11, and that Lender and its successors and assigns are intended
third party beneficiaries of the waivers and agreements set forth in this
SECTION 11.4.
11.5 ELECTION OF REMEDIES. If Lender may, under applicable law, proceed to
realize its benefits under any of the Loan Documents giving Lender a Lien upon
any Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this SECTION 11. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Borrower or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation which such Borrower might otherwise have had but for such action by
Lender. Any election of remedies which results in the denial or impairment of
the right of Lender to seek a deficiency judgment against any Borrower shall not
impair any other Borrower's obligation to pay the full amount of the
Obligations. In the event Lender shall bid at any foreclosure or trustee's sale
or at any private sale permitted by law or the Loan Documents, Lender may bid
all or less than the amount of the Obligations and the amount of such bid need
not be paid by Lender but may be credited against the Obligations. The amount of
the successful bid at any such sale, whether Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this SECTION 11, notwithstanding that any present
or future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Lender might otherwise be entitled but
for such bidding at any such sale.
11.6 LIMITATION. Notwithstanding any provision herein contained to the
contrary, each Borrower's liability under this SECTION 11 (which liability is in
any event in addition to amounts for which such Borrower is primarily liable
under SECTION 1) shall be limited to an amount not to exceed as of any date of
determination the greater of:
(a) the net amount of all Loans advanced to any other Borrower
under this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Borrower; and
(b) the amount which could be claimed by Lender from such Borrower
under this SECTION 11 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the United States Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law after taking into account, among other
things, such Borrower's right of contribution and indemnification from each
other Borrower under SECTION 11.7.
11.7 CONTRIBUTION WITH RESPECT TO GUARANTY OBLIGATIONS. (a) To the extent
that any Borrower shall make a payment under this SECTION 11 of all or any of
the Obligations (other than Loans made to that Borrower for which it is
primarily liable) (a "GUARANTOR PAYMENT") which, taking into account all other
Guarantor Payments then previously or concurrently made by any other Borrower,
exceeds the amount which such Borrower would otherwise have paid if each
Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment
in the same proportion that such Borrower's "ALLOCABLE AMOUNT" (as defined
below) (as determined immediately prior to such Guarantor Payment) bore to the
aggregate Allocable Amounts of each of the Borrowers as determined immediately
prior to the making of such Guarantor Payment, then, following indefeasible
payment in full in cash of the Obligations and termination of the Commitments,
such Borrower shall be entitled to receive contribution and indemnification
payments from, and be reimbursed by, each other Borrower for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this SECTION 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the United States
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.
(c) This SECTION 11.7 is intended only to define the relative
rights of Borrowers and nothing set forth in this SECTION 11.7 is intended to or
shall impair the obligations of each Borrower to pay any amounts as and when the
same shall become due and payable in accordance with the terms of this
Agreement, including SECTION 11.1. Nothing contained in this SECTION 11.7 shall
limit the liability of any Borrower to pay the Loans made directly or indirectly
to that Borrower and accrued interest, Fees and expenses with respect thereto
for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of Borrower to which such
contribution and indemnification is owing.
20
(e) The rights of the indemnifying Borrowers against other Credit
Parties under this SECTION 11.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of Lender's
obligation to extend any credit under this Agreement.
11.8 LIABILITY CUMULATIVE. The liability of Borrowers under this SECTION 11
is in addition to and shall be cumulative with all liabilities of each Borrower
to Lender under this Agreement and the other Loan Documents to which such
Borrower is a party or in respect of any Obligations or obligation of the other
Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
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IN WITNESS WHEREOF, this
Loan and Security Agreement has been duly executed as
of the date first written above.
BALLANTYNE OF OMAHA, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
DESIGN & MANUFACTURING, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
XENOTECH RENTAL CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
XENOTECH STRONG, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
BALLANTYNE OVERSEAS CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Duly Authorized Signatory
22
SCHEDULE A - DEFINITIONS
Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless otherwise provided elsewhere in this Agreement or in the other Loan
Documents) the following respective meanings:
"Account Debtor" shall mean any Person who is or may become obligated with
respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in the Code, now
owned or hereafter acquired by any Person, including: (i) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents or Instruments),
whether arising out of goods sold or services rendered or from any other
transaction (including any such obligations which may be characterized as an
account or contract right under the Code); (ii) all of such Person's rights in,
to and under all purchase orders or receipts for goods or services; (iii) all of
such Person's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods); (iv) all moneys
due or to become due to such Person under all purchase orders and contracts for
the sale of goods or the performance of services or both by such Person or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Person), including the right to receive the proceeds of said
purchase orders and contracts; and (v) all collateral security and guarantees of
any kind given by any other Person with respect to any of the foregoing.
"Accounts Payable Analysis" shall mean a certificate in the form of EXHIBIT D.
"Accounts Receivable Roll Forward Analysis" shall mean a certificate in the form
of EXHIBIT E.
"Affiliate" shall mean, with respect to any Person: (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power for the election of directors of such Person; (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person; or (iii) each of such Person's
officers, directors, joint venturers and partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Agreement including all appendices, exhibits or
schedules attached or otherwise identified thereto, restatements and
modifications and supplements thereto, and any appendices, exhibits or schedules
to any of the foregoing, each as in effect at the time such reference becomes
operative; provided, that except as specifically set forth in this Agreement,
any reference to the Disclosure Schedules to this Agreement shall be deemed a
reference to the Disclosure Schedules as in effect on the Closing Date or in a
written amendment thereto executed by Borrower and Lender.
"Books and Records" shall mean all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or any Borrower's business.
"Borrower" and "Borrowers" shall have the meanings assigned to them in the
preamble of this Agreement.
"Borrower Agreement" shall mean the Borrower Agreement among Borrower, Lender,
and Ex-Im Bank, in the form of EXHIBIT Y.
"Borrowing Base Certificate" shall mean a Domestic Borrowing Base Certificate or
a Foreign Borrowing Base Certificate.
Schedule A - Page 1
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
"Capital Expenditures" shall mean all payments or accruals (including Capital
Lease Obligations) for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise would be
disclosed as such in a note to such balance sheet, other than, in the case of
any Borrower, any such lease under which such Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"Cash Collateral Account" shall have the meaning assigned to it in SCHEDULE C.
"Change of Control" shall mean, with respect to any Person on or after the
Closing Date, that any change in the composition of such Person's stockholders
as of the Closing Date shall occur which would result in any stockholder or
group acquiring 49.9% or more of any class of Stock of such Person, or that any
Person (or group of Persons acting in concert) shall otherwise acquire, directly
or indirectly (including through Affiliates), the power to elect a majority of
the Board of Directors of such Person or otherwise direct the management or
affairs of such Person by obtaining proxies, entering into voting agreements or
trusts, acquiring securities or otherwise.
"Charges" shall mean all Federal, state, county, city, municipal, local, foreign
or other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party's
business.
"Chattel Paper" shall mean all "chattel paper," as such term is defined in the
Code, now owned or hereafter acquired by any Person, wherever located.
"Closing Date" shall mean the Business Day on which the conditions precedent set
forth in SECTION 2 have been satisfied or specifically waived in writing by
Lender, and the initial Loan has been made.
"Closing Fee" shall have the meaning assigned to it in SCHEDULE E.
"Code" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York; provided, that in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Lender's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "Code" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
"Collateral" shall have the meaning assigned to it in SECTION 6.1.
"Collection Account" shall mean that certain account of Lender, account number
▇▇-▇▇▇-▇▇▇ in the name of GECC CAF Depository at Bankers Trust Company, ▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ number ▇▇▇-▇▇▇-▇▇▇.
Schedule A - Page 2
"Commitment Termination Date" shall mean the earliest of (i) the Stated Expiry
Date, (ii) the date Lender's obligation to advance funds is terminated pursuant
to SECTION 7.2, and (iii) the date of indefeasible prepayment in full by
Borrowers of the Obligations in accordance with the provisions of SECTION
1.2(c).
"Contracts" shall mean all the contracts, undertakings, or agreements (other
than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which any Person may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.
"Contractual Obligation" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument, or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Copyright License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting the right to use any Copyright or
Copyright registration.
"Copyrights" shall mean all of the following now owned or hereafter acquired by
any Person: (i) all copyrights in any original work of authorship fixed in any
tangible medium of expression, now known or later developed, all registrations
and applications for registration of any such copyrights in the United States or
any other country, including registrations, recordings and applications, and
supplemental registrations, recordings, and applications in the United States
Copyright Office; and (ii) all Proceeds of the foregoing, including license
royalties and proceeds of infringement suits, the right to ▇▇▇ for past, present
and future infringements, all rights corresponding thereto throughout the world
and all renewals and extensions thereof.
"Corporate Credit Party" shall mean any Credit Party that is a corporation,
partnership or limited liability company.
"Credit Party" shall mean each Borrower, and each other Person (other than
Lender) that is or may become a party to this Agreement or any other Loan
Document.
"Default" shall mean any Event of Default or any event which, with the passage
of time or notice or both, would, unless cured or waived, become an Event of
Default.
"Default Rate" shall have the meaning assigned to it in SECTION 1.5(c).
"Design & Manufacturing" shall mean Design & Manufacturing, Inc., a
Nebraska
corporation.
"Documents" shall mean all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.
"Domestic Borrowing Availability" shall mean with respect to any Borrower, at
any time, the lesser of (i) the Domestic Maximum Amount less the sum of the
aggregate Domestic Revolving Credit Advances attributable to the other Borrowers
or (ii) such Borrower's Domestic Borrowing Base, in each case less reserves
established by Lender from time to time.
"Domestic Borrowing Base" shall mean at any time an amount equal to the sum at
such time of:
(a) 70% of the value (as determined by Lender) of each Borrower's
Eligible Domestic Accounts (PROVIDED that Lender shall reduce the
foregoing percentage by one percentage point for each percentage point
that the dilution of such Borrower's Accounts (calculated by Lender as
the average dilution over the most recent three months) exceeds 20%);
PLUS
(b) solely with respect to the Domestic Borrowing Base of Leading
Borrower, the lesser of (i) $2,200,000 or (ii) the sum of (A) the
lesser of $1,600,000 or 50% of the value of Leading Borrower's Eligible
Domestic Inventory consisting of lenses, (B) the lesser of $500,000 or
40% of the value of Leading Borrower's Eligible Domestic Inventory
consisting of finished platters, theatre equipment, and spotlights, and
(C) the lesser of $100,000 or 25% of the value of Leading Borrower's
Schedule A - Page 3
Eligible Domestic Inventory consisting of finished restaurant
equipment, in each case as determined by Lender, valued on a first-in,
first-out basis (at the lower of cost or market);
PROVIDED that the Domestic Borrowing Base of Leading Borrower shall be reduced
by the Foreign Revolver Reserve, the Inventory Reserve, the Lens Reserve, and
the Domestic Environmental Reserve.
"Domestic Borrowing Base Certificate" shall mean a certificate in the form of
EXHIBIT C-1.
"Domestic Environmental Reserve" shall mean an amount equal to $750,000;
PROVIDED that if no Default or Event of Default exists as of August 31, 2002, as
demonstrated to the sole satisfaction of Lender by the Financial Statements
delivered with respect to such date, then the Domestic Environmental Reserve
shall be reduced to $562,500 commencing with the Fiscal Month immediately after
Lender's receipt of such Financial Statements; and PROVIDED FURTHER, that if no
Default or Event of Default exists as of February 28, 2003, as demonstrated to
the sole satisfaction of Lender by the Financial Statements delivered with
respect to such date, then the Domestic Environmental Reserve shall be reduced
to $375,000 commencing with the Fiscal Month immediately after Lender's receipt
of such Financial Statements.
"Domestic Maximum Amount" shall mean $6,000,000.
"Domestic Revolving Credit Advances" shall have the meaning assigned to it in
SECTION 1.1(a).
"Domestic Revolving Credit Loan" shall mean at any time the sum of (i) the
aggregate amount of Domestic Revolving Credit Advances then outstanding, plus
(ii) the total Letter of Credit Obligations incurred by Lender and outstanding
at such time, plus (iii) the amount of accrued but unpaid interest thereon and
Letter of Credit Fees with respect thereto.
"Domestic Revolving Credit Notes" shall mean each promissory note executed by a
Borrower substantially in the form of EXHIBIT F-1.
"Eligible Domestic Accounts" shall mean, as at the date of determination with
respect to any Borrower, all Accounts of such Borrower (other than Foreign
Accounts) except any Account:
(a) that does not arise from the sale of goods or the performance of
services by such Borrower in the ordinary course of such Borrower's business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process;
(c) against which any defense, counterclaim or setoff, whether
well-founded or otherwise, is asserted or which is a "contra" Account;
(d) that is not a true and correct statement of a bona fide
indebtedness incurred in the amount of the Account for merchandise sold or
services performed and accepted by the Account Debtor obligated upon such
Account;
(e) with respect to which an invoice, acceptable to Lender in form and
substance, has not been sent;
(f) that is not owned by such Borrower or is subject to any right,
claim, or interest of another Person, other than the Lien in favor of Lender;
(g) that arises from a sale to or performance of services for an
employee, Affiliate, Subsidiary or Stockholder of any Borrower or any other
Credit Party, or an entity which has common officers or directors with any
Borrower or any other Credit Party;
(h) that is the obligation of an Account Debtor that is the Federal (or
local) government or a political subdivision thereof, unless Lender has agreed
to the contrary in writing and such Borrower has complied with the Federal
Assignment of Claims Act of 1940 (or the state equivalent thereof, if any) with
respect to such obligation;
Schedule A - Page 4
(i) that is the obligation of an Account Debtor located in a foreign
country unless such Account is supported by a letter of credit in which Lender
has a first priority perfected security interest by possession or credit
insurance acceptable to Lender (and naming Lender as loss payee);
(j) that is the obligation of an Account Debtor to whom any Borrower is
or may become liable for goods sold or services rendered by the Account Debtor
to any Borrower, to the extent of any Borrower's liability to such Account
Debtor;
(k) that arises with respect to goods which are delivered on a
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor may be conditional;
(l) that is an obligation for which the total unpaid Accounts of the
Account Debtor exceed 20%of the aggregate of all Accounts, to the extent of such
excess;
(m) that is not paid within 60 days from its due date or 90 days from
its invoice date or that are Accounts of an Account Debtor if 25% (or, with
respect to the accounts of National Cinema Supply, Inc. or Capital City Supply,
Inc., 10%) or more of the Accounts owing from such Account Debtor remain unpaid
within such time periods;
(n) is an obligation of an Account Debtor that has suspended business,
made a general assignment for the benefit of creditors, is unable to pay its
debts as they become due or as to which a petition has been filed (voluntary or
involuntary) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors;
(o) that arises from any ▇▇▇▇-and-hold or other sale of goods which
remain in any Borrower's possession or under any Borrower's control;
(p) as to which Lender's interest therein is not a first priority
perfected security interest;
(q) to the extent that such Account exceeds any credit limit
established by Lender in Lender's good faith credit judgment;
(r) as to which any of such Borrower's representations or warranties
pertaining to Accounts are untrue;
(s) that represents interest payments, late or finance charges, or
service charges owing to such Borrower;
(t) that is an obligation of National Cinema Supply, Inc. or Capital
City Supply, Inc. unless the Borrowers have satisfied each of the following
conditions:
a) the Borrowers' Fixed Charge Coverage Ratio, calculated as of
any three consecutive Fiscal Months ending after the Closing
Date exceeded 1.10 : 1.00 for such period (as demonstrated to
Lender's sole satisfaction on the relevant Financial
Statements); and
b) the Borrowers' Fixed Charge Coverage Ratio, calculated as of
every three consecutive Fiscal Months ending after the
condition in clause (a) is satisfied exceeded 0.80 : 1.00 for
each such period (as demonstrated to Lender's sole
satisfaction on the relevant Financial Statements);
(u) that is an obligation of National Cinema Supply, Inc. or Capital
City Supply, Inc. to the extent the aggregate outstanding amount of the
obligations of both such Persons to any Borrower exceeds $500,000 (regardless of
whether the conditions in clause (t) are satisfied); or
(v) that is not otherwise acceptable in the good faith discretion of
Lender, provided, that Lender shall have the right to create and adjust
eligibility standards and related reserves from time to time in its good faith
credit judgment.
"Eligible Domestic Inventory" shall mean as at the date of determination as to
any Borrower, all Inventory of such Borrower (other than Export-Related
Inventory), except any Inventory that:
(a) is not subject to a first priority perfected security interest of
Lender or is not owned by such Borrower free and clear of all Liens and rights
of others (except the Liens in favor of Lender);
(b) is not located on premises owned, leased, or operated by such
Borrower and referenced in DISCLOSURE SCHEDULE (3.2),
Schedule A - Page 5
(c) is not located on premises where the aggregate amount of all
Inventory (valued at cost) of such Borrower located thereon is greater than
$100,000;
(d) is located on premises with respect to which Lender has not
received a landlord or mortgagee letter acceptable in form and substance to
Lender (unless Lender has placed a Reserve satisfactory to Lender on the
applicable Borrower's Borrowing Base with respect to such Inventory);
(e) is in transit;
(f) is covered by a negotiable document of title, unless such document
and evidence of acceptable insurance covering such Inventory has been delivered
to Lender,
(g) in Lender's good faith credit judgment, is obsolete, unsalable,
shopworn, damaged, unfit for further processing, is of substandard quality or is
not of good and merchantable quality, free from any defects;
(h) consists of (i) discontinued items, (ii) slow-moving or excess
items held in inventory, or (iii) used items held for resale;
(i) does not consist of raw materials or finished goods;
(j) does not meet all standards imposed by any Governmental Authority,
including with respect to its production, acquisition or importation (as the
case may be);
(k) is placed by such Borrower on consignment or held by such Borrower
on consignment from another Person;
(l) is held for rental or lease by or on behalf of such Borrower;
(m) is produced in violation of the Fair Labor Standards Act and
subject to the "hot goods" provisions contained in 29 U.S.C. Section 215 or any
successor statute or section;
(n in any way fails to meet or violates any warranty, representation or
covenant contained in this Agreement or any other Loan Document;
(o) is subject to any licensing, patent, royalty, trademark, trade name
or copyright agreement with any third parties;
(p) requires the consent of any Person for the completion of
manufacture, sale or other disposition of such Inventory by Lender following an
Event of Default and such completion, manufacture or sale constitutes a breach
or default under any contract or agreement to which such Borrower is a party or
to which such Inventory is or may become subject; or
(q) is not otherwise acceptable in the good faith discretion of Lender,
provided, that Lender shall have the right to create and adjust eligibility
standards and related reserves from time to time in its good faith credit
judgment.
"Eligible Export-Related Inventory" shall mean with respect to Leading Borrower,
at the date of determination, all Export-Related Inventory of such Borrower (a)
which would be included in the determination of such Borrower's Foreign
Borrowing Base in accordance with the Ex-Im Bank Documents, (b) which would be
considered Eligible Domestic Inventory but for the fact that such Inventory is
Export-Related Inventory, (c) as to which all of Leading Borrower's
representations and warranties in the Loan Documents are true and correct in all
respects, (d) with respect to which Leading Borrower has complied with all of
its covenants and duties in the Loan Documents, and (e) in which Lender has a
first-priority and perfected security interest under this Agreement.
"Eligible Foreign Accounts" shall mean with respect to Leading Borrower, at the
date of determination, all Foreign Accounts of Leading Borrower (a) which would
be included in the determination of Leading Borrower's Foreign Borrowing Base in
accordance with the Ex-Im Bank Documents, (b) would otherwise be an Eligible
Domestic Account of such Borrower but for clauses (g), (h), (i), (l), (m), (n),
(q), (t), and (u) of the definition thereof, (c) as to which all of Leading
Borrower's representations and warranties in the Loan Documents are true and
correct in all respects, (d) with respect to which Leading Borrower has complied
Schedule A - Page 6
with all of its covenants and duties in the Loan Documents, and (e) in which
Lender has a first-priority and perfected security interest under this
Agreement.
"Environmental Laws" shall mean all Federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).
"Environmental Liabilities" shall mean all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person and
which relate to any health or safety condition regulated under any Environmental
Law, environmental permits or in connection with any Release, threatened
Release, or the presence of a Hazardous Material.
"Equipment" shall mean all "equipment" as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including any and
all machinery, apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal property (other than Inventory) of every
kind and description which may be now or hereafter used in such Person's
operations or which are owned by such Person or in which such Person may have an
interest, and all parts, accessories and accessions thereto and substitutions
and replacements therefor.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA Affiliate of any liability with respect to any withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Credit Party or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" shall have the meaning assigned to it in SECTION 7.1.
"Ex-Im Bank" shall mean the Export-Import Bank of the United States.
"Ex-Im Bank Documents" shall mean the Ex-Im Bank Guarantee, the Loan
Authorization Agreement between Lender and Ex-Im Bank, and the Borrower
Agreement.
Schedule A - Page 7
"Ex-Im Bank Guarantee" shall mean the guarantee executed by Ex-Im Bank in favor
of Lender and in a form satisfactory to Lender, together with all amendments,
modifications and supplements thereto.
"Export Order Backlog" shall mean, at any date of determination thereof, the
aggregate dollar amount of unfulfilled orders received by Leading Borrower which
will be Export Transactions.
"Export-Related Inventory" shall mean, at the date of determination thereof,
such portion of Leading Borrower's total Inventory consisting of theatre raw
materials, theatre work in process and theatre finished goods (other than
lenses) or bulbs as is equal to Leading Borrower's Export Sales Percentage as of
the end of the most recently completed period of twelve (12) Fiscal Months.
"Export Sale Percentage" shall mean, for any period of time, the percentage of
Leading Borrower's total sales of theatre raw materials, theatre work in process
and theatre finished goods or bulbs during such period that constitute Export
Transactions.
"Export Transaction" shall mean any transaction in which any Borrower will sell
Inventory to an Account Debtor located in a foreign country.
"Fees" shall mean the fees due to Lender as set forth in SCHEDULE E.
"Financial Statements" shall mean the consolidated and consolidating income
statement, balance sheet and statement of cash flows of each Borrower and its
Subsidiaries, internally prepared for each Fiscal Month, and audited for each
Fiscal Year, prepared in accordance with GAAP.
"Fiscal Month" shall mean any of the monthly accounting periods of Borrowers.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of
Borrowers.
"Fiscal Year" shall mean the 12 month period of Borrowers ending December 31 of
each year. Subsequent changes of the fiscal year of Borrowers shall not change
the term "Fiscal Year" unless Lender shall consent in writing to such change.
"Foreign Accounts" shall mean those Accounts of any Borrower that are an
obligation of an Account Debtor located in a foreign country and which are not
otherwise Eligible Domestic Accounts.
"Foreign Borrowing Availability" shall mean, at any time, the lesser of (i) the
Foreign Maximum Amount or (ii) the Foreign Borrowing Base, in each case less
reserves as established by Lender from time to time.
"Foreign Borrowing Base" shall mean at any time an amount equal to the sum at
such time of:
(a) 70% of the value (as determined by Lender) of Leading Borrower's
Eligible Foreign Accounts (provided, that Lender shall reduce the foregoing
percentage by one percentage point for each percentage point that the dilution
of Leading Borrower's Accounts (calculated by Lender as the average dilution
over the most recent three months) exceeds 20%); plus
(b) the sum of (i) 45% of the value of Leading Borrower's Eligible
Export-Related Inventory consisting of theatre finished goods (other than
lenses) and (ii) 15% of the value of Leading Borrower's Eligible Export-Related
Inventory consisting of (X) theatre raw materials and theatre work in process
(other than lenses), and (Y) bulbs, in each case as determined by Lender, valued
on a first-in, first-out basis (at the lower of cost or market);
PROVIDED, that the portion of the Foreign Borrowing Base attributable to
Eligible Export-Related Inventory at any one time shall not exceed the lesser of
(i) 60% of the aggregate outstanding amount of the Foreign Revolving Credit Loan
at such time, (ii) the sum of the Export Order Backlog at such time plus
$700,000, or (iii) the sum of the Export Order Backlog at such time plus 50% of
the Foreign Borrowing Base which otherwise would consist of Eligible
Export-Related Inventory in excess of the Export Order Backlog; and, PROVIDED
FURTHER; that the Foreign Borrowing Base shall be reduced by the Foreign
Environmental Reserve.
"Foreign Borrower Base Certificate" shall mean a certificate in the form of
EXHIBIT C-2.
"Foreign Environmental Reserve" shall mean an amount equal to $250,000; PROVIDED
that if no Default or Event of Default exists as of August 31, 2002, as
demonstrated to the sole satisfaction of Lender by the
Schedule A - Page 8
Financial Statements delivered with respect to such date, then the Foreign
Environmental Reserve shall be reduced to $187,500, commencing with the Fiscal
Month immediately after Lender's receipt of such Financial Statements; and
PROVIDED FURTHER, that if no Default or Event of Default exists as of February
28, 2003, as demonstrated to the sole satisfaction of Lender by the Financial
Statements delivered with respect to such date, then the Foreign Environmental
Reserve shall be reduced to $125,000 commencing with the Fiscal Month
immediately after Lender's receipt of such Financial Statements.
"Foreign Facility Fee" shall have the meaning assigned to it in SCHEDULE E.
"Foreign Maximum Amount" shall mean $2,000,000.
"Foreign Revolver Reserve" shall mean, at any time of determination thereof, an
amount equal to the greater of (a) 10% of the aggregate outstanding Foreign
Revolving Credit Loan at such time, or (b) such percentage of the aggregate
outstanding Foreign Revolving Credit Loan at such time which is not guaranteed
by Ex-Im Bank pursuant to the Ex-Im Bank Guarantee.
"Foreign Revolving Credit Advance" shall have the meaning assigned to it in
SECTION 1.1(b).
"Foreign Revolving Credit Loan" shall mean at any time the sum of (i) the
aggregate amount of Foreign Revolving Credit Advances then outstanding, plus
(ii) the amount of accrued but unpaid interest thereon with respect thereto.
"Foreign Revolving Credit Note" shall mean the promissory note executed by
Leading Borrower substantially in the form of EXHIBIT F-2.
"GAAP" shall mean generally accepted accounting principles in the United States
of America as in effect from time to time, consistently applied.
"General Intangibles" shall mean all "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Person, including
all right, title and interest which such Person may now or hereafter have in or
under any Contract, Intellectual Property, interests in partnerships, joint
ventures and other business associations, permits, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials,
Books and Records, Goodwill (including the Goodwill associated with any
Intellectual Property), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss, and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key-person, and business interruption insurance, and all
unearned premiums), uncertificated securities, choses in action, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification.
"Goods" shall mean all "goods," as such term is defined in the Code, now owned
or hereafter acquired by any Person, wherever located, including movables,
fixtures, equipment, inventory, or other tangible personal property.
"Goodwill" shall mean all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" shall mean any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such
Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such guaranteeing Person
(whether or not contingent): (i) to purchase or repurchase any such primary
obligation; (ii) to advance or supply funds (a) for the purchase or payment of
any such primary obligation or (b) to maintain working capital or equity
Schedule A - Page 9
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor; (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation; or (iv) to indemnify the owner of
such primary obligation against loss in respect thereof.
"Guarantor" shall mean each Person which executes a guaranty or a support, put
or other similar agreement in favor of Lender in connection with the
transactions contemplated by this Agreement.
"Guaranty" shall mean any agreement to perform all or any portion of the
Obligations on behalf of Borrower or any other Credit Party, in favor of, and in
form and substance satisfactory to, Lender, together with all amendments,
modifications and supplements thereto, and shall refer to such Guaranty as the
same may be in effect at the time such reference becomes operative.
"Hazardous Material" shall mean any substance, material or waste which is
regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance.
"Hazardous Waste" shall have the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. Sections 6901 et. seq.).
"Indebtedness" of any Person shall mean: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than 45 days past due); (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments; (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property); (iv) all Capital Lease Obligations;
(v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in clauses
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; (vii) the Obligations; and (viii) all liabilities
under Title IV of ERISA.
"Indemnified Liabilities" and "Indemnified Person" shall have the meaning
assigned to such terms in SECTION 1.11.
"Index Rate" shall mean the latest rate for 30-day dealer placed commercial
paper (which for purposes hereof shall mean high grade unsecured notes sold
through dealers by major corporations in multiples of $1,000), which normally is
published in the "Money Rates" section of The Wall Street Journal (or if such
rate ceases to be so published, as quoted from such other generally available
and recognizable source as Lender may select). The Index Rate shall be
determined (i) on the first Business Day immediately prior to the Closing Date
and (ii) thereafter, on the last Business Day of each calendar month for
calculation of interest for the following month.
"Instruments" shall mean all "instruments," as such term is defined in the Code,
now owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
Schedule A - Page 10
"Intellectual Property" shall mean any and all Licenses, Patents, Copyrights,
Trademarks, trade secrets and customer lists.
"Inventory" shall mean all "inventory," as such term is defined in the Code, now
or hereafter owned or acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property which are held by or
on behalf of such Person for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in such Person's
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including other supplies.
"Inventory Reserve" shall mean, at any date of determination thereof, an amount
equal to the greater of (a) 10% of the value (as determined by Lender) of the
Borrowers' Eligible Domestic Inventory at such time or (b) $150,000.
"Investment Property" shall mean all "investment property," as such term is
defined in the Code, now or hereafter acquired by an Person, wherever located.
"IRC" and "IRS" shall mean respectively, the Internal Revenue Code of 1986 and
the Internal Revenue Service, and any successor thereto.
"Lender" shall mean General Electric Capital Corporation and, if at any time
Lender shall decide to assign or syndicate all or any of the Obligations, such
term shall include such assignee or such other members of the syndicate.
"Lens Reserve" shall mean, at any date of determination thereof, a cost test
reserve determined by Lender in its sole good faith discretion with respect to
Borrowers' Inventory at such time consisting of lenses, subject to adjustment by
Lender in its good faith discretion after cost test adjustments are completed by
the Leading Borrower to the Lender's satisfaction.
"Letters of Credit" shall mean any and all commercial or standby letters of
credit issued at the request and for the account of any Borrower for which
Lender has incurred Letter of Credit Obligations.
"Letter of Credit Fee" shall have the meaning assigned to it in SCHEDULE E.
"Letter of Credit Obligations" shall mean all outstanding obligations (including
all duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or another, of
Letters of Credit, all as further set forth in SCHEDULE C.
"Letter-of-Credit Rights" shall mean all "letter-of-credit rights," as such term
is defined in the Code, now owned or hereafter acquired by an Person.
"License" shall mean any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Person.
"Lien" shall mean any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"Litigation" shall mean any claim, lawsuit, litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority.
"Loan Documents" shall mean this Agreement, the Notes, the Financial Statements,
each Guaranty, the Power of Attorney, the Lock Box Account Agreements, the
Borrower Agreement, the Mortgages, the Pledge Agreement, the Trademark Security
Agreements, the Patent Security Agreements, and the other documents
Schedule A - Page 11
and instruments listed in SCHEDULE F, and all security agreements, mortgages and
all other documents, instruments, certificates, and notices at any time
delivered by any Person (other than Lender) in connection with any of the
foregoing.
"Loans" shall mean the Revolving Credit Loan including the Letter of Credit
Obligations, and the Term Loan.
"Lock Box Account" and "Lock Box Account Agreement" shall have the meanings
assigned to such terms in SCHEDULE D.
"Material Adverse Effect" shall mean: a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of any
Borrower or any other Credit Party, (b) any Borrower's or any other Credit
Party's ability to pay or perform the Obligations under the Loan Documents to
which such Credit Party is a party in accordance with the terms thereof, (c) the
Collateral or Lender's Liens on the Collateral or the priority of any such Lien,
or (d) Lender's rights and remedies under this Agreement and the other Loan
Documents.
"Minimum Actionable Amount" shall mean $100,000.
"Mortgages" shall mean the
Nebraska Deed of Trust in the form of EXHIBIT W-1
executed by Leading Borrower in favor of Lender and the Illinois Mortgage in the
form of EXHIBIT W-2 executed by Design & Manufacturing in favor of Lender.
"Mortgaged Properties" shall have the meaning assigned to it in SCHEDULE F.
"Multiemployer Plan" shall mean a "multiemployer plan," as defined in Section
4001(a) (3) of ERISA, to which Borrower, any other Credit Party or any ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean at any time with respect to any
Borrower, sum of (i) such Borrower's Domestic Borrowing Availability less the
Domestic Revolving Credit Loan attributable to such Borrower plus (ii) in the
case of Leading Borrower only, such Borrower's Foreign Borrowing Availability
less the Foreign Revolving Credit Loan attributable to such Borrower.
"Notes" shall mean the Domestic Revolving Credit Notes, the Foreign Revolving
Credit Note, and the Term Note.
"Notice of Revolving Credit Advance" shall have the meaning assigned to it in
SECTION 1.1(c).
"Obligations" shall mean all loans, advances, debts, expense reimbursement,
fees, liabilities, and obligations for the performance of covenants, tasks or
duties or for payment of monetary amounts (whether or not such performance is
then required or contingent, or amounts are liquidated or determinable) owing by
any Borrower and any other Credit Party to Lender, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other
instrument, whether arising under any of the Loan Documents or under any other
agreement between such Borrower, such Credit Party and Lender, and all covenants
and duties regarding such amounts. This term includes all principal, interest
(including interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Borrower under any of the Loan Documents, and all
principal and interest due in respect of the Loans and all obligations and
liabilities of any Guarantor under any Guaranty.
"Patent License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting any right with respect to any
invention on which a Patent is in existence.
"Patents" shall mean all of the following in which any Person now holds or
hereafter acquires any interest: (i) all letters patent of the United States or
any other country, all registrations and recordings thereof, and all
Schedule A - Page 12
applications for letters patent of the United States or any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or Territory thereof, or any other country; and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Encumbrances" shall mean the following encumbrances: (i) Liens for
taxes or assessments or other governmental Charges or levies, either not yet due
and payable or to the extent that nonpayment thereof is permitted by the terms
of SECTION 3.10; (ii) pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of any Credit Party; (v)
inchoate and unperfected workers', mechanics', or similar liens arising in the
ordinary course of business so long as such Liens attach only to Equipment,
fixtures or real estate; (vi) carriers', warehouseman's', suppliers' or other
similar possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of $50,000 at any time so long as such Liens attach only to Inventory;
(vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party; (viii) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent)
to the extent permitted under SECTION 5(b)(vii); (x) Liens in existence on the
Closing Date as disclosed on DISCLOSURE SCHEDULE 5(e) provided that no such Lien
is spread to cover additional property after the Closing Date and the amount of
Indebtedness secured thereby is not increased; (xi) Liens in favor of Lender
securing the Obligations; and (xii) other Liens expressly permitted in writing
by Lender in its sole discretion.
"Permitted Intercompany Loans" shall mean any loan or advance of money by
Leading Borrower to Design & Manufacturing, Xenotech Strong, Inc., or Strong
Westrex, Inc. (the "BORROWING AFFILIATE"); PROVIDED that each of the following
conditions is met at the time of and after giving effect to the making of such
loan or advance and the use of the proceeds thereof: (i) no Default or Event of
Default shall be in existence, (ii) each of the Leading Borrower and the
Borrowing Affiliate shall be Solvent, (iii) the aggregate outstanding principal
amount at any one time of all such loans or advances made by Leading Borrower to
Design & Manufacturing shall not exceed $5,500,000 (such maximum amount to
increase by $350,000 each Fiscal Year commencing with the Fiscal Year ending
December 31, 2002), by Leading Borrower to Xenotech Strong, Inc. shall not
exceed $5,200,000 (such maximum amount to increase by $350,000 each Fiscal Year
commencing with the Fiscal Year ending December 31, 2002), and by Leading
Borrower to Strong Westrex, Inc. shall not exceed $150,000 (such maximum amount
to increase by $50,000 each Fiscal Year commencing with the Fiscal Year ending
December 31, 2002), (iv) such loan or advance shall be evidenced by appropriate
entries made on the books and records of the Leading Borrower and the Borrowing
Affiliate and by a duly executed promissory note (in the form of EXHIBIT P) from
the Borrowing Affiliate to the Leading Borrower which shall have been endorsed
with recourse by the Leading Borrower to Lender and shall have been delivered to
Lender.
"Person" shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether Federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.
"Plan" shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the IRC
or Section 302 of ERISA, and in respect of which
Schedule A - Page 13
any Credit Party or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall have the meaning given such term in SCHEDULE F.
"Prepayment Fee" shall mean the prepayment fee specified in SCHEDULE E.
"Proceeds" shall mean "proceeds," as such term is defined in the Code and, in
any event, shall include: (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Borrower or any other Credit Party from time
to time with respect to any Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable to any Borrower or any other Credit Party
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority); (iii) any claim of any Borrower or any other Credit Party against
third parties (a) for past, present or future infringement of any Intellectual
Property or (b) for past, present or future infringement or dilution of any
Trademark or Trademark License or for injury to the goodwill associated with any
Trademark, Trademark registration or Trademark licensed under any Trademark
License; (iv) any recoveries by any Borrower or any other Credit Party against
third parties with respect to any litigation or dispute concerning any
Collateral; and (v) any and all other amounts from time to time paid or payable
under or in connection with any Collateral, upon disposition or otherwise.
"Projections" shall mean as of any date the consolidated and consolidating
balance sheet, statements of income and cash flow for each Borrower and its
Subsidiaries (including forecasted Capital Expenditures and Net Borrowing
Availability) (i) by month for the next Fiscal Year, and (ii) by year for the
following three Fiscal Years, in each case prepared in a manner consistent with
GAAP and accompanied by senior management's discussion and analysis of such
plan.
"Purchase Money Indebtedness" shall mean (i) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (ii) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
any part of the purchase price of any fixed asset, and (iii) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).
"Purchase Money Lien" shall mean any Lien upon any fixed assets which secures
the Purchase Money Indebtedness related thereto but only if such Lien shall at
all times be confined solely to the asset the purchase price of which was
financed or refinanced through the incurrence of the Purchase Money Indebtedness
secured by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
"Real Property" shall have the meaning assigned to it in SECTION 3.15.
"Release" shall mean, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.
"Requirement of Law" shall mean as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Restricted Payment" shall mean: (i) the declaration or payment of any dividend
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of any Borrower's or any other
Credit Party's Stock (except a dividend or other payment or distribution to
Leading Borrower from any Other Borrower); (ii) any payment or distribution made
in respect of any subordinated Indebtedness of any Borrower or any other Credit
Party in violation of any subordination or other agreement made in favor of
Lender; (iii) any payment on account of the purchase, redemption, defeasance or
other
Schedule A - Page 14
retirement of any Borrower's or any other Credit Party's Stock or Indebtedness
or any other payment or distribution made in respect of any thereof, either
directly or indirectly; other than (a) that arising under this Agreement or (b)
interest and principal, when due without acceleration or modification of the
amortization as in effect on the Closing Date, under Indebtedness (not including
subordinated Indebtedness, payments of which shall be permitted only in
accordance with the terms of the relevant subordination agreement made in favor
of Lender) described in DISCLOSURE SCHEDULE (5(b)) or otherwise permitted under
SECTION 5(b)(vi); or (iv) any payment, loan, contribution, or other transfer of
funds or other property to any Stockholder of such Person which is not expressly
and specifically permitted in this Agreement; provided, that no payment to
Lender shall constitute a Restricted Payment.
"Revolving Credit Advances" shall mean the Domestic Revolving Credit Advances
and the Foreign Revolving Credit Advances.
"Revolving Credit Loan" shall mean the Domestic Revolving Credit Loan and the
Foreign Revolving Credit Loan.
"Revolving Credit Rate" shall have the meaning assigned to it in SECTION 1.5(a).
"Stated Expiry Date" shall mean August 30, 2003; PROVIDED that the Stated Expiry
Date shall automatically be extended for two (2) consecutive one (1) year
periods, the first of which shall commence on the second (2nd) anniversary of
the date of this Agreement and, if so extended for such first one year period,
the second of which shall commence on the third (3rd) anniversary of the date of
this Agreement, unless, in each case, prior to the then-current Stated Expiry
Date (a) Borrowers provide written notice to Lender not less than ninety (90)
days prior to the then current Stated Expiry Date that Borrowers have elected
not to extend the then current Stated Expiry Date, or (b) Lender provides
written notice to any Borrower not less than ninety (90) days prior to the then
current Stated Expiry Date that Lender has elected not to extend the then
current Stated Expiry Date. The foregoing notwithstanding, the Stated Expiry
Date shall not be extended if, as of the then current Stated Expiry Date, a
Default shall have occurred and is continuing. Nothing contained herein shall be
deemed to be a commitment by Lender to extend the Stated Expiry Date at any time
in effect. The Stated Expiry Date shall in no event be later than the fourth
(4th) anniversary of the date of this Agreement.
"Stock" shall mean all certificated and uncertificated shares, options,
warrants, membership interests, general or limited partnership interests,
participation or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Stockholder" shall mean each holder of Stock of any Borrower or any other
Credit Party.
"Subordinated Debt" shall mean Indebtedness of any Borrower in such amounts,
incurred pursuant to such terms and conditions, and subject to such terms and
conditions of subordination, as may be satisfactory to Lender in its sole
discretion (including, without limitation, the satisfaction of any requirement
by Lender that the holder of such Indebtedness enter into a written
subordination agreement with such Borrower and Lender in form and substance
satisfactory to Lender in its sole discretion.
"Subsidiary" shall mean, with respect to any Person, (i) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (ii) any partnership or limited liability
company in which such Person or one or more Subsidiaries of such Person has an
equity interest
Schedule A - Page 15
(whether in the form of voting or participation in profits or capital
contribution) of more than 50% or of which any such Person is a general partner
or manager or may exercise the powers of a general partner or manager.
"Supporting Obligations" shall mean all "supporting obligations," as such term
is defined in the Code, now owned or hereafter acquired by any Person.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on or measured
by the net income of Lender.
"Term Loan" shall mean the loan in the amount specified in and evidenced by the
Term Note, and made to Borrowers under the terms of the Agreement, and any
renewals, extensions, revisions, modifications or replacements therefor or
thereof.
"Term Loan Borrowers" shall mean Leading Borrower and Design & Manufacturing.
"Term Loan Rate" shall have the meaning assigned to it in SECTION 1.5(a).
"Term Note" shall mean the promissory note of Borrowers dated the Closing Date,
substantially in the form of EXHIBIT G.
"Termination Date" shall mean the date on which all Obligations under this
Agreement are indefeasibly paid in full, in cash (other than amounts in respect
of Letter of Credit Obligations if any, then outstanding, provided that
Borrowers shall have funded such amounts in cash in full into the Cash
Collateral Account), and Borrowers shall have no further right to borrow any
moneys or obtain other credit extensions or financial accommodations under this
Agreement.
"Total Maximum Amount" shall mean the sum of the Domestic Maximum Amount plus
the Foreign Maximum Amount.
"Trademark License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting any right to use any Trademark or
Trademark registration.
"Trademarks" shall mean all of the following now owned or hereafter acquired by
any Person: (i) all trademarks, trade names, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof, and (ii) all reissues, extensions
or renewals thereof.
"Unused Line Fee" shall have the meaning assigned to it in SCHEDULE E.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
Any accounting term used in this Agreement or the other Loan Documents shall
have, unless otherwise specifically provided therein, the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance with GAAP consistently applied; provided, that all financial
covenants and calculations in the Loan Documents shall be made in accordance
with GAAP as in effect on the Closing Date unless Borrower and Lender shall
otherwise specifically agree in writing. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. All other undefined terms contained in this
Agreement or the other Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code. The words "herein,"
"hereof" and
Schedule A - Page 16
"hereunder" or other words of similar import refer to this Agreement as a whole,
including the exhibits and schedules thereto, as the same may from time to time
be amended, modified or supplemented, and not to any particular section,
subsection or clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the following
additional rules of construction shall apply, unless specifically indicated to
the contrary: (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural; (b) the term "or" is not exclusive; (c) the term "including" (or any
form thereof) shall not be limiting or exclusive; (d) all references to statutes
and related regulations shall include any amendments of same and any successor
statutes and regulations; and (e) all references to any instruments or
agreements, including references to any of the Loan Documents, shall include any
and all modifications or amendments thereto and any and all extensions or
renewals thereof.
Schedule A - Page 17
SCHEDULE B
LENDER'S AND BORROWERS' ADDRESSES FOR NOTICES
Lender's Address:
Name: General Electric Capital Corporation
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: Ballantyne of Omaha, Inc. Account Manager
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Leading Borrower's Address:
Name: Ballantyne of Omaha, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 402-453-7238
Other Borrowers' Addresses:
Name: Design & Manufacturing, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 402-453-7238
Name: Xenotech Strong, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 402-453-7238
Name: Xenotech Rental, Inc.
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att'n: ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 402-453-7238
with a courtesy copy of any notice to any Borrower to:
Daniel Etna, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Schedule B - Page 1
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Schedule B - Page 2
SCHEDULE C
LETTERS OF CREDIT
1. Lender agrees, subject to the terms and conditions hereinafter set forth, to
incur Letter of Credit Obligations in respect of the issuance of Letters of
Credit issued on terms acceptable to Lender and supporting obligations of each
Borrower incurred in the ordinary course of such Borrower's business, in order
to support the payment of such Borrower's inventory purchase obligations,
insurance premiums, or utility or other operating expenses and obligations, as
Ballantyne of Omaha, Inc. shall request as agent for such Borrower by written
notice to Lender that is received by Lender not less than five Business Days
prior to the requested date of issuance of any such Letter of Credit; PROVIDED,
that: (a) that the aggregate amount of all Letter of Credit Obligations in favor
of such Borrower at any one time outstanding (whether or not then due and
payable) shall not exceed [n/a]; (b) no Letter of Credit shall have an expiry
date which is later than the Stated Expiry Date or one year following the date
of issuance thereof; and (c) Lender shall be under no obligation to incur any
Letter of Credit Obligation if after giving effect to the incurrence of such
Letter of Credit Obligation, the Net Borrowing Availability would be less than
zero. The maximum amount payable in respect of each Letter of Credit requested
by any Borrower will be guaranteed by Lender in favor of the issuing bank under
terms of a separate agreement between Lender and the issuing bank. Each Borrower
will enter into an application and agreement for such Letter of Credit with the
issuing bank selected by Lender (which may be an Affiliate of Lender). The bank
that issues any Letter of Credit pursuant to this Agreement shall be determined
by Lender in its sole discretion.
2. The notice to be provided to Lender requesting that Lender incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily employed by the issuing bank, together with a written request
by the applicable Borrower and the bank that Lender approve such Borrower's
application. Upon receipt of such notice Lender shall establish a reserve
against such Borrower's Borrowing Availability in the amount of 100% of the face
amount of the Letter of Credit Obligation to be incurred. Approval by Lender in
the written form agreed upon between Lender and the issuing bank (a) will
authorize the bank to issue the requested Letter of Credit, and (b) will
conclusively establish the existence of the Letter of Credit Obligation as of
the date of such approval.
3. In the event that Lender shall make any payment on or pursuant to any Letter
of Credit Obligation, Borrower shall be unconditionally obligated to reimburse
Lender therefor, and such payment shall then be deemed to constitute a Revolving
Credit Advance in favor of such Borrower. For purposes of computing interest
under SECTION 1.5, a Revolving Credit Advance made in satisfaction of a Letter
of Credit Obligation shall be deemed to have been made as of the date on which
the issuer or endorser makes the related payment under the underlying Letter of
Credit.
4. In the event that any Letter of Credit Obligations, whether or not then due
or payable, shall for any reason be outstanding on the Commitment Termination
Date, Borrower will either (a) cause the underlying Letter of Credit to be
returned and canceled and each corresponding Letter of Credit Obligation to be
terminated, or (b) pay to Lender, in immediately available funds, an amount
equal to 105% of the maximum amount then available to be drawn under all Letters
of Credit in favor of such Borrower not so returned and canceled to be held by
Lender as cash collateral in an account under the exclusive dominion and control
of Lender (the "Cash Collateral Account").
5. In the event that Lender shall incur any Letter of Credit Obligations in
favor of any Borrower, such Borrower agrees to pay the Letter of Credit Fee to
Lender as compensation to Lender for incurring such Letter of Credit
Obligations. In addition, such Borrower shall reimburse Lender for all fees and
charges paid by Lender on account of any such Letters of Credit or Letter of
Credit Obligations to the issuing bank.
Schedule C - Page 1
6. Each Borrower's Obligations to lender with respect to any Letter of Credit or
Letter of Credit Obligation shall be evidenced by Lender's records and shall be
absolute, unconditional and irrevocable and shall not be affected, modified or
impaired by (a) any lack of validity or enforceability of the transactions
contemplated by or related to such Letter of Credit or Letter of Credit
Obligation; (b) any amendment or waiver of or consent to depart from all or any
of the terms of the transactions contemplated by or related to such Letter of
Credit or Letter of Credit Obligation; (c) the existence of any claim, set-off,
defense or other right which any Borrower or any other Credit Party may have
against Lender, the issuer or beneficiary of such Letter of Credit, or any other
Person, whether in connection with this Agreement, any other Loan Document or
such Letter of Credit or the transactions contemplated thereby or any unrelated
transactions; or (d) the fact that any draft, affidavit, letter, certificate,
invoice, ▇▇▇▇ of lading or other document presented under or delivered in
connection with such Letter of Credit or any other Letter of Credit proves to
have been forged, fraudulent, invalid or insufficient in any respect or any
statement therein proves to have been untrue or incorrect in any respect.
7. In addition to any other indemnity obligations which any Borrower may have to
Lender under this Agreement and without limiting such other indemnification
provisions, Each Borrower hereby agrees to indemnify Lender from and to hold
Lender harmless against any and all claims, liabilities, losses, costs and
expenses (including, attorneys' fees and expenses) which Lender may (other than
as a result of its own gross negligence or willful misconduct) incur or be
subject to as a consequence, directly or indirectly, of (a) the issuance of or
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation or (b) any suit, investigation or proceeding as to which Lender is or
may become a party as a consequence, directly or indirectly, of the issuance of
any Letter of Credit, the incurring of any Letter of Credit Obligation or any
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation. The obligations of each Borrower under this paragraph shall survive
any termination of this Agreement and the payment in full of the Obligations.
8. Each Borrower hereby assumes all risks of the acts, omissions or misuse of
each Letter of Credit by the beneficiary or issuer thereof and, in connection
therewith, Lender shall not be responsible (a) for the validity, sufficiency,
genuineness or legal effect of any document submitted in connection with any
drawing under any Letter of Credit even if it should in fact prove in any
respect to be invalid, insufficient, inaccurate, untrue, fraudulent or forged;
(b) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or any rights or
benefits thereunder or any proceeds thereof, in whole or in part, even if it
should prove to be invalid or ineffective for any reason; (c) for the failure of
any issuer or beneficiary of any Letter of Credit to comply fully with the terms
thereof, including the conditions required in order to effect or pay a drawing
thereunder; (d) for any errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy, telex or otherwise;
(e) for any loss or delay in the transmission or otherwise of any document or
draft required in order to make a drawing under any Letter of Credit; or (f) for
any consequences arising from causes beyond the direct control of Lender.
Schedule C - Page 2
SCHEDULE D
CASH MANAGEMENT
Borrowers agree to establish, and to maintain, until the Termination Date, the
cash management system described below:
1. No Corporate Credit Party: (i) shall (nor shall it permit any of its
Subsidiaries to) open or maintain any deposit, checking, operating or other bank
account, or similar money handling account, with any bank or other financial
institution except for those accounts identified in ATTACHMENT I hereto (to
include a ▇▇▇▇▇ cash account not to exceed $5,000 during any Fiscal Month, and a
payroll account not to exceed an amount equal to one regular payroll at any
time); and (ii) shall close or permit to be closed any of the accounts listed in
ATTACHMENT I hereto, in each case without Lender's prior written consent, and
then only after such Credit Party has implemented agreements with such bank or
financial institution and Lender acceptable to Lender.
2. Commencing on the Closing Date and continuing until the Termination Date,
each Corporate Credit Party shall deposit or cause to be deposited directly all
cash, checks, notes, drafts or other similar items relating to or constituting
proceeds of or payments made in respect of any and all Collateral (collectively,
the "RECEIPTS") into accounts in such Credit Party's name (collectively, the
"DOMESTIC DEPOSIT ACCOUNTS") set forth in paragraph 1 of ATTACHMENT I hereto;
PROVIDED that all Receipts that relate to Foreign Accounts shall be deposited to
the Foreign Deposit Account set forth in paragraph 3 of ATTACHMENT 1 hereto
(collectively, together with Domestic Deposit Accounts, the "DEPOSIT ACCOUNTS").
3. On or before the Closing Date, each Corporate Credit Party shall execute a
tri-party agreement with Lender and each bank where a Deposit Account is
located, which agreement shall provide for the establishment of a post office
box under the control of such bank (each, a "LOCK BOX") for collection of
Receipts intended for the relevant Deposit Account. Each Corporate Credit Party
hereby authorizes Lender (and grants an irrevocable power of attorney to Lender
coupled with an interest) to deliver such agreements and to take such other
actions as Lender deems necessary to accomplish the purposes of this paragraph.
4. Commencing on the date on which the combined Net Borrowing Availability of
all Borrowers is less than $1,500,000 and continuing until the earlier of the
Termination Date or the date (if any) on which Lender in its sole discretion
waives in writing the requirements of this sentence, (i) each Corporate Credit
Party (other than Design & Manufacturing, Inc.) shall instruct each of its
Account Debtors to send all Receipts to a Lock Box (and each Corporate Credit
Party hereby authorizes Lender to issue such instructions on such Credit Party's
behalf) and (ii) such Corporate Credit Party shall authorize and direct such
bank to endorse and deposit such Receipts in the Deposit Account attached to
such Lock Box (subject to standard lock box exceptions for checks marked "in
full and final settlement" and the like), and (iii) if any Corporate Credit
Party receives any Receipts, such Corporate Credit Party shall promptly deposit
such Receipts directly in such Corporate Credit Party's Deposit Account.
5. On or before the Closing Date, each bank at which the Deposit Accounts are
held shall have entered into tri-party lock box agreements (the "DEPOSIT ACCOUNT
AGREEMENTS") with Lender and the applicable Credit Party, in form and substance
acceptable to Lender. Each such Deposit Account Agreement shall provide, among
other things, that (a) such bank executing such agreement has no rights of
setoff or recoupment or any other claim against such Deposit Account, other than
for payment of its service fees and other charges directly related to the
administration of such account, and (b) such bank agrees to sweep on a daily
basis all amounts in the Deposit Account to the Collection Account.
6. On the Closing Date, (a) the blocked account arrangements shall immediately
become operative at the banks at which the Deposit Accounts are maintained, and
(b) amounts outstanding under the Revolving Credit
Schedule D - Page 1
Loan (for purposes of the Borrowing Availability) shall be reduced through daily
sweeps, by wire transfer, of the Deposit Accounts into the Collection Account.
Borrowers acknowledge that they shall have no right to gain access to any of the
moneys in the Deposit Accounts until after the Termination Date.
7. Each Borrower may maintain, in its name, accounts (the "DISBURSEMENT
ACCOUNTS") at a bank or banks acceptable to Lender into which Lender shall, from
time to time, deposit proceeds of Revolving Credit Advances made pursuant to
SECTION 1.1 for use solely in accordance with the provisions of SECTION 1.3. All
of the Disbursement Accounts as of the Closing Date are listed in paragraph 3 of
ATTACHMENT I hereto.
8. Upon the request of Lender, each Corporate Credit Party shall forward to
Lender, on a daily basis, evidence of the deposit of all items of payment
received by such Credit Party into the Deposit Accounts and copies of all such
checks and other items, together with a statement showing the application of
those items relating to payments on Accounts to outstanding Accounts and a
collection report with regard thereto in form and substance satisfactory to
Lender.
Schedule D - Page 2
ATTACHMENT 1 TO SCHEDULE D
LIST OF BANK ACCOUNTS
1. OPERATING ACCOUNTS
BORROWER BANK ACCOUNT #
Ballantyne of Omaha, Inc. ▇▇▇▇▇ Fargo Bank (Omaha, NE) ▇▇▇▇-▇▇▇-▇▇▇
Xenotech Strong, Inc. ▇▇▇▇▇ Fargo Bank (Omaha, NE) ▇▇▇▇-▇▇▇-▇▇▇
Xenotech Strong, Inc. ▇▇▇▇▇ Fargo Bank ▇▇▇▇-▇▇▇-▇▇▇
(Los Angeles, CA)
Ballantyne of Omaha, Inc. Bank of America 003660792467
DBA Strong Communications (Orlando, FL)
Xenotech Strong, Inc. DBA Bank of America 003660660816
Skytracker (Orlando, FL)
Design & Manufacturing, Inc ▇▇▇▇▇▇ National Bank 101-170
(Fisher, IL)
2. DOMESTIC DEPOSIT ACCOUNTS.
BORROWER BANK ACCOUNT #
Ballantyne of Omaha, Inc. ▇▇▇▇▇ Fargo Bank (Omaha, NE) 0687170431
Xenotech Strong, Inc. ▇▇▇▇▇ Fargo Bank (Omaha, NE) 0687170456
2. FOREIGN DEPOSIT ACCOUNT.
Ballantyne of Omaha, Inc. ▇▇▇▇▇ Fargo Bank (Omaha, NE) 0687170449
3. DISBURSEMENT ACCOUNTS.
Same as Operating Accounts.
4. ▇▇▇▇▇ CASH ACCOUNT. (not to exceed $5,000).
None.
5. PAYROLL ACCOUNT (not to exceed one regular payroll).
Schedule D - Page 3
None.
Schedule D - Page 4
SCHEDULE E - FEES
1. UNUSED LINE FEE: For each day from the Closing Date, and through and
including the Termination Date, an amount equal to the Total Maximum Amount less
the Revolving Credit Advances outstanding as of such day multiplied by .25%, the
product of which is then divided by 360. The Unused Line Fee for each month
(except for the month in which the Termination Date occurs) is payable on the
first day of each calendar month following the Closing Date; the final monthly
installment of the Unused Line Fee is payable on the Termination Date.
Notwithstanding the foregoing, any unpaid Unused Line Fee is immediately due and
payable on the Commitment Termination Date.
2. LETTER OF CREDIT FEE: For each day for which Lender maintains Letter of
Credit Obligations outstanding, an amount equal to the amount of the Letter of
Credit Obligations outstanding on such day, multiplied by [n/a] %, the product
of which is then divided by 360. The Letter of Credit Fee incurred for each
month is payable at the same time each payment of the Unused Line Fee is due.
Notwithstanding the foregoing, any unpaid Letter of Credit Fee is immediately
due and payable on the Commitment Termination Date.
3. CLOSING FEE: A non-refundable closing fee of $49,375, payable and fully
earned at closing (the "CLOSING FEE").
4. PREPAYMENT FEE:
The Prepayment Fee shall be an amount equal to the sum of (x) the Domestic
Maximum Amount, PLUS (y) the Foreign Maximum Amount, PLUS (z) the principal
amount outstanding under the Term Loan on the date of prepayment and
termination, multiplied by:
2% if Lender's obligation to make further Revolving Credit Advances or
incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) on or after the Closing Date and on or
before the first anniversary of the Closing Date, payable on the Commitment
Termination Date; or
1% if Lender's obligation to make further Revolving Credit Advances or
incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) after the first anniversary of the Closing
Date and on or before the Stated Expiry Date then in effect, payable on the
Commitment Termination Date.
Each Borrower acknowledges and agrees that (i) it would be difficult or
impractical to calculate Lender's actual damages from early termination of
Lender's obligation to make further Revolving Credit Advances and incur
additional Letter of Credit Obligations for any reason pursuant to SECTION
1.2(c) or SECTION 7.2, (ii) the Prepayment Fees provided above are intended to
be fair and reasonable approximations of such damages, and (iii) the Prepayment
Fees are not intended to be penalties.
5. AUDIT FEES: Borrowers jointly and severally agree to reimburse Lender at the
rate of $750 per person per day, plus out of pocket expenses, for the audit
reviews, field examinations and collateral examinations conducted by Lender.
6. FOREIGN FACILITY FEES: Borrowers jointly and severally agree to pay Lender an
annual foreign facility fee (the "FOREIGN FACILITY FEE") in an amount of $5,000,
which fee shall be payable on the Closing Date and on each anniversary thereof
until the Termination Date, and Borrowers jointly and severally agree to pay
Lender from time to time any and all other fees payable by Lender to Ex-Im Bank
in connection with the Ex-Im Bank Guarantee.
Schedule E - Page 1
SCHEDULE F
SCHEDULE OF DOCUMENTS
The obligation of Lender to make the initial Revolving Credit Advances and
extended other credit is subject to satisfaction of the condition precedent that
Lender shall have received the following, each, unless otherwise specified below
or the context otherwise requires, dated the Closing Date, in form and substance
satisfactory to Lender and its counsel:
PRINCIPAL LOAN DOCUMENTS.
1. AGREEMENT. The
Loan and Security Agreement duly executed by Borrowers.
2. NOTES. Duly executed Note(s) to the order of Lender evidencing the Loans.
3. BORROWING BASE CERTIFICATES. An original Domestic Borrowing Base
Certificate for each Borrower duly executed by a responsible officer of
such Borrower and an original Foreign Borrowing Base Certificate duly
executed by a responsible officer of Leading Borrower.
4. NOTICE OF REVOLVING CREDIT ADVANCE. An original Notice of Revolving Credit
Advance duly executed by a responsible officer of Borrowers.
COLLATERAL DOCUMENTS.
1. ACKNOWLEDGMENT COPIES OF FINANCING STATEMENTS. Acknowledgment copies of
proper Financing Statements (Form UCC-l) (the "FINANCING STATEMENTS") duly
filed under the Code in all jurisdictions as may be necessary or, in the
opinion of Lender, desirable to perfect Lender's Lien on the Collateral.
2. UCC SEARCHES. Certified copies of UCC Searches, or other evidence
satisfactory to Lender, listing all effective financing statements which
name Borrower(s) (under present name, any previous name or any trade or
doing business name) as debtor and covering all jurisdictions referred to
in paragraph (1) immediately above, together with copies of such other
financing statements.
3. PATENT AND TRADEMARK SECURITY AGREEMENTS. Trademark Security Agreement (in
the form of EXHIBIT U) executed by each Borrower (the "TRADEMARK SECURITY
AGREEMENTS") and Patent Security Agreement (in the form of EXHIBIT V)
executed by each Borrower (the "PATENT SECURITY AGREEMENT").
4. OTHER RECORDINGS AND FILINGS. Evidence of the completion of all other
recordings and filings (including UCC-3 termination statements and other
Lien release documentation) as may be necessary or, in the opinion of and
at the request of Lender, desirable to perfect Lender's Lien on the
Collateral and ensure such Collateral is free and clear of other Liens.
5. POWER OF ATTORNEY. Powers of Attorney duly executed by each Credit Party
executing the Agreement.
6. PLEDGE AGREEMENT. The Pledge Agreement (in the form of EXHIBIT M) duly
completed and executed by Leading Borrower and covering all of the
outstanding Stock of the Other Borrowers (the "PLEDGE AGREEMENT"), together
with all certificates evidencing the shares of the Stock or the Borrower's
Subsidiaries covered thereby and accompanied by duly executed blank and
undated transfer powers for such certificates.
7. MORTGAGES AND RELATED DOCUMENTS. (a) The Mortgages in the form of EXHIBIT
W-1 duly executed by Leading Borrower and EXHIBIT W-2 duly executed by
Design & Manufacturing, and covering all of such Borrowers' Real Property
located in Omaha,
Nebraska, and Fisher, Illinois, respectively
(collectively, the "MORTGAGED PROPERTIES"), together with (i) lender's
title insurance commitments for the Mortgaged Properties, all in form and
substance to the Lender in its sole discretion; (ii) current as-built
surveys for the Mortgaged Properties in form and substance satisfactory to
Lender, (iii) evidence that a counterpart of each Mortgage has been
recorded in all places to the extent necessary or desirable, in the
judgment of Lender, to create a valid, enforceable and perfected Lien
(subject only to Permitted Encumbrances) on the Mortgaged Property covered
thereby in favor of the Lender (or in favor of such trustee for the Lender
as may be required under local law), and (iv) such opinions of such
Borrowers' counsel with respect to the Mortgages as Lender may require.
Schedule F - Page 1
THIRD PARTY AGREEMENTS.
1. LANDLORD CONSENTS. Unless otherwise agreed to in writing by Lender, duly
executed landlord waivers and consents from the landlords of all of each
Borrower's leased or owned locations where Collateral is held, in each
case, in form and substance satisfactory to Lender.
2. CASH MANAGEMENT SYSTEM. Duly executed Deposit Account Agreements, Lockbox
Account Agreements, and, if required by Lender, pledged account agreements
in respect of the Disbursement Accounts as contemplated by SCHEDULE D.
3. GUARANTEE. Guarantees executed by Strong Westrex, Inc. and by Ballantyne
Overseas Corp.
4. RELIANCE LETTERS. Reliance letters from M.B. Valuation Services, Inc., with
respect to the inventory and equipment appraisals performed on behalf of
▇▇▇▇▇ Fargo Bank
Nebraska, National Association, and from ▇▇▇▇▇▇, ▇▇▇▇▇ &
Associates, Inc., with respect to the real estate appraisal performed on
behalf of ▇▇▇▇▇ Fargo Bank
Nebraska, National Association
5. PAYOFF LETTER. A Payoff Letter in the form of EXHIBIT Q executed ▇▇▇▇▇
Fargo Bank
Nebraska, National Association
6. INTERCREDITOR AGREEMENT. An Intercreditor Agreement, in form and substance
satisfactory to Lender in its sole discretion, with Sanyo ▇▇▇▇▇▇ Company.
OTHER DOCUMENTS.
1. SECRETARY CERTIFICATE. A Secretary Certificate in the form of EXHIBIT H to
the Agreement duly completed and executed by the Secretary of each Credit
Party executing the Agreement, together with all attachments thereto.
2. ENVIRONMENTAL AUDIT. An environmental assessment of Leading Borrower's
Omaha, Nebraska real property in form and substance (and issued by an
environmental engineering or assessment firm) satisfactory to Lender and on
which Lender is expressly permitted to rely.
3. FINANCIAL STATEMENTS AND PROJECTIONS. Copies of the Financial Statements
and Projections, which Projections shall include a capital expenditures
budget for Borrower(s) in form and substance satisfactory to Lender.
4. INSURANCE POLICIES. Certified copies of insurance policies described in
Section 3.16, together with evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender.
5. EXISTING LEASE AGREEMENTS. Copies of any existing real property leases and
equipment leases to which (each) Borrower is a party and any other document
or instrument evidencing or relating to existing Indebtedness of
Borrower(s), together with all certificates, opinions, instruments,
security documents and other documents relating thereto, all of which shall
be satisfactory in form and substance to Lender, certified by an authorized
officer of Borrower(s) as true, correct and complete copies thereof.
6. AUTHORIZED BORROWERS' REPRESENTATIVE LETTER. A letter (in the form of
EXHIBIT T) duly completed and executed on behalf of the Borrower.
7. PAYMENT OF PROCEEDS LETTER. A letter (in the form of EXHIBIT S) duly
completed and executed on behalf of Borrowers.
8. LETTER TO ACCOUNT DEBTORS. Multiple undated letters (in the form of EXHIBIT
X) to Account Debtors duly executed in blank on behalf of Borrowers.
EX-IM BANK DOCUMENTS.
1 MASTER GUARANTEE AGREEMENT. A copy of the Master Guarantee Agreement
between Ex-Im Bank and Lender.
2. WAIVER LETTER. A waiver letter, containing such waivers as Lender deems
necessary, duly executed by Ex-Im Bank.
3. BORROWER AGREEMENT. The Borrower Agreement, with a copy of the Country
Limitation Schedule, duly completed and executed by Borrowers and Ex-Im
Bank.
Schedule F - Page 2
4. LOAN AUTHORIZATION NOTICE, WITH ACKNOWLEDGEMENT OF RECEIPT BY BORROWER. The
Loan Authorization Notice, duly executed by Ex-Im Bank, and receipt thereof
acknowledged by Borrower.
Schedule F - Page 3
SCHEDULE G
FINANCIAL COVENANTS
1. FIXED CHARGE COVERAGE RATIO. For each period set forth below, Borrowers shall
maintain a Fixed Charge Coverage Ratio of not less than the amount set forth
opposite such period:
PERIOD MINIMUM RATIO
September 1, 2001 through September 30, 2001 0.75 : 1.00
September 1, 2001 through October 31, 2001 0.75 : 1.00
September 1, 2001 through November 30, 2001 0.75 : 1.00
September 1, 2001 through December 31, 2001 1.00 : 1.00
September 1, 2001 through January 31, 2002 1.00 : 1.00
September 1, 2001 through February 28, 2002 1.00 : 1.00
September 1, 2001 through March 31, 2002 1.00 : 1.00
September 1, 2001 through April 30, 2002 1.05 : 1.00
September 1, 2001 through May 31, 2002 1.05 : 1.00
September 1, 2001 through June 30, 2002 1.05 : 1.00
September 1, 2001 through July 31, 2002 1.10 : 1.00
September 1, 2001 through August 31, 2002 1.10 : 1.00
October 1, 2001 through September 30, 2002 1.10 : 1.00
November 1, 2001 through October 31, 2002, and each 1.15 : 1.00
rolling twelve-month Fiscal Month period thereafter
As used in this Agreement (including this SCHEDULE G covenant), the following
terms shall have the following meanings:
"EBITDA" shall mean, for any period, the Net Income (Loss) of Borrowers and
their Subsidiaries on a consolidated basis for such period, PLUS interest
expense, income tax expense, amortization expense, depreciation expense and
extraordinary losses and MINUS extraordinary gains, in each case, of Borrowers
and their Subsidiaries on a consolidated basis for such period determined in
accordance with GAAP to the extent included in the determination of such Net
Income (Loss).
Schedule G - Page 1
"FIXED CHARGE COVERAGE RATIO" shall mean, for any period, the ratio of the
following for Borrowers and their Subsidiaries on a consolidated basis
determined in accordance with GAAP: (a) EBITDA for such period LESS Capital
Expenditures for such period which are not financed through the incurrence of
any Indebtedness (excluding the Revolving Credit Loan) to (b) the sum of (i)
interest expense paid or accrued in respect of any Indebtedness during such
period, PLUS (ii) taxes to the extent accrued or otherwise payable with respect
to such period PLUS (iii) regularly scheduled payments of principal paid or that
were required to be paid on Funded Debt (excluding the Revolving Credit Loan)
during such period, PLUS (iv) the aggregate amount of Permitted Intercompany
Loans made by Leading Borrower to Strong Westrex, Inc. during such period.
"FUNDED DEBT" shall mean, for any Person, all of such Person's Indebtedness
(other than the Loans) which by the terms of the agreement governing or
instrument evidencing such Indebtedness matures more than one year from, or is
directly or indirectly renewable or extendible at the option of such Person
under a revolving credit or similar agreement obligating the lender or lenders
to extend credit over a period of more than one year from, the date of creation
thereof, including current maturities of long-term debt, revolving credit, and
short-term debt extendible beyond one year at the option of such Person.
"NET INCOME (LOSS)" shall mean with respect to any Person and for any period,
the aggregate net income (or loss) after taxes of such Person for such period,
determined in accordance with GAAP.
2 CAPITAL EXPENDITURES. Borrowers and their Subsidiaries on a consolidated basis
shall not make aggregate Capital Expenditures, other than Capital Expenditures
financed through the incurrence of Indebtedness (excluding the Revolving Credit
Loan), in any Fiscal Year in excess of $1,250,000.
Schedule G - Page 2