Exhibit 4.1
LOAN AND SECURITY AGREEMENT
BETWEEN
FIRST UNION COMMERCIAL CORPORATION,
AS LENDER
AND
TITAN SERVICES, INC.
AS BORROWER
CLOSING DATE: DECEMBER ___, 1996
TABLE OF CONTENTS
SECTION 1. . . . . . . . . . . . . . . . . . .GENERAL DEFINITIONS
1
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . .1
1.2. Accounting Terms.. . . . . . . . . . . . . . . . . . 20
1.3. Other Terms. . . . . . . . . . . . . . . . . . . . . 20
1.4. Construction and Interpretation. . . . . . . . . . . 20
SECTION 2. . . . . . . . . . . . . . . . . . . . .CREDIT FACILITY
21
2.1. Revolver Facility. . . . . . . . . . . . . . . . . . 21
2.2. All Revolver Loans to Constitute One Obligation. . . 23
SECTION 3. . . . . . . . . . . . . . INTEREST, FEES AND REPAYMENT
23
3.1. Interest, Fees and Charges.. . . . . . . . . . . . . 23
3.2. Payments and Collections.. . . . . . . . . . . . . . 27
SECTION 4. . . . . . . . . . . . . REPRESENTATIONS AND WARRANTIES
29
4.1. General Representations and Warranties.. . . . . . . 29
4.2. Reaffirmation. . . . . . . . . . . . . . . . . . . . 34
4.3. Survival of Representations and Warranties.. . . . . 34
SECTION 5. . . . . . . . . . .COVENANTS AND CONTINUING AGREEMENTS
34
5.1. Affirmative Covenants. . . . . . . . . . . . . . . . 34
5.2. Negative Covenants.. . . . . . . . . . . . . . . . . 39
5.3. Financial Covenants. . . . . . . . . . . . . . . . . 42
SECTION 6. . . . . . . . . . . . . . . . . . . . . . . COLLATERAL
43
6.1. Grant of Security Interest.. . . . . . . . . . . . . 43
6.2. Representations, Warranties and Covenants -- Collateral
Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.3. Lien Perfection. . . . . . . . . . . . . . . . . . . 43
6.4. Location of Collateral.. . . . . . . . . . . . . . . 44
6.5. Insurance of Collateral. . . . . . . . . . . . . . . 44
6.6. Protection of Collateral.. . . . . . . . . . . . . . 44
6.7. Special Provisions Relating to Accounts. . . . . . . 45
6.8. Special Provisions Relating to Inventory.. . . . . . 47
6.9. Special Provisions Relating to Supply Contracts. . . 47
SECTION 7. . . . . . . .EVENTS OF DEFAULT AND REMEDIES ON DEFAULT
48
7.1. Events of Default. . . . . . . . . . . . . . . . . . 48
7.2. Acceleration of the Obligations. . . . . . . . . . . 50
7.3. Other Remedies.. . . . . . . . . . . . . . . . . . . 50
7.4. License to Use.. . . . . . . . . . . . . . . . . . . 51
7.5. Remedies Cumulative; No Waiver.. . . . . . . . . . . 52
SECTION 8. . . . . . . . . . . . . . . . . . . . . .MISCELLANEOUS
52
8.1. Power of Attorney. . . . . . . . . . . . . . . . . . 52
8.2. Indemnity. . . . . . . . . . . . . . . . . . . . . . 53
8.3. Modification of Agreement; Sale of Interest. . . . . 53
8.4. Reimbursement of Expenses. . . . . . . . . . . . . . 54
8.5. Indulgences Not Waivers. . . . . . . . . . . . . . . 55
8.6. Severability.. . . . . . . . . . . . . . . . . . . . 55
8.7. Successors and Assigns.. . . . . . . . . . . . . . . 56
8.8. Cumulative Effect. . . . . . . . . . . . . . . . . . 56
8.9. Execution in Counterparts. . . . . . . . . . . . . . 56
8.10. . . . . . . . . . . . . . . . . . . . . . . . Notices.
56
8.11. . . . . . . . . . . . . . . . . . . .Lender's Consent.
56
8.12. . . . . . . . . . . . . . . . . . . . Time of Essence.
56
8.13. . . . . . . . . . . . . . . . . . . .Entire Agreement.
57
8.14. . . . . . . . . . . . . . . . . . . . .Interpretation.
57
8.15. . . . . . . . . . . . Marshalling; Payments Set Aside.
57
8.16. . . . . . . . . . . . . . . . . . . . . .Construction.
57
8.17. . . . . . . . . . . . . . . . . . . . . GOVERNING LAW.
57
8.18. . . . . . . . . . . . . . . . . .WAIVER OF JURY TRIAL.
57
8.19. . . . . . . .ARBITRATION AND PRESERVATION OF REMEDIES.
58
8.20. . . . . . . . . . . . . . . . . . . . . . . Publicity.
59
8.21. . . . . . . . . . . . . . . . . . . . . Effectiveness.
59
8.22. . . . . . . . . . . . . . . . . . . . . Sole Benefit.
60
8.23. . . . . . . . . . . . . . Certain Waivers by Borrower.
60
8.24. . . . . . . . . . . . . . . Independence of Covenants.
60
8.25. . . . . . . . . . . . . . . . . . . . . Severability.
60
8.26. . . . . . . . . . . . . . . . . . . . . . . .Headings.
60
8.27. . . . . . . . . . . . . . . No Fiduciary Relationship.
60
8.28. . . . . . . . . . . .Limitation of Lender's Liability.
61
8.29. . . . . . . . . . . . . . . . . . . . . . . . No Duty.
61
8.30. . . . . . . . . . . . . . . . . . . .Maximum Interest.
61
SECTION 9. . . . . . . . . . . . . . . . . . CONDITIONS PRECEDENT
62
9.1. Conditions to Initial Loans. . . . . . . . . . . . . 62
9.2. Conditions to All Loans. . . . . . . . . . . . . . . 63
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, made as of the ____ day of
December, 1996 (the "Closing Date"), by and between FIRST UNION
COMMERCIAL CORPORATION ("Lender"), a North Carolina corporation
with an office at the address specified on the signature page to
this Agreement; and TITAN SERVICES, INC. ("Borrower"), a Tennessee
corporation with its chief executive office and principal place of
business at the address specified on the signature page to this
Agreement;
W I T N E S S E T H T H A T:
WHEREAS, Borrower is engaged primarily in the business of
warehousing proprietary spare parts for automobile manufacturers
under long-term supply contracts; and
WHEREAS, Lender has committed to extend financing to Borrower
in the form of a revolving credit facility to provide for
Borrower's ongoing working capital needs under its existing supply
contracts and to support its entry into new supply contracts; and
WHEREAS, the initial such credit extension will be used by
Borrower to refinance and pay in full its existing revolving credit
facilities with NationsBank of Tennessee, N.A.
NOW, THEREFORE, in consideration of the agreements, provisions
and covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
SECTION 1. GENERAL DEFINITIONS
1.1. Defined Terms. When used in this Agreement, the
following terms shall have the following meanings:
"Account Debtor" - any Person who is or may become obligated
on or under an Account.
"Accounts" - shall mean (i) all "accounts," as that term is
defined under Article 9 of the Code and (ii) all that other
Property described under the term "Accounts" in the Collateral
Schedule.
"Affiliate" - a Person: (i) that directly or indirectly,
through one or more intermediaries, controls, or is controlled by,
or is under common control with, Borrower; (ii) that beneficially
owns or holds five percent (5%) or more of any class of Voting
Stock or other equity interest of Borrower; or (iii) five percent
(5%) or more of whose Voting Stock (or in the case of a Person
which is not a corporation, five percent (5%) or more of whose
equity interest) is beneficially owned or held by Borrower or a
Subsidiary of Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of Voting Stock or other equity interests, by
contract, or otherwise.
"Agreement" - this Loan and Security Agreement, as it may be
modified or amended from time to time. The term "Agreement," as
used herein, shall include all Schedules, Exhibits, Annexes and
Appendices hereto, and all amendments or modifications hereof, and
shall refer to this Agreement as the same shall be in effect at the
time such reference becomes operative.
"Applicable Law" - all laws, rules and regulations applicable
to the Person, conduct, transaction, covenant or Loan Documents in
question, including, but not limited to, all applicable common law
and equitable principles; all provisions of all applicable federal,
state, and local constitutions, statutes, rules, regulations and
orders of governmental bodies; and all orders, judgments and
decrees of all courts and arbitrators. The term "Applicable Law"
shall include all Environmental Laws.
"Authorized Officer" means the chief executive officer, chief
operating officer or chief financial officer of Borrower or Owner,
as the case may be, and such other officers or representatives of
Borrower or Owner as Borrower or Owner may nominate, and Lender may
approve, from time to time for purposes hereof.
"Bank Agency Agreement" means an agreement, satisfactory in
form and substance to Lender, among Lender, Borrower and each bank
at which Borrower maintains depository accounts respecting the
manner of receipt, collection and disposition of funds of Borrower
constituting proceeds from the sale of Inventory, the collection of
Accounts and the disposition of other Collateral. Without
limitation, the foregoing shall include "blocked account"
agreements, "agency" agreements and "lockbox" agreements.
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy," as amended from time to time and all rules
and regulations promulgated thereunder.
"Base Margined Rate" - with respect to each day during each
Interest Period pertaining to a Base Rate Loan, a rate per annum
determined for such day by Lender to be equal to the Base Rate plus
the applicable Interest Margin. The Base Margined Rate as of the
Closing Date is eight and one-fourth of one percent (8 1/4%) per
annum.
"Base Rate" - the rate of interest quoted by North Carolina
Bank from time to time at its office in Charlotte, North Carolina
as its prime rate, whether or not such bank actually charges such
rate and whether or not such rate is the lowest rate charged by
such bank; and if the prime rate is discontinued by such bank as a
standard, a comparable reference rate designated by Lender as a
substitute therefor shall be the Base Rate.
"Base Rate Loans" - Loans bearing interest at rates determined
by reference to the Base Rate. The Base Rate as of the Closing
Date is eight and one-fourth of one percent (8 1/4%) per annum.
"Borrowing Base" - at any date of determination thereof, an
amount, determined for each Eligible Supply Contract, equal to the
lesser of:
(a) a sum, not to exceed Eighteen Million Four
Hundred Thousand Dollars ($18,400,000), in aggregate
amount, determined by Lender from time to time for each
Eligible Supply Contract (which, initially, for the
"Saturn Contract" and the "▇▇ ▇▇▇▇▇▇▇ Contract"
identified on the Supply Contracts Schedule, being the
only Eligible Supply Contracts existing on the Closing
Date, shall be Four Million Six Hundred Thousand Dollars
($4,600,000) and Four Million Eight Hundred Thousand
Dollars ($4,800,000), respectively), less, in each case,
any Reserves applicable or allocable thereto; or
(b) an amount equal to the sum of (i) the
"Inventory Component" (as defined hereinbelow), plus (ii)
the "Receivables Component" (as defined hereinbelow) less
(iii) any Reserves applicable or allocable thereto, in
each instance; wherein (a) the "Inventory Component" of
the Borrowing Base shall be ninety percent (90%), or such
lesser percentage as Lender may determine to be
appropriate from time to time, of the cost of Eligible
Inventory identified to such Eligible Supply Contract at
such date, with cost calculated on a first-in, first-out
(FIFO) basis; and (b) the "Receivables Component" of the
Borrowing Base shall be eighty percent (80%), or such
lesser percentage as Lender may determine to be
appropriate from time to time, of the net amount of
Eligible Accounts arising from such Eligible Supply
Contract outstanding at such date (the "net amount"
thereof being equal to the face amount of such
outstanding Accounts, less any and all returns, rebates,
discounts calculated on shortest terms, credits,
allowances, sales or excise taxes of any nature at any
time issued, owing, claimed, granted, outstanding or
payable in connection with such Accounts at such time).
"Borrowing Base Certificate" means a certificate, ap-
propriately completed and in substantially the form of Exhibit "A",
issued by an Authorized Officer in respect of the Borrowing Base
pursuant to Section 5.1(I).
"Business Day" - any day that is not a Saturday, Sunday or a
legal holiday on which banks are authorized or required to be
closed in Atlanta, Georgia, and, with respect to all notices,
determinations, fundings and payments in connection with LIBOR Rate
Loans, any day that is a Business Day described above and that is
also a day for trading by and between banks in Dollar deposits in
the applicable interbank LIBOR market.
"Capital Expenditures" - expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a
useful life of more than one (1) year, including the direct or
indirect acquisition of such assets by way of increased product or
service charges, offset items or otherwise and the principal
portion of payments with respect to Capitalized Lease Obligations.
"Capital Lease" - any lease of Property which would be
capitalized on the lessee's balance sheet or for which the amount
of the asset or liability thereunder, if so capitalized, should be
disclosed in a note to such balance sheet.
"Capitalized Lease Obligation" - any Indebtedness represented
by obligations under a Capital Lease, and the amount of such
Indebtedness shall be the capitalized amount of such obligations.
"Charges" - all taxes, assessments, levies, claims or charges
upon Borrower, its income or sales, or any of its Properties
imposed by any Governmental Authority.
"Chattel Paper" - shall mean (i) all "chattel paper," as that
term is defined under Article 9 of the Code and (ii) all that other
Property described under the term "Chattel Paper" in the Collateral
Schedule.
"Code" - the Uniform Commercial Code as adopted and in force
in the State of Georgia.
"Collateral" - all of the following described types of
Property and interests in Property of Borrower, whether now owned
or existing or hereafter created, acquired or arising and wherever
located: (A) all Accounts; (B) all Chattel Paper; (C) all
Documents; (D) all Instruments; (E) all Inventory; (F) all
Equipment; (G) all General Intangibles; (H) all monies and other
Property of any kind, now or at any time or times hereafter, in the
possession or under the control of Lender, a bailee of Lender or
Tennessee Bank; (I) all Products and Proceeds of the Property
described in (A) through (H) above, including, without limitation,
Proceeds of and unearned premiums with respect to insurance
policies insuring any of the Collateral and claims against any
Person for loss of, damage to, or destruction of any or all of the
foregoing; all as more particularly set forth and described in the
Collateral Schedule; and (J) all funds at any time on deposit in
the Controlled Disbursement Accounts, the Dominion Accounts and the
Investment Accounts. The term "Collateral" shall also include any
other Property of Borrower in which at any time a Lien is granted
to or for the benefit of Lender.
"Collateral Location" shall mean each store, distribution
center, warehouse or other location, whether owned or leased by
Borrower or otherwise, at which any Collateral is situated at any
time or from time to time.
"Compliance Certificate" means a certificate, appropriately
completed and substantially in the form of Exhibit "B", issued by
an Authorized Officer in respect of Borrower's continuing
compliance with this Agreement pursuant to Section 5.1(H)(iii).
"Consolidated" - the consolidation of the accounts or other
items as to which such term applies.
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that
Person: (a) with respect to any Indebtedness or other liability or
obligation of another Person; (b) with respect to any letter of
credit or banker's acceptance issued for the account of that Person
or as to which that Person is otherwise liable for reimbursement of
drawings; (c) under Interest Rate Agreements; (d) under any for-
eign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect that Person against
fluctuations in currency values; (e) under any "take or pay,"
"guaranteed purchase," "sale or return" or similar arrangement, or
(f) with respect to any employee welfare benefit plan covering
retired or terminated employees and their beneficiaries.
"Controlled Disbursement Account" - a deposit account of
Borrower maintained with Tennessee Bank into which the proceeds of
any Loans shall be disbursed.
"Debt Service Coverage" - for each period of twelve (12)
consecutive Fiscal Months of Borrower, the quotient of (A)
Borrower's EBITDA for such period, minus the sum of (i) all
Unfinanced Capital Expenditures made in such period, (ii) all Non-
Reimbursed Expenses paid in cash or accrued in such period, (iii)
all Distributions paid in cash or accrued in such period and (iv)
all income and franchise taxes paid in cash or accrued in such
period (net of any amounts of paid-in capital returned by Owner in
respect thereof in such period); divided by (B) the sum of (i)
Interest Expense for such period, plus (ii) scheduled principal
payments with respect to all direct Indebtedness of Borrower in
such period.
"Default" - an event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both,
become an Event of Default.
"Default Rate" - a fluctuating interest rate which is two
percent (2%) per annum above the Base Margined Rate.
"Distribution" - (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock
of Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that
class of stock to the holders of that class; (b) any redemption,
conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any
shares of any class of stock of Borrower or any of its Subsidiaries
now or hereafter outstanding; (c) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of stock of Borrower or any
of its Subsidiaries now or hereafter outstanding; (d) any payment
by Borrower or any of its Subsidiaries to any Affiliate of any
management fees or similar fees, whether pursuant to a management
agreement or otherwise; and (e) any payment or prepayment of
principal of, premium (if any) or interest on, or any redemption,
conversion, exchange, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any Subordinated Debt.
"Documents" - shall mean (i) all "documents," as that term is
defined under Article 9 of the Code and (ii) all that other
Property described under the term "Documents" in the Collateral
Schedule.
"Dollars" - and the sign "$" refer to currency of the United
States of America.
"Dominion Account" - a special deposit account established by
Borrower pursuant to a Bank Agency Agreement over which Lender
shall have sole and exclusive access and control for withdrawal
purposes.
"EBITDA" - for any fiscal period, Borrower's net income, plus
(a) Interest Expense paid or accrued in such period,
(b) amortization and depreciation deducted in determining net
income in such period, (c) any Distributions paid in cash or
accrued in such period, (d) Non-Reimbursed Expenses paid in cash or
accrued in such period and (e) income and franchise taxes paid or
accrued in such period; provided, however, that in calculating net
income for the purpose of determining EBITDA there shall be
excluded therefrom: (i) any gain or loss arising from the sale of
capital assets; (ii) any gain arising from any write-up of assets;
(iii) all earnings of any Subsidiary accrued prior to the date it
became a Subsidiary; (iv) all earnings of any entity substantially
all the assets of which have been acquired in any manner by
Borrower, realized by such entity prior to the date of such
acquisition; (v) all net earnings of any entity (other than a
Subsidiary) in which Borrower has an ownership interest unless such
net earnings have actually been received by Borrower in the form of
cash distributions; (vi) any portion of the net earnings of any
Subsidiary which for any reason is unavailable for payment of
dividends to Borrower; (vii) all earnings of any Person to which
any assets of Borrower have been sold, transferred or disposed of,
or into which Borrower has merged, or with which Borrower has been
a party to any consolidation or other form of reorganization, prior
to the date of such transaction; (viii) any gain arising from the
acquisition of any Securities of Borrower; and (ix) any gain
arising from extraordinary or nonrecurring items.
"Eligible Account" - an Account arising in the ordinary course
of Borrower's business from the sale of Inventory or rendition of
services which Lender deems to be an Eligible Account. Without
limiting the generality of the foregoing, no Account is to be an
Eligible Account if: (i) it arises out of a sale made by Borrower
to a Subsidiary or an Affiliate of Borrower or to a Person
controlled by an Affiliate of Borrower; (ii) it is unpaid for more
than sixty (60) days after the original due date shown on the
invoice or is due or unpaid more than ninety (90) days after the
original invoice date; (iii) fifty percent (50%) or more of the
Accounts from the Account Debtor are not deemed Eligible Accounts
hereunder by operation of clause (ii) above; (iv) any covenant,
representation or warranty contained in this Agreement with respect
to such Account has been breached; (v) the Account Debtor is also
Borrower's creditor or supplier, or has disputed liability with
respect to such Account, or the Account otherwise is or may become
subject to any right of setoff by the Account Debtor, to the extent
of the amount of any offset, dispute or claim; (vi) the Account
Debtor has commenced a voluntary case under the Bankruptcy Code, or
made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in
the premises in respect of the Account Debtor in an involuntary
case under the Bankruptcy Code or any other petition or other
application for relief under the Bankruptcy Code has been filed
against the Account Debtor, or if the Account Debtor has ceased to
do business, suspended business, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it
or for all or a significant portion of its assets or affairs;
(vii) it arises from a sale outside the United States, unless the
sale is on letter of credit, guaranty or acceptance terms, in each
case acceptable to Lender; (viii) it arises from a sale to the
Account Debtor on a ▇▇▇▇-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return
basis or the Account otherwise does not represent a final sale;
(ix) Lender believes that collection of such Account is insecure or
that payment thereof is doubtful or will be delayed by reason of
the Account Debtor's financial condition; (x) the Account Debtor is
the United States of America or any department, agency or
instrumentality thereof, unless Borrower assigns its right to
payment of such Account to Lender, in form and substance
satisfactory to Lender, so as to comply with the Assignment of
Claims Act of 1940, as amended; (xi) the address of the Account
Debtor to which invoices are delivered by Borrower is located in
the States of New Jersey, Minnesota or Indiana, unless Borrower has
filed a Notice of Business Activities Report with the appropriate
officials in those states for the then current year; (xii) the
Account Debtor is located in a state in which Borrower is deemed to
be doing business under the laws of such state and which denies
creditors access to its courts in the absence of qualification to
transact business in such state or of the filing of any reports
with such state, unless Borrower has qualified as a foreign
corporation authorized to transact business in such state or has
filed all required reports; (xiii) Lender does not have a duly
perfected first priority security interest therein or the Account
is otherwise subject to any Lien, other than a Permitted Lien;
(xiv) the total unpaid Accounts of the Account Debtor exceed a
credit limit determined by Lender, to the extent such Account
exceeds such limit; (xv) the Account is evidenced by Chattel Paper
or an Instrument, or has been reduced to judgment; (xvi) Borrower
has made any agreement with the Account Debtor for any deduction
therefrom, except for discounts or allowances which are made in the
ordinary course of business for prompt payment and which discounts
or allowances are reflected in the calculation of the face value of
each invoice related to such Account; (xvii) Borrower has made an
agreement with the Account Debtor to extend the time of payment
thereof beyond the initial payment terms; (xviii) the Account
arises from a retail sale of goods to a Person who is purchasing
same primarily for personal, family or household purposes; (xix)
any covenant, representation or warranty contained herein or in any
Loan Document has been breached with respect to such Account
(unless then cured); or (xx) the Account arises from a contract or
purchase order which, by its terms, makes void or unenforceable the
assignment of such Account.
"Eligible Inventory" - such Inventory of Borrower which Lender
deems to be Eligible Inventory. Without limiting the generality of
the foregoing, no Inventory is to be Eligible Inventory unless it
(i) is finished goods in Borrower's possession and control, which
have been identified to and purchased in respect of, and which
conform in all respects with all requirements of, an existing
Eligible Supply Contract, (ii) is readily marketable and saleable
in its current form, in the normal course of Borrower's business at
prices at least equal to the cost thereof, (iii) is not obsolete or
unmerchantable, (iv) is not goods returned to Borrower by or
repossessed from an Account Debtor or goods taken in trade,
(v) meets all standards imposed by any Governmental Authority,
(vi) conforms in all respects to the covenants, warranties and
representations set forth in this Agreement, (vii) is at all times
subject to Lender's duly perfected, first priority security
interest and no other Lien, except a Permitted Lien, (viii) is
situated at a Collateral Location listed and described in the
Location and Real Property Schedule, as it may be changed from time
to time pursuant to Sections 5.1(I) and (N), (ix) is not located at
any Collateral Location which is leased or which belongs to any
processor, landlord, warehouseman or other third party, unless a
Lien Waiver has been executed by such Person or a Reserve has been
imposed in respect thereof, (x) is not in-transit, (xi) is not
subject to a negotiable warehouse receipt or other negotiable
instrument, unless Lender is the holder thereof, (xii) is owned by
Borrower and not held by it on consignment or other sale or return
terms, or (xiii) with respect to which the manufacture, sale or use
thereof is subject to any licensing, patent, royalty, trademark,
copyright or similar agreement limits or restricts Borrower's or
Lender's right to sell or otherwise dispose of such Inventory.
"Eligible Supply Contract" - any Supply Contract: (i) which
is entered into by Borrower, individually (and not as joint
venturer), with a manufacturer domiciled in the United States and
otherwise acceptable to Lender; (ii) which requires delivery of
Inventory solely to a plant or production facility of such
manufacturer located within the continental United States; (iii)
which is valid and subsisting in all respects; (iv) which is not in
default, nor has any notice of termination, revocation, rescission
or cancellation been given or received by Borrower in respect
thereof; (v) which contains a mandatory purchase, "take or pay,"
liquidated damages or similar provisions, acceptable to Lender, on
the part of the manufacturer in respect of Inventory identified to
such Supply Contract; (vi) which includes an express acknowledgment
of Lender's Lien on the subject Inventory and its right to receive
and enforce, as collateral assignee of Borrower, all payment
obligations owing in respect thereof; and (vii) as to which
Borrower has complied in all respects with the terms of Sections
3.2(B), 6.1 and 6.9 relevant thereto. As of the Closing Date,
those Supply Contracts identified on the Supply Contracts Schedule
as the "Saturn Contract" and the "▇▇ ▇▇▇▇▇▇▇ Contract" are the only
Eligible Supply Contracts.
"Environmental Laws" - all federal, state and local laws,
rules, regulations, ordinances, programs, permits, guidances,
orders and consent decrees relating to environmental clean up,
pollution, toxic waste or other environmental matters.
"Environmental Liens" - Liens in favor of any Governmental
Authority arising under or in connection with any Environmental
Law.
"Equipment" - shall mean (i) all "equipment" and "fixtures,"
as each such term is defined under Article 9 of the Code and (ii)
all that other Property described under the term "Equipment" in the
Collateral Schedule.
"Event of Default" - as defined in Section 7 of this
Agreement.
"Financial Statements" - collectively (i) as of the Closing
Date, the financial statements described in and attached to the
Financial and Contingency Schedule; (ii) thereafter, the most
recent financial statements delivered from time to time pursuant to
Section 5.1(H).
"Fiscal Year" means the annual accounting period of Owner and
its Consolidated Subsidiaries (including Borrower) as in effect on
the Closing Date. As used herein, "Fiscal Quarter" and "Fiscal
Month" shall have correlative meanings.
"GAAP" - generally accepted accounting principles in the
United States of America in effect from time to time.
"General Intangibles" - shall mean (i) all "general
intangibles," as that term is defined under Article 9 of the Code
and (ii) all that other Property described under the term "General
Intangibles" in the Collateral Schedule. The term "General
Intangibles" shall include, in any event, all right, title and
interest of Borrower in respect of all Supply Contracts, whether
now or hereafter existing.
"Governmental Authority" means any nation or government or
federal, state, county, province, canton, city, town, municipality,
local or other political subdivision thereof, and any department,
commission, agency or instrumentality exercising executive,
legislative, judicial, regulatory or administrative function of or
pertaining to government.
"Guarantor" - each Person who now or hereafter guarantees
payment or performance of the whole or any part of the Obligations.
As of the Closing Date, the Owner is the only Guarantor.
"Guaranty Agreement" - each Guaranty Agreement which is
executed by a Guarantor in favor of Lender.
"Indebtedness" - as applied to a Person means, without
duplication (i) all items which would be included in determining
total liabilities as shown on the liability side of a balance sheet
of such Person as at the date as of which Indebtedness is to be
determined, including, without limitation, Capitalized Lease
Obligations, (ii) all Contingent Obligations of such Person and
(iii) in the case of Borrower (without duplication), the
Obligations.
"Instruments" - shall mean (i) all "instruments," as that term
is defined under Article 9 of the Code and (ii) all that other
Property described under the term "Instruments" in the Collateral
Schedule.
"Interest Margin" means the interest rate per annum, to be
added to the Base Rate or the LIBOR Rate, as the case may be, in
order to determine, respectively, the Base Margined Rate and the
LIBOR Margined Rate, which (i) for Base Rate Loans, shall be zero
percent (0%) per annum, and (ii) for LIBOR Rate Loans, shall be two
and one-half percent (2 1/2%) per annum.
"Interest Period" - any interest period applicable to a
Revolver Loan, as provided in Section 3.1.
"Interest Rate Agreement" - any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect Borrower
or any of its Subsidiaries against fluctuations in interest rates.
"Inventory" - shall mean (i) all "inventory," as that term is
defined under Article 9 of the Code and (ii) all that other
Property described under the Term "Inventory" in the Collateral
Schedule.
"Investment Account" - an investment account maintained by
Borrower with Tennessee Bank.
"Lender's Account" - an account of Lender with Tennessee Bank
designated by Lender from time to time as the account to which all
remittances in respect of any given Eligible Supply Contract are to
be made.
"Liabilities" - all liabilities of a Person includable on a
balance sheet of such Person.
"LIBOR Rate" - for each Interest Period, a rate of interest
(such rate to be rounded upward to the next whole multiple of one-
sixteenth of one percent (1/16th of 1%)) determined by Lender to be
equal to: (a) the rate of interest determined by Lender at which
deposits in Dollars for the relevant Interest Period are offered
based on information presented on the Telerate Screen LIBOR Page
3750 at approximately 11:00 a.m., London time, two (2) Business
Days prior to the first day of such Interest Period; provided,
however, that if, for any reason, such rate is not available, then
"LIBOR Rate" shall mean the rate per annum at which, in the opinion
of Lender, Dollars in the amount of the requested LIBOR Loan are
being offered to leading reference banks for settlement in the
London interbank market at approximately such time and for such
maturity, divided by (b) a number equal to 1.0 minus the percentage
expressed as decimal and rounded upwards, if necessary, to the next
whole multiple of one-sixteenth of one percent (1/16th of 1%),
determined by Lender to be in effect for such day as prescribed by
the Federal Reserve Board (or any successor) for determining the
maximum reserve requirement (including any basic, supplemental or
emergency reserves) for member banks of the Federal Reserve System
in respect of Eurocurrency liabilities (or any similar category of
liabilities).
"LIBOR Margined Rate" - with respect to each day during each
Interest Period pertaining to a LIBOR Rate Loan, a rate per annum
determined for such day by Lender to be equal to the LIBOR Rate
plus the applicable Interest Margin.
"LIBOR Rate Loans" - Loans bearing interest at rates
determined by reference to the LIBOR Rate.
"Lien" - any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property,
whether such interest is based on the common law, statute or
contract, and including, but not limited to, the security interest,
security title or lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or
bailment for security purposes.
"Lien Waiver" shall mean a written agreement, in substantially
the form of Exhibit "C" or which Lender otherwise determines to be
acceptable from time to time, pursuant to which a landlord, ▇▇▇▇-
▇▇▇▇▇▇▇▇, processor or other Person in possession or control of any
Inventory or other Property of Borrower shall agree to waive or
subordinate its rights and claims in such Property, grant access to
Lender for the repossession of such Property and make such other
agreements with Lender relative thereto as Lender shall determine
to be relevant in the circumstances.
"Loan Account" - a loan account established on the books of
Lender for the purpose of recording the disbursement and collection
of Loans.
"Loan Documents" - this Agreement, the Other Agreements and
the Security Documents.
"Loans" - all loans and advances made by Lender pursuant to
this Agreement, including, without limitation, all Revolver Loans.
"Material Adverse Effect" - the effect of any event or
condition which, alone or when taken together with other events or
conditions occurring or existing concurrently therewith, (a) has or
may be reasonably expected to have a material adverse effect upon
the business, operations, Properties, condition (financial or
otherwise) or business prospects of Borrower, any Guarantor, or any
Subsidiary, or the industry in which Borrower, any Guarantor or any
Subsidiary operates; (b) has or may be reasonably expected to have
any material adverse effect whatsoever upon the validity or
enforceability of this Agreement or any of the other Loan
Documents; (c) has or may be reasonably expected to have any
material adverse effect upon any of the Collateral, the Liens of
Lender with respect to any of the Collateral or the priority of any
such Liens; or (d) has impaired, or may be reasonably expected to
impair, materially the ability of Borrower or any Guarantor to
perform its respective obligations under this Agreement, any
Guaranty Agreement or any of the other Loan Documents or of Lender
to enforce or collect the obligations or realize upon any of the
Collateral in accordance with the Loan Documents and Applicable
Law.
"Maximum Rate" - the maximum non-usurious rate of interest
permitted by Applicable Law that at any time, or from time to time,
may be contracted for, taken, reserved, charged or received on the
Indebtedness in question or, to the extent that at any time
Applicable Law may thereafter permit a higher maximum non-usurious
interest rate, then such higher rate. Notwithstanding any other
provision hereof, the Maximum Rate is to be calculated on a daily
basis (computed on the actual number of days elapsed over a year of
365 or 366 days, as the case may be).
"Money Borrowed" - as applied to Indebtedness, means
(i) Indebtedness for borrowed money; (ii) Indebtedness, whether or
not in any such case the same was for borrowed money, (A) which is
represented by notes payable or drafts accepted that evidence
extension of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which
interest charges are customarily paid (other than accounts payable)
or that was issued or assumed as full or partial payment for
Property; (iii) Indebtedness that constitutes a Capitalized Lease
Obligation; (iv) Indebtedness under any agreement or obligation to
reimburse the issuer of any letter of credit for amounts paid by
the issuer on account of such letter of credit; and
(v) Indebtedness under any guaranty of obligations that would
constitute Indebtedness for Money Borrowed under clauses
(i) through (iv) hereof.
"Net Proceeds" - proceeds (including cash receivable (when
received) by way of deferred payment) received by Borrower from the
sale, lease, transfer or other disposition of any Property,
including, without limitation, insurance proceeds and awards of
compensation received with respect to the destruction or
condemnation of all or part of such Property, net of: (i) the
direct costs of such sale, lease, transfer or other disposition;
and (ii) any amounts applied, with Lender's consent, to repayment
of Indebtedness (other than the Obligations) secured by a Permitted
Lien on the Property disposed.
"Net Worth" - of any Person, means the total shareholders'
equity (including capital stock, additional paid-in capital and
retained earnings, after deducting treasury stock) which would
appear as such on a balance sheet of such Person.
"Non-Reimbursed Expenses" - any expenses of Borrower which are
not identified to, and reimbursable to Borrower under, any existing
Supply Contract; including, for this purpose, (i) any expenses of
Borrower which have been submitted for reimbursement under any
Supply Contract but as to which Borrower's request for
reimbursement has been refused under such Supply Contract, to the
extent of such rejection, (ii) any expenses otherwise reimbursable
under any Supply Contract which have exceeded any limitation
imposed on the amount thereof under such Supply Contract, to the
extent of such excess; and (iii) marketing expenses.
"North Carolina Bank" - First Union National Bank of North
Carolina, a national bank.
"Notes" - collectively, (i) the Revolver Notes and (ii) any
other Instruments at any time evidencing any of the Obligations.
"Notice of Borrowing" - a notice in substantially the form of
Exhibit "D" issued by an Authorized Officer of Borrower, requesting
a Revolver Loan.
"Obligations" - all indebtedness, liabilities and obligations
owing, arising, due to or payable from Borrower to Lender of every
kind or nature, whether absolute or contingent, due or to become
due, joint or several, liquidated or unliquidated, matured or
unmatured, primary or secondary, now existing or hereafter
incurred, purchase money or nonpurchase money, or arising under any
of the Loan Documents or otherwise, and regardless of the form or
purpose of such indebtedness, liabilities or obligations,
including, without limitation, all of the Loans, all liabilities of
Borrower to Lender under any indemnity, reimbursement, guaranty,
deposit or other agreement heretofore or hereafter executed by
Borrower with or in favor of Lender (whether or not Borrower is the
account party or drawer). The term "Obligations" includes all
interest, charges, expenses, attorneys' fees and other sums
chargeable to Borrower under any of the Loan Documents and all
obligations which Borrower may have (under contract or Applicable
Law) to reimburse Lender in connection with any Interest Rate
Agreement, foreign exchange contract, letter of credit, banker's
acceptance or guaranty issued by Lender to Borrower or for
Borrower's benefit.
"Other Agreements" - any and all agreements, instruments and
documents (other than this Agreement and the Security Documents),
heretofore, now or hereafter executed by Borrower and delivered to
Lender with respect to the transactions contemplated by this
Agreement.
"Overadvance" - on any date, (i) in respect of any Eligible
Supply Contract, the amount by which the total amount of Revolver
Loans outstanding in respect of such Eligible Supply Contract on
such date exceeds the Borrowing Base in respect of such Eligible
Supply Contract on such date or (ii) generally, the amount by which
the total amount of all Revolver Loans outstanding on such date
exceeds the Borrowing Base on such date.
"Owner" - SETECH, Inc., a Delaware corporation, formerly known
as Aviation Education Systems, Inc.
"Participating Lender" - any Person which is either: (i) an
assignee of Lender hereunder; or (ii) the purchaser from Lender of
a participation interest in any Loans or other Obligations.
"Permitted Indebtedness" - any of the following:
(i) obligations owing to Lender; (ii) Indebtedness of any
Subsidiary to Borrower; (iii) accounts payable to trade creditors
(including Affiliates, to the extent then permitted under Section
5.2(D)) which are not aged more than one hundred twenty (120) days
from billing date and current operating expenses (other than Money
Borrowed) which are not more than sixty (60) days past due, in each
case incurred in the ordinary course of business and paid within
such time period, unless the same are actively being Properly
Contested; (iv) obligations to pay rents on operating leases
permitted herein; (v) Permitted Purchase Money Indebtedness;
(vi) Contingent Obligations arising out of endorsements of checks
and other negotiable instruments for deposit or collection in the
ordinary course of business; (vii) Charges not yet past due or
payable; (viii) Subordinated Debt in existence on the Closing Date;
(ix) additional Subordinated Debt incurred subsequent to the
Closing Date, provided that (A) the terms thereof are no less
favorable to Borrower than those pertaining to its Subordinated
Debt existing on the Closing Date and (B) the total amount of all
Subordinated Debt outstanding at any one time (inclusive of
Subordinated Debt under clause (viii) above and this clause (ix))
shall not exceed Five Hundred Thousand Dollars ($500,000); and
(x) Indebtedness not included in clauses (i) through (ix) above
which is disclosed in the Financial and Contingency Schedule.
"Permitted Investments" - the following: (i) investments in
one or more Subsidiaries of Borrower, to the extent existing on the
Closing Date; (ii) Property to be used in the ordinary course of
business; (iii) Current Assets arising from the sale of goods and
services in the ordinary course of business of Borrower and its
Subsidiaries; and (iv) any of the following investments, if and to
the extent made within an Investment Account, to-wit: (a) deposit
accounts and certificates of deposit maintained with, or issued by,
Tennessee Bank maturing in thirty (30) days or less; (b) direct
obligations of the United States of America maturing in thirty (30)
days; and (c) "overnight" repurchase contracts in respect of
commercial paper offered by Tennessee Bank.
"Permitted Liens" - any of the following: (i) Liens at any
time granted in favor of Lender; (ii) statutory Liens of carriers,
mechanics, materialmen, landlords, warehousemen, and other similar
liens imposed by law, which are incurred in the ordinary course of
business for sums not yet due or which, if due and payable, are
being Properly Contested; provided that a Lien Waiver shall have
been executed in respect thereof or a deduction from the Borrowing
Base in an amount satisfactory to Lender shall have been made
therefor; (iii) Liens resulting from deposits made in the ordinary
course of business in connection with workmen's compensation,
unemployment insurance, social security and other like laws;
(iv) attachment, judgment and other similar non-tax Liens
(excluding Environmental Liens) arising in connection with court
proceedings, but only if and for so long as the execution or other
enforcement of such Liens is and continues to be effectively stayed
and bonded on appeal in a manner satisfactory to Lender for the
full amount thereof, the validity and amount of the claims secured
thereby are being Properly Contested, such Liens do not, in the
aggregate, materially detract from the value of the Property of
Borrower or materially impair the use thereof in the operation of
Borrower's business and such Liens are and at all times remain
junior in priority to the Liens in favor of Lender; (v) Liens of a
bank (including Tennessee Bank) or other financial institution with
respect to funds on deposit with such institution; (vi) such other
Liens as appear on the Lien Schedule; (vii) Liens in existence
immediately prior to the Closing Date that are paid and satisfied
in full and released on the Closing Date as a result of the
application of Borrower's cash on hand at the Closing Date and/or,
the proceeds of the Loans being made on the Closing Date; and
(viii) Purchase Money Liens securing Permitted Purchase Money
Indebtedness which is not incurred in violation of this Agreement.
"Permitted Proceeds Uses" - any of the following: (i) the
satisfaction of certain existing Indebtedness of Borrower for money
borrowed; (ii) closing costs associated with this transaction; and
(iii) Borrower's general operating needs, to the extent not
inconsistent with the provisions of this Agreement and Applicable
Law.
"Permitted Purchase Money Indebtedness" - Purchase Money
Indebtedness of Borrower which (i) is incurred under a Supply
Contract to the extent that the costs associated therewith are
passed through to, and reimbursed by, the buyer under such
contract; or (ii) when aggregated with the principal amount of all
other Purchase Money Indebtedness (not included within clause (i)
above) and Capitalized Lease Obligations of Borrower at the time
outstanding, does not exceed Fifty Thousand Dollars ($50,000).
"Person" - an individual, partnership, corporation, joint
venture, joint stock company, limited liability company, land
trust, business trust, unincorporated organization, a government or
agency or political subdivision thereof, or any other form of
entity.
"Plan" - an employee benefit plan now or hereafter maintained
for employees of Borrower that is covered by Title IV of ERISA.
"Proceeds" - shall mean all "proceeds," as that term is
defined in Article 9 of the Code, of the Collateral.
"Products" - shall mean all "products," as that term is
defined in Article 9 of the Code, of the Collateral.
"Projections" - Borrower's forecasted: (a) balance sheets and
cash flow statements, on an aggregate basis, including all Supply
Contracts, and (b) income statements, on a per Supply Contract and
aggregate basis, all prepared on a consistent with Borrower's
historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
"Properly Contested" - in the case of any Liability of
Borrower that is not paid as and when due or payable by reason of
Borrower's bona fide dispute concerning its liability to pay same
or concerning the amount thereof, that (i) such Liability and any
Liens securing same are being properly contested in good faith by
appropriate proceedings promptly institute and diligently
conducted; (ii) Borrower has established appropriate reserves as
shall be required in conformity with GAAP, (iii) the non-payment of
such Liability will not have a Material Adverse Effect and will not
result in a forfeiture of any assets of Borrower; (iv) no Lien is
imposed upon any of Borrower's assets with respect to such
Liability unless such Lien is at all times junior and subordinate
in priority to the Liens in favor of Lender (except only with
respect to property taxes that have priority as a matter of
applicable state law) and enforcement of such Lien is stayed during
the period prior to the final resolution or disposition of such
dispute; (v) if Liability results from the entry, rendition or
issuance against Borrower or any of its assets of a judgment, writ,
order or decree, such judgment, writ, order or decree is stayed or
bonded pending a timely appeal or other judicial review; and (vi)
if such contest is abandoned, settled or determined adversely to
Borrower, Borrower forthwith pays such Liabilities and all
penalties and interest in connection therewith.
"Property" - any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchase Money Indebtedness" - means and includes (i) any
Indebtedness (other than the Obligations) for the payment of all or
any part of the purchase price of any fixed assets, including
Capitalized Lease Obligations, (ii) any Indebtedness (other than
the Obligations) incurred at the time of or within ten (10) days
prior to or after the acquisition of any fixed assets for the
purpose of financing all or any part of the purchase price thereof,
and (iii) any renewals, extensions or refinancings thereof, but not
any increases in the principal amounts thereof outstanding at the
time.
"Purchase Money Lien" - a Lien upon fixed assets which secures
Purchase Money Indebtedness incurred by Borrower in connection with
its acquisition of such fixed assets, but only if such Lien is at
all times to be confined solely to those fixed assets (and proceeds
thereof) the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien
and such Lien constitutes a purchase money security interest under
the Code.
"Restricted Investment" - any investment in cash or by
delivery of Property to any Person, whether by acquisition of
stock, Indebtedness or other obligation or Security, or by loan,
advance, capital contribution, subscription or otherwise, in any
Property, except Permitted Investments.
"Reserves" - shall mean an amount calculated from time to time
by Lender equal to the sum of: (i) any amounts which Borrower is
obligated to pay to any third party, whether for rent, royalties,
insurance or taxes or otherwise, which Borrower does not pay when
due, until paid by Borrower or by Lender on its behalf by charging
same as a Loan pursuant hereto; and (ii) any other amounts which
Lender elects to reserve from borrowing availability from time to
time.
"Revolver Facility" - the credit facility established by
Lender in favor of Borrower pursuant to Section 2 hereof, inclusive
of each sub-facility created thereunder in respect of an Eligible
Supply Contract.
"Revolver Loan" - a Loan made by Lender under the Revolver
Facility in respect of an Eligible Supply Contract.
"Revolver Note" - each promissory note executed by Borrower on
the Closing Date in favor of Lender to evidence any and all
Revolver Loans made under the Revolving Facility in respect of an
Eligible Supply Contract; together with any and all renewals and
extensions thereof, and any amendments or modifications thereto.
Each Revolver Note shall be substantially in the form of Exhibit
"E". There shall be only one (1) Revolver Note per each Eligible
Supply Contract.
"Schedule of Accounts" - the detailed aged trial balance of
all Accounts of Borrower existing as of the last day of the
preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an
Account so listed and any other information Lender reasonably
requests.
"Schedules" - all Schedules, together with all attachments
thereto, provided by the Borrower and attached to this Agreement
and made a part hereof. The Schedules are listed on the first page
following the signature page to this Agreement.
"Security" - is to have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
"Security Documents" - the Guaranty Agreement and any and all
other instruments and agreements now or at any time hereafter
securing the whole or any part of the Obligations.
"Solvent" - as to any Person, means that such Person (i) owns
Property the fair value of which is greater than the amount
required to pay all of such Person's Indebtedness (including
contingent debts), (ii) owns Property the present fair salable
value of which is greater than the amount that will be required to
pay the probable liability of such Person on its existing
Indebtedness as such becomes absolute and matured, (iii) is able to
pay all of its Indebtedness as such Indebtedness matures, and
(iv) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about
to engage.
"Subordinated Debt" - Indebtedness of Borrower that is
expressly subordinated to the Obligations in right of payment and
claim pursuant to an agreement or provisions approved in writing by
Lender. As of the Closing Date, the only Subordinated Debt is that
owing by Borrower to Owner, and is described more particularly on
the Financial and Contingency Schedule.
"Subsidiary" - any corporation, association or other business
entity of which more than fifty percent (50%) of the total voting
power of shares of stock (or equivalent ownership or controlling
interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by a Person or one or more of the other Subsidiaries of
the Person or a combination thereof.
"Supply Contract" - each supply contract, long term purchase
order or similar arrangement between Borrower, as seller, and an
automobile manufacturer or other customer, as buyer, with respect
to the acquisition, warehousing and ultimate sale and delivery of
any Inventory to a specific production facility of such
manufacturer; as it may be supplemented, extended, modified or
amended from time to time.
"Tennessee Bank" - First Union National Bank of Tennessee, a
national bank.
"Termination Date" - that date which is three (3) years from
the Closing Date.
"Unfinanced Capital Expenditures" - Capital Expenditures not
financed through Permitted Purchase Money Indebtedness.
"Voting Stock" - Securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the board of
directors of such corporation (or Persons performing similar
functions).
1.2. Accounting Terms. Unless otherwise specified herein, all
terms of an accounting character used in this Agreement shall be
interpreted, all accounting determinations under this Agreement
shall be made, and all financial statements required to be
delivered under this Agreement shall be prepared in accordance with
GAAP, applied on a basis consistent with the most recent audited
Consolidated financial statements of Borrower and its Subsidiaries
heretofore delivered to Lender and using the same method for
inventory valuation as used in such audited financial statements,
except for any change in which Borrower's independent public
accountants concur or as required by GAAP; provided, however, that
unless and until either (i) Lender shall have determined, and given
written notice to Borrower to such effect, that such changes will
not affect (in a manner adverse to Lender's interests) the
calculation of the financial covenants set forth in Section 5.3 or
Borrower's compliance therewith, or (ii) Lender and Borrower shall
have amended the financial covenants set forth in Section 5.3 to
reflect such changes, all calculations of the financial covenants
set forth in said Section 5.3 shall be made on a basis consistent
with those used in the preparation of the latest financial
statements as to which no such change was made.
1.3. Other Terms. All terms contained in this Agreement and
not otherwise specifically defined herein are to have the meanings
provided for by the Code to the extent the same are used or defined
therein.
1.4. Construction and Interpretation. References herein to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to
Sections, subsections, Exhibits and Schedules, respectively, of
this Agreement unless otherwise specifically provided. Any of the
terms defined in Section 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on the
reference. In this Agreement, "hereof," "herein," "hereto,"
"hereunder" and the like mean and refer to this Agreement as a
whole and not merely to the specific section, paragraph or clause
in which the respective word appears. Words importing any gender
include the other genders. References to "writing" include
printing, typing, lithography and other means of reproducing words
in a tangible visible form. The words "including," "includes" and
"include" shall be deemed to be followed by the words "without
limitation." References to agreements and other contractual
instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the
extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan
Document. References to Persons include their respective permitted
successors and assigns or, in the case of Governmental Authorities,
Persons succeeding to the relevant functions of such Persons. All
references to statutes and related regulations shall include, as to
any statute, its related regulations, any amendments of same and
any successor statutes and regulations. Any consent, waiver,
approval or determination which, pursuant hereto or to any Loan
Document, is required or permitted to be given or made by Lender
shall be made in its sole discretion, exercised in good faith and,
if and where required by Applicable Law, in a commercially rea-
sonable manner. Any reference herein or in any Loan Document "to
the knowledge" of any Person (or words of substantially the same
import) shall mean to its knowledge after, and assuming, reasonable
investigation and diligence.
SECTION 2. CREDIT FACILITY
Subject to all of the terms and conditions of this Agreement,
in reliance upon the representations and warranties made herein and
in the other Loan Documents and so long as no Default or Event of
Default then exists, Lender will provide credit to the Borrower as
follows:
2.1. Revolver Facility.
(1) During the period from the date hereof to, but not
including, the Termination Date, Borrower may borrow, repay and
reborrow Revolver Loans in respect of each Eligible Supply Contract
in up to a maximum principal amount at any time outstanding under
the Revolver Facility equal to the Borrowing Base determined by
Lender for such Eligible Supply Contract at such time; provided,
however, that in the event that any Overadvance shall ever exist,
Borrower shall repay such Overadvance, in full, immediately; and,
provided, further, that if any Eligible Supply Contract shall cease
to be an Eligible Supply Contract, then, Lender may, at its option,
(i) refuse to make any further Revolver Loans in respect thereof
and (ii) demand full payment of all Revolver Loans then outstanding
in respect thereof. Each Revolver Loan shall be made (or deemed
made), in the following manner: (a) Borrower shall give Lender
written or oral notice of its intention to borrow (which notice
shall be irrevocable) before 11:30 a.m. (Atlanta, Georgia time), on
any Business Day specifying the Eligible Supply Contract in respect
of which such Loan is being requested, the amount of the proposed
borrowing, the proposed borrowing date and whether such Loan is to
be a Base Rate Loan or a LIBOR Rate Loan; (b) unless payment is
otherwise timely made by Borrower, the becoming due of any
Obligation required to be paid under this Agreement or any Loan
Document shall be deemed irrevocably to be a request by Borrower
for a Revolver Loan on the due date of, and in the amount required
to pay, such Obligations; and (c) the presentation by Borrower for
payment by Tennessee Bank of any check or other item of payment
drawn on the Controlled Disbursement Account shall be deemed
irrevocably to be a request for a Revolver Loan in the amount of
such check or other item of payment; it being understood that, in
the case of clauses (b) and (c) above, Lender shall have the right
to allocate the Revolver Loans arising therefrom to any one or more
or all of the Eligible Supply Contracts, at Lender's discretion
(even if, in doing so, an Overadvance is created). The proceeds of
each Revolver Loan requested by oral or written notice of intention
to borrow given as described above are to be disbursed by Lender in
lawful money of the United States of America in immediately
available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter or
other instructions from Borrower, and in the case of each
subsequent borrowing, by wire transfer to the Controlled
Disbursement Account; and the proceeds of each Revolver Loan
requested to satisfy an Obligation as described above are to be
disbursed by Lender by way of direct payment of the relevant
Obligation. Each oral request for a Revolver Loan is to be
conclusively presumed to be made by a Person authorized by Borrower
to do so; and the making of the requested Revolver Loan shall
conclusively establish Borrower's obligation to repay such Revolver
Loan in accordance with this Agreement. Any written notice of
intention to borrow shall be in the form of a Notice of Borrowing.
Any oral notice of intention to borrow may, at Lender's option, be
required to be confirmed not later than one (1) Business Day later
than the giving of oral notice by the giving of a written Notice of
Borrowing. Notwithstanding the foregoing, and in any event, all
notices of intention to borrow LIBOR Rate Loans shall be delivered
by a Notice of Borrowing received by Lender at least three (3)
Business Days in advance of a proposed borrowing date and be in the
minimum amount of Five Hundred Thousand Dollars ($500,000) and
integral multiples of Fifty Thousand Dollars ($50,000) in excess
thereof. The proceeds of each Revolver Loan shall be used by
Borrower solely for Permitted Proceeds Uses. Notwithstanding
Lender's receipt (or deemed receipt) of any request for a Revolver
Loan, Lender shall not be bound to honor any such request except to
the extent, in the manner and subject to all terms and conditions
relevant thereto contained herein. The Indebtedness of Borrower to
Lender arising from the making of each Revolver Loan in respect of
an Eligible Supply Contract shall be evidenced by a Revolver Note
in a principal amount equal to the maximum amount of borrowings
which may be obtained hereunder in respect of such Eligible Supply
Contract. Each Revolver Note shall be executed and delivered in
conjunction with a Supply Contract being accepted by Lender as an
Eligible Supply Contract.
(2) The Revolver Facility will be in effect for a period
commencing on the date hereof and ending on the Termination Date,
unless sooner terminated as hereinafter provided.
(3) Lender may immediately terminate the Revolver
Facility, without notice, upon or after the occurrence of an Event
of Default and during its continuation; and the Revolver Facility
shall automatically terminate, without notice, upon the occurrence
of any Event of Default of the type specified in Section 7.1(G).
(4) Upon the effective date of any termination of the
Revolver Facility, all Revolver Loans then outstanding, shall
become due and payable, in full, and Lender may discontinue making
further Loans to Borrower. No termination (regardless of cause or
procedure) of the Revolver Facility shall in any way affect or
impair the rights, powers or privileges of Lender or the
obligations, duties or liabilities of Borrower relating to (i) any
transaction or event occurring prior to the effective date of such
termination or (ii) any of the undertakings, agreements, covenants,
warranties or representations of Borrower contained in this
Agreement or in any of the other Loan Documents.
2.2. All Revolver Loans to Constitute One Obligation. All
Revolver Loans, regardless whether or how allocated to any given
Eligible Supply Contract, are to constitute one general Obligation
of Borrower, and are to be secured by Lender's security interest in
and Lien upon all of the Collateral, and by all other security
interests and Liens heretofore, now or at any time or times
hereafter granted by Borrower to Lender to the extent provided in
the Security Documents under which any such Lien arises.
SECTION 3. INTEREST, FEES AND REPAYMENT
3.1. Interest, Fees and Charges.
(1) Interest.
(1) Rate of Interest. The Revolver Loans shall
bear interest from the date such Loans are made to the date
paid at the Base Margined Rate or at the LIBOR Margined Rate,
at Borrower's option, and the applicable basis for determining
the rate of interest shall be selected by Borrower at the time
a Notice of Borrowing is given. The basis for determining the
interest rate with respect to any Revolver Loan may be changed
by Borrower from time to time pursuant to subparagraph
(iii) below. If on any day a Loan is outstanding with respect
to which notice has not been delivered to Lender in accordance
with the terms of this Agreement specifying the basis for
determining the rate of interest, then for that day that Loan
shall bear interest at the Base Margined Rate.
(2) Interest Periods. In connection with each
LIBOR Rate Loan, in its Notice of Borrowing therefor, Borrower
shall select an interest period (each an "Interest Period") to
be applicable to such Loan, which Interest Period shall be
either a one (1), two (2) or three (3) month period, provided
that: (1) the initial Interest Period for any such Loan shall
commence on the funding date of such Loan; (2) in the case of
immediately successive Interest Periods, each successive
Interest Period shall commence on the day on which the next
preceding Interest Period expires; (3) if an Interest Period
would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding
Business Day, but if any Interest Period would otherwise
expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day; (4) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to part (5)
below, end on the last Business Day of a calendar month;
(5) no Interest Period shall extend beyond the Termination
Date; (6) no Interest Period with respect to any of the Loans
may extend beyond a date on which Borrower is required to make
a scheduled payment of principal with respect to such Loan;
(7) the Interest Period for a Loan that is converted pursuant
to subparagraph (iii) below shall commence on the date of such
conversion and shall expire on the date on which the Interest
Period for the Loans so converted expires; and (8) there shall
be no more than two (2) Interest Periods relating to LIBOR
Rate Loans allocated to any one Eligible Supply Contract
outstanding at any time.
(3) Conversion or Continuation. Subject to the
provisions of this subparagraph (iii) and the limitation on
the number of Interest Periods prescribed in subparagraph (ii)
above, Borrower shall have the option to (1) convert at any
time all or any part of outstanding Loans equal to Five
Hundred Thousand Dollars ($500,000) and integral multiples of
Fifty Thousand Dollars ($50,000) in excess of that amount from
Loans bearing interest at a rate determined by reference to
one basis to Loans bearing interest at a rate determined by
reference to an alternative basis, or (2) upon the expiration
of any Interest Period applicable to a LIBOR Rate Loan, to
continue all or any portion of such Loan equal to Five Hundred
Thousand Dollars ($500,000) and integral multiples of Fifty
Thousand Dollars ($50,000) in excess of that amount as a LIBOR
Rate Loan and the succeeding Interest Period(s) of such
continued Loan shall commence on the last day of the Interest
Period of the Loan to be continued; provided that LIBOR Rate
Loans may only be converted into Loans bearing interest
determined by reference to an alternative basis on the
expiration date of an Interest Period applicable thereto; and
provided, further, that no outstanding Loan may be continued
as, or be converted into, a LIBOR Rate Loan when an Event of
Default or Default has occurred and is continuing; and
provided, finally, that no Loan may be converted into a LIBOR
Rate Loan until ten (10) days after the Closing Date; i.e.,
any Loans made on the Closing Date or within ten (10) days
thereafter shall be made as Base Rate Loans. Borrower shall
deliver a fully and properly completed Notice of Borrowing to
Lender no later than 11:00 a.m. (Atlanta time) at least three
(3) Business Days in advance of any proposed
conversion/continuation date in respect of any LIBOR Rate
Loan.
(4) Inability to Determine Interest Rate. In the
event that Lender determines that, by reason of circumstances
affecting the London interbank market, either (i) adequate and
reasonable means do not exist for ascertaining the LIBOR Rate
for any requested Interest Period or (ii) the interest rate
determined for such Interest Period does not accurately
reflect the cost to Lender of making or maintaining LIBOR Rate
Loans during such Interest Period; then, Lender shall
forthwith give notice of such determination to Borrower. From
and after Borrower's receipt of such notice, any then
requested LIBOR Rate Loans shall be made as Base Rate Loans,
any Base Rate Loans that were to have been converted to LIBOR
Rate Loans shall be continued as Base Rate Loans and any
outstanding LIBOR Rate Loans shall be converted, on the last
day of the then current Interest Period with respect thereto,
to Base Rate Loans; and no further LIBOR Rate Loans shall be
made or continued as such, nor shall Borrower has the right to
convert Base Rate Loans to LIBOR Rate Loans unless and until
the circumstances causing such suspension of LIBOR Rate Loans
no longer exists.
(5) Illegality. Notwithstanding any other
provisions herein, if any Applicable Law or any change therein
or in the interpretation or application thereof shall make it
unlawful for Lender to make or maintain LIBOR Rate Loans as
contemplated by this Agreement, (a) the commitment of Lender
hereunder to make LIBOR Rate Loans, continue LIBOR Rate Loans
as such or convert Base Rate Loans to LIBOR Rate Loans shall
forthwith be canceled and (b) Lender's Loans then outstanding
as LIBOR Rate Loans, if any, shall be converted automatically
to Base Rate Loans on the respective last day's of the then
current Interest Periods with respect to such Loans or within
such earlier period as required by law.
(6) Computation and Payment of Interest. In
computing interest on any Loan, the date of funding of the
Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from
a LIBOR Rate Loan, the date of conversion of such LIBOR Rate
Loan to such Base Rate Loan shall be included and the date of
payment of such Loan or the expiration date of an Interest
Period applicable to such Loan, or with respect to a Base Rate
Loan being converted to a LIBOR Rate Loan, the date of
conversion of such Base Rate Loan to such LIBOR Rate Loan,
shall be excluded; provided that if a Loan is repaid on the
same day on which it is made, one day's interest shall be paid
on that Loan. All interest (together with any fees or other
charges determined on a "per annum" basis) shall be calculated
on a daily basis (computed on the actual number of days
elapsed over a year of 360 days, unless reference to a 365 or
366-day year is necessary in order not to exceed the Maximum
Rate), commencing on the Closing Date, and shall be payable
(i) monthly, in arrears, on the first day of each month, in
the case of Base Rate Loans, (ii) at the end of the Interest
Period selected therefor, in the case of LIBOR Rate Loans, and
(iii) on demand, at maturity (whether by stated payment terms,
by acceleration or otherwise).
(7) Default Rate of Interest. Upon the occurrence
of an Event of Default, and during its continuance, at
Lender's election, the principal amount of all Obligations
then and thereafter shall bear interest at the Default Rate.
Interest at the Default Rate shall be paid without prejudice
to the rights of Lender to collect any other amounts provided
to be paid hereunder or under any of the other Loan Documents
or to declare a default under this Agreement or any of the
other Loan Documents.
(2) LIBOR Indemnity. Borrower agrees to indemnify
Lender and to hold Lender harmless from any loss or expense which
Lender may sustain or incur as a consequence of (a) default by
Borrower in payment when due of the principal amount of or interest
on any LIBOR Rate Loans, (b) default by Borrower in making,
continuing or converting a borrowing after Borrower has given a
Notice of Borrowing in respect thereto, (c) default by Borrower in
making any prepayment after Borrower has given a voluntary
prepayment notice, or (d) the making of a prepayment of a LIBOR
Rate Loan on a day which is not the last day of the Interest Period
with respect thereto, including, without limitation, in each case,
any such loss or expense arising from the reemployment of funds
obtained by Lender to maintain its LIBOR Rate Loans hereunder or
from fees payable to terminate the deposits from which such funds
were obtained. The amount of such loss or expense shall be
determined by Lender using any reasonable attribution or averaging
method which it selects and, as appropriate, based on the
assumption that a requested LIBOR Rate Loan was funded in the
London interbank market by Lender on the requested disbursement
date; and shall be due and payable on demand. A certificate of the
Lender claiming entitlement to such indemnity, addressed to
Borrower, setting forth the nature of the occurrence giving rise to
such amount of such loss or expense, the claim for indemnity
hereunder, and the method by which the amount of such claim was
determined, shall accompany each demand for indemnity hereunder.
(3) Capital Adequacy. If after the Closing Date, Lender
determines, in good faith, that (a) the adoption of any Applicable
Law regarding capital requirements for banks or bank holding
companies or the subsidiaries thereof, (b) any change in the
interpretation or administration of any such law, rule or
regulation by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or (c) compliance by Lender or its holding company with
any request or directive of any such governmental authority,
central bank or comparable agency regarding capital adequacy
(whether or not having the force of law), has the effect of
reducing the return on Lender's capital to a level below that which
Lender could have achieved (taking into consideration Lender's and
its holding company's policies with respect to capital adequacy
immediately before such adoption, change or compliance and assuming
that Lender's capital was fully utilized prior to such adoption,
change or compliance) but for such adoption, change or compliance
as a consequence of Lender' s commitment to make the Loans pursuant
hereto by any amount deemed by Lender to be material: (i) Lender
is promptly, after Lender's determination of such occurrence, to
give notice thereof to Borrower, and (ii) Borrower is to pay to
Lender as an additional fee from time to time, on demand, such
amount as Lender certifies to be the amount that will compensate
Lender for such reduction. A certificate of Lender claiming
entitlement to such compensation, setting forth the nature of the
occurrence giving rise to such compensation, the additional amount
or amounts to be paid to Lender, and the method by which such
amounts were determined will be conclusive in the absence of
manifest error. In determining such amount, Lender may use any
reasonable averaging and attribution method.
3.2. Payments and Collections.
(1) Manner and Time of Payment. All payments of the
Obligations made by Borrower pursuant hereto, whether voluntary or
mandatory, shall be made without deduction, defense, set-off or
counterclaim and in same day funds delivered to Lender by wire
transfer to Lender, referencing, where applicable, the Eligible
Supply Contract in respect of which the Loans being repaid arose
and the corresponding Lender's Account to which such payments are
to be deposited. In order to cause timely payment to be made to
Lender of all Obligations as and when due, Borrower hereby autho-
rizes and directs Lender, at Lender's option, to debit the Loan
Account (by increasing the principal balance of the Revolving Loans
then outstanding) for any amounts of principal, accrued interest,
fees, charges or expenses at any time owing hereunder or under any
Loan Documents as and when such Obligations become due; it being
understood that, in such connection, in the absence of contrary
direction from Borrower, Lender shall have the right to allocate
the Revolver Loans arising therefrom to any one or more or all of
the Eligible Supply Contracts, at Lender's discretion (even if, in
doing so, an Overadvance is created).
(2) Dominion Accounts. In addition to payments of the
Obligations made (or deemed made) by Borrower pursuant to
subsection (A) hereinabove, Borrower shall also be obliged to
establish a Dominion Account for each Eligible Supply Contract into
which all Proceeds of Accounts and Inventory in respect of each
Eligible Supply Contract shall be deposited as and when received by
Borrower. Each such Dominion Account shall be opened with
Tennessee Bank or, subject to Lender's approval, a bank selected by
Borrower, but satisfactory to Lender, which bank shall agree to a
Bank Agency Agreement. Collected funds deposited to each Dominion
Account opened in respect of an Eligible Supply Contract shall be
disbursed therefrom on a daily basis, first, to the corresponding
Lender's Account, thereupon to be applied in payment of that
portion (if any) of the corresponding Revolver Loan then
outstanding which exceeds the then reported Inventory Component of
the Borrowing Base derived from such Eligible Supply Contract, and,
next, as to any balance remaining, to the Controlled Disbursement
Account (unless Borrower otherwise directs Lender to apply such
proceeds, instead, to the Obligations in accordance with subsection
(A) above); provided, however, that, notwithstanding the foregoing,
if (i) an Overadvance has occurred or would occur, but for the
direct application of a greater amount (or all) of such proceeds to
the Obligations, Lender may apply such proceeds accordingly to
reduce or avoid such Overadvance; or (ii) a Default or Event of
Default has occurred and is continuing, Lender may cause any
portion or all of such proceeds to be remitted directly to one or
more Lender's Accounts for application to the Obligations in the
manner specified in subsection (C) below. Borrower shall provide
Lender with copies of all bank statements which it receives
relative to each Dominion Account from any bank (other than from
Tennessee Bank) as soon as practicable but in any event within ten
(10) days from the date each such statement is received by
Borrower, and shall provide Lender with a reconciliation report
with respect to each such bank statement for each such account as
soon as practicable after Borrower's receipt of each such bank
statement but in any event within twenty (20) days from the date of
such receipt.
(3) Credit for Collections. All payments and other
collections received by Lender for application to outstanding
Obligations, whether pursuant to subsections (A) or (B) above, or
otherwise, shall be applied to outstanding Obligations on the
Business Day of receipt or deposit by Lender of same in immediately
available funds in a Lender's Account during regular banking hours
of Tennessee Bank, in accordance with subsection (F) below, with
such application to be made, first, to any expenses of Lender
incurred in effecting such collections; next, to any accrued inter-
est or fees which are then due and payable to Lender pursuant
hereto; next, to any other Obligations of Borrower which are then
due and payable; next, to any Revolving Loans then outstanding
(with any Revolving Loans then constituting Base Rate Loans deemed
paid first); it being understood that, in the absence of contrary
direction from Borrower, Lender shall have the right to allocate
such collections between or among Revolver Loans then outstanding,
at Lender's discretion (even if, in doing so, an Overadvance is
created); and, lastly, provided that no Event of Default has
occurred and is continuing, any remainder shall be remitted to Bor-
rower. If an Event of Default has occurred and is continuing,
without limiting any other rights and remedies of Lender hereunder,
Lender may apply any remainder to any other Obligations then out-
standing, regardless of whether then past due, or hold the same as
additional cash Collateral pending the due dates for payment of
such Obligations.
(4) Loan Account; Statements of Account. Lender shall
enter all Revolver Loans as debits to the Loan Account and shall
also record in the Loan Account all payment made by Borrower on
Revolver Loans and all proceeds of Collateral which are finally
paid to Lender, and may record therein, in accordance with
customary accounting practice, all charges and expenses properly
chargeable to Borrower hereunder. Lender will account to Borrower
monthly with a statement of Loans, charges and payments made
pursuant to this Agreement, and such account rendered by Lender is
to be deemed final, binding and conclusive upon Borrower unless
Lender is notified by Borrower in writing to the contrary within
thirty (30) days after the date each account is mailed to Borrower.
Such notice is only to be deemed an objection to those items
specifically objected to therein.
(5) Payments on Business Days. Whenever any payment to
be made hereunder, whether of principal, interest, fees or
otherwise, shall be stated to be due on a day that is not a Busi-
ness Day, the payment may be made on the next succeeding Business
Day and such extension of time shall be included in the computation
of the amount of interest or fees due hereunder.
(6) Timing of Receipt of Funds. All funds received for
application to the Obligations pursuant hereto shall be deemed re-
ceived pursuant hereto on the Business Day received if such funds
are received by Tennessee Bank for deposit in a Lender's Account by
2:00 p.m. CDT on such day; otherwise, such funds shall be deemed
received on the succeeding Business Day.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1. General Representations and Warranties. To induce Lender
to enter into this Agreement, and make Loans hereunder, Borrower
warrants and represents to Lender that:
(1) Organization. Each of Borrower and any Subsidiary
is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation, as
provided in the Corporate Information Schedule and has duly
qualified and is authorized to do business and is in good standing
as a foreign corporation in each other state or jurisdiction where
the character of its Properties or the nature of its activities
make such qualification necessary.
(2) Corporate Name. During the preceding seven (7)
years, neither Borrower nor any Subsidiary has been known as or
used any corporate, fictitious or trade names, and has had no
office, place of business or agent for service of process located
in any state or county, except as disclosed in the Corporate
Information Schedule.
(3) Corporate Authority. Borrower has the right and
power and is duly authorized and empowered to enter into, execute,
deliver and perform this Agreement and each of the other Loan
Documents to which it is a party. The execution, delivery and
performance of this Agreement and each such Loan Document have been
duly authorized by all necessary corporate action on the part of
Borrower and do not and will not (i) require any consent or
approval of the shareholders of Borrower; (ii) contravene
Borrower's articles of incorporation or bylaws; (iii) violate, or
cause Borrower to be in default under, any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to Borrower;
(iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease
or instrument to which Borrower is a party or by which it or its
Properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any Lien (other than Permitted Liens)
upon or with respect to any of the Properties now owned or
hereafter acquired by Borrower.
(4) Governmental Consents. The execution, delivery and
performance by Borrower of this Agreement and each Loan Document to
which it is a party, and the consummation of the transactions
contemplated therein do not and will not require any registration
with, consent or approval of, or notice to, or other action to,
with or by, any Governmental Authority except for any filings
required by federal or state securities laws (which filings, if
required, have been made) and filings required in connection with
the perfection of security interests granted pursuant to the Loan
Documents.
(5) Enforceability. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be,
a legal, valid and binding obligation of Borrower enforceable
against it in accordance with its terms, except to the extent that
such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights
generally or by principles of equity pertaining to the availability
of equitable remedies.
(6) Good Standing. Each of Borrower and any Subsidiary
has, and is in good standing with respect to, all governmental
consents, approvals, authorizations, permits, certificates,
inspections, and franchises necessary to continue to conduct its
business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it.
(7) Permits. Each of Borrower and any Subsidiary owns
or possesses all the patents, trademarks, service marks, trade
names, copyrights and licenses necessary for the present and
planned future conduct of its business, all of which are listed in
the Intellectual Property Schedule attached hereto and made a part
hereof, without any known conflict with the rights of others.
(8) Capital Stock. Owner owns and controls, and has
good title to, all of the shares of the Voting Stock of Borrower,
free and clear of any Liens other than Permitted Liens. Borrower
owns and controls, and has good title to, all of the shares of the
Voting Stock of each Subsidiary, if any, free and clear in each
case of any Lien other than Permitted Liens. All such shares of
Voting Stock owned by Borrower have been duly issued and are fully
paid and non-assessable. Other than as set forth in the Corporate
Information Schedule, there are not outstanding any options to
purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, or any Securities or
obligations convertible into, or any powers of attorney relating
to, shares of the capital stock of Borrower or any Subsidiary, or
any agreements or instruments binding upon Borrower or Owner
relating to the ownership of its shares of any such capital stock.
(9) Solvency. Borrower is now and, after giving effect
to all Loans to be made hereunder, at all times will be, Solvent.
(10) No Restrictions. Borrower is not a party or subject
to any contract or agreement or charter or other corporate
restriction, that restricts its right or ability to incur
Indebtedness. Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or
otherwise) any of its Property, whether now owned or hereafter
acquired, to be subject to a Lien that is not a Permitted Lien.
(11) No Lawsuits. Except as set forth in the Financial
and Contingency Schedule, there are no actions, suits, proceedings
or investigations pending, or to the knowledge of Borrower,
threatened, against or affecting Owner, Borrower or any of their
respective Subsidiaries, or the business, operations, Properties,
prospects, profits or condition of Borrower or any of such
Subsidiaries, in any court or before any Governmental Authority,
and no action, suit, proceeding or investigation shown in the
Financial and Contingency Schedule will have a Material Adverse
Effect. Neither Borrower nor any of its Subsidiaries is in default
with respect to any order, writ, injunction, judgement, decree or
rule of any Governmental Authority.
(12) Title. Each of Borrower and any Subsidiary has
good, indefeasible and marketable title to and fee simple ownership
of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of its other Property, in each
case, free and clear of all Liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights
and the like), except Permitted Liens.
(13) Financial Statements. The Financial Statements have
been prepared in accordance with GAAP and present fairly the
financial position and the results of operations reflected in the
Financial Statements. Since the date of the Financial Statements,
there has been no material change in the condition, financial or
otherwise, of Borrower or any of its Subsidiaries except changes in
the ordinary course of business, none of which individually or in
the aggregate has been materially adverse. The Financial
Statements, this Agreement or any other written statement of
Borrower to Lender (including, without limitation, those statements
contained in filings, if any, with the Securities and Exchange
Commission) do not contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact which Borrower
has failed to disclose to Lender in writing which has had, or
foreseeably will have, a Material Adverse Effect, other than facts
which are generally available to the public and not particular to
Borrower, such as general economic and industry trends. The Fiscal
Year of Borrower ends as provided in the Financial and Contingency
Schedule.
(14) Tax Returns. Each of Borrower and any Subsidiary
has filed all federal, state and local tax returns and other
reports it is required by Applicable Law to file and has paid, or
made provision for the payment of, all Charges that are due and
payable, excepting any which are being Properly Contested. The
provision for taxes on the books of Borrower and its Subsidiaries
are adequate for all years not closed by applicable statutes, and
for its current fiscal year.
(15) Material Agreements. Except as may be disclosed in
the Material Agreement Schedule, neither Borrower nor any of its
Subsidiaries is a party to any collective bargaining agreement.
There are no material grievances, disputes or controversies with
any union or any other organization of Borrower's employees, or
threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
(16) Applicable Law. Each of Borrower and any Subsidiary
has duly complied with, and its Properties, business operations and
leaseholds are in compliance in all material respects with, the
provisions of all Applicable Law, and there have been no citations,
notices or orders of noncompliance issued to Borrower or any of its
Subsidiaries under any such Applicable Law.
(17) Not a Surety. Except as provided in the Financial
and Contingency Schedule, neither Borrower nor any Subsidiary is
obligated as surety or indemnitor under any surety or similar Bond
or other contract issued or entered into any agreement to assure
payment, performance or completion of performance of any
undertaking or obligation of any Person.
(18) No Default. No event has occurred and no condition
exists which would, upon the execution and delivery of this
Agreement or Borrower's performance hereunder, constitute a Default
or an Event of Default. Neither Borrower nor any of its
Subsidiaries is in default, and no event has occurred and no
condition exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute, a default in
the payment of any Indebtedness to any Person.
(19) Brokers. Except as provided in the Financial and
Contingency Schedule, there are no claims for brokerage
commissions, finder's fees or investment banking fees in connection
with the transactions contemplated by this Agreement.
(20) No Threatened Termination. There exists no actual
or threatened termination, cancellation or limitation of, or any
material modification or change in, the business relationship
between Borrower and any material supplier or any customer or group
of customers whose purchases individually or in the aggregate are
material to the business of Borrower, and no present condition or
state of facts or circumstances will, after the consummation of the
transaction contemplated herein, have a Material Adverse Effect or
prevent Borrower from conducting such business in substantially the
same manner in which it has heretofore been conducted.
(21) Locations. The Location and Real Property Schedule
includes a complete listing of all Collateral Locations, Capital
Leases and all operating leases of Borrower.
(22) Insurance. The Insurance Schedule sets forth a
complete and accurate description of all policies of insurance in
effect as of the Closing Date for Borrower. Borrower is adequately
insured under such policies, no notice of cancellation has been
received with respect to any of such policies. Borrower and its
Subsidiaries are in compliance with all conditions contained in
such policies.
(23) Bank Accounts. The Financial and Contingency
Schedule sets forth the account numbers and location of all bank
accounts of Borrower as of the Closing Date.
(24) Employee Benefit Plans. The Employee Benefits
Schedule sets forth all retirement, pension, profit-sharing,
401(K), deferred compensation, health, disability and other
employee benefit programs in existence on the Closing Date.
4.2. Reaffirmation. Each request for a Loan made by Borrower
pursuant to this Agreement or any of the other Loan Documents shall
constitute (i) an automatic representation and warranty by Borrower
to Lender that there does not then exist any Default or Event of
Default and (ii) a reaffirmation as of the date of said request
that all of the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true
in all material respects, except for any changes disclosed pursuant
to Section 5.1(N).
4.3. Survival of Representations and Warranties. Borrower
covenants, warrants and represents to Lender that all
representations and warranties of Borrower contained in this
Agreement, or in any of the other Loan Documents shall be true at
the time of Borrower's execution thereof, and shall survive the
execution, delivery and acceptance hereof and thereof, and the
closing of the transactions described herein or related hereto.
SECTION 5. COVENANTS AND CONTINUING AGREEMENTS
5.1. Affirmative Covenants. During the term of this
Agreement, and thereafter for so long as there are any Obligations
to Lender, Borrower shall (and shall cause each of its
Subsidiaries, as appropriate, to):
(1) Charges. Pay and discharge all Charges prior to the
date on which such Charges become delinquent or penalties attach
thereto, except and to the extent only that such Charges are being
Properly Contested and that, if such contest is abandoned or
determined adversely to Borrower, Borrower promptly pays all such
Charges and any penalties and interest payable in connection
therewith. Borrower shall pay and discharge any lawful claims
which, if unpaid, would become a Lien against any of Borrower's
Properties, except for Permitted Liens.
(2) Taxes. Timely file all federal, state and local tax
returns and other reports which Borrower or such Subsidiary is
required by Applicable Law to file and maintain adequate reserves
for the payment of all taxes, assessments, governmental charges,
and levies imposed upon it, its income, or its profits, or upon any
Property belonging to it.
(C) Transaction Costs. Pay to Lender, on demand, any
and all fees, costs or expenses which Lender or any Participating
Lender pays to a bank or other similar institution (including,
without limitation, any fees paid by the Lender to any
Participating Lender) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower,
by Lender or any Participating Lender, proceeds of loans made by
Lender to Borrower pursuant to this Agreement and (ii) the
depositing for collection, by Lender or any Participating Lender,
of any check or item of payment received or delivered to Lender or
any Participating Lender on account of the Obligations.
(3) Corporate Existence. Preserve and maintain its
separate corporate existence and all rights, privileges, and
franchises in connection therewith, and maintain its qualification
and good standing in all states in which such qualification is
necessary.
(4) Properties. Maintain its Properties in good
condition and repair, and make all necessary renewals, repairs,
replacements, additions and improvements thereto.
(5) Applicable Law. Comply with all Applicable Laws,
including, without limitation, all Environmental Laws, and obtain
and keep in force any and all licenses, permits, franchises, or
other governmental authorizations necessary to the ownership of its
Properties or to the conduct of its business which, if not complied
with, obtained or kept in force, individually or in the aggregate,
could be reasonably expected to have a Material Adverse Effect.
(6) Books and Records. Keep, and cause each Subsidiary
to keep, adequate records and books of account with respect to its
business activities in which proper entries are made in accordance
with GAAP reflecting all its financial transactions.
(7) Inspections. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, during
normal business hours, to visit and inspect the Properties of
Borrower, inspect and make extracts from its books and records, and
discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial
condition, business prospects and results of operations; provided
that any confidential information which Lender obtains in the
course of such visits, inspections, extractions and discussions
shall be maintained by Lender in the same manner, and to the same
extent, as Lender's own confidential information.
(8) Financial Statements. Cause to be prepared and
furnished to Lender the following (all to be kept and prepared in
accordance with GAAP applied on a consistent basis, unless
Borrower's certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent
with GAAP):
(1) as soon as possible, but not later than one
hundred twenty (120) days after the close of each Fiscal Year
of Borrower, unqualified audited Financial Statements of (A)
Borrower, separately, and (B) Owner and its Subsidiaries
(including Borrower) as of the end of such Fiscal Year, in
each case, on a consolidated and consolidating basis
(including Borrower), certified by a firm of independent
certified public accountants of recognized national standing
or otherwise acceptable to Lender (except for a qualification
for a change in accounting principles with which the
independent public accountant concurs); and, for purposes
hereof, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., which are Borrower's certified
public accountants on the Closing Date, are acceptable to
Lender;
(2) as soon as possible, but not later than thirty
(30) days after the end of each Fiscal Month hereafter,
unaudited interim Financial Statements of Borrower and its
Subsidiaries (if any) as of the end of such Fiscal Month and
as of that portion of Borrower's Fiscal Year then elapsed, on
a consolidated and consolidating basis, as appropriate
(including income statements on a per Supply Contract basis,
on which Non-Reimbursed Expenses shall be separately
classified), certified by an Authorized Officer of Borrower as
prepared in accordance with GAAP and fairly presenting the
consolidated financial position and results of operations of
Borrower and its Subsidiaries (if any) for such Fiscal Month
and Fiscal Year to date, subject only to changes from year-end
audit adjustments and except that such Financial Statements
need not contain footnotes;
(3) within thirty (30) days after then end of each
Fiscal Month, a Compliance Certificate, with appropriate
insertions, signed by Borrower's Authorized Officer;
(4) as soon as available and in any event no later
than thirty (30) days prior to the end of each Fiscal Year of
Borrower, month-by-month Projections of Borrower and its
Subsidiaries (if any) for the forthcoming Fiscal Year,
including income statements on a per Supply Contract basis;
(5) as soon as possible, but not later than forty-
five (45) days after the end of each Fiscal Quarter of Owner,
unaudited interim Financial Statements of Owner and its
Subsidiaries (including Borrower) as of the end of such Fiscal
Quarter and as of that portion of Owner's Fiscal Year then
elapsed, certified by an Authorized Officer of Owner as
prepared in accordance with GAAP and fairly presenting the
consolidated and consolidating financial position and results
of operations of Owner and its Subsidiaries for such Fiscal
Quarter and Fiscal Year to date, subject only to changes from
year-end audit adjustments, and except that such Financial
Statements need not contain footnotes.
(6) promptly after the sending or filing thereof,
as the case may be, copies of any proxy statements, financial
statements or reports which Borrower or Owner makes available
to its shareholders and copies of any 10-Q, 10-K or other,
similar reports and any registration statements which Borrower
or Owner files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor,
or any national securities exchange; and
(7) such other related data and information
(financial and otherwise) as Lender, from time to time, may
reasonably request.
Concurrently with the delivery of the financial statements
described in clause (i) of this Section, Borrower shall forward to
Lender a copy of the accountants' report to Borrower's and Owner's
management that is prepared in connection with such financial
statements and also shall cause to be prepared and furnished to
Lender a certificate of the aforesaid certified public accountants
certifying to Lender that, based upon their examination of the
financial statements of Borrower and any Subsidiaries, either
(i) they are not aware of any Default or Event of Default, or
(ii) specifying the nature of any Default or Event of Default.
Lender further shall be permitted to communicate from time to time
directly with such accountants in respect of any such Financial
Statements, report or certificate (whether issued or to be issued),
and the contents thereof.
(9) Collateral Reports. On the fifth (5th) Business Day
after each Fiscal Month end, or more frequently if requested or
accepted by Lender, deliver to Lender a Borrowing Base Certificate,
in form satisfactory to Lender, setting forth the full calculation
of Borrower's Borrowing Base on a per Eligible Supply Contract
basis, accompanied by a detailed schedule of all Inventory,
segregated by Collateral Location, and a Schedule of Accounts of
Borrower, as of the last Business Day of the preceding Fiscal
Month-end; in each case, also compiled on a per Eligible Supply
Contract basis. In addition, within five (5) Business Days after
the end of each Fiscal Month, Borrower will deliver to Lender an
open accounts payable listing and a report listing all new
Collateral Locations (including relocations) and all closed
Collateral Locations since the last such report.
(10) Physical Counts of Inventory. Conduct (or cause to
be conducted) daily cycle counts and an annual physical inventory
and test count of its Inventory (or more frequently, in each case,
from and after the occurrence of any Event of Default, and during
its continuance, at the direction of Lender). Borrower shall give
Lender reasonable advance notice (but not less than one calendar
week, however) of its intention to conduct each annual physical
inventory and test count, and permit Lender to attend and observe
such activity. In any event, Borrower shall provide Lender with
copies of each daily cycle count on a daily basis and annual physi-
cal count of Inventory. Each annual physical count shall be
accompanied by Borrower's report as to the book value of such In-
ventory and an analysis of the book value of such Inventory in
relation to the physical count thereof.
(11) Other Notices. Notify Lender in writing:
(i) promptly after Borrower's learning thereof, of the commencement
of any litigation affecting Borrower or any of its Properties, and
of the institution of any administrative proceeding which may have
a Material Adverse Effect; (ii) promptly after Borrower's learning
thereof, of any labor dispute to which Borrower may become a party,
any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is
a party or by which it is bound; (iii) promptly after the
occurrence thereof, of any Default or Event of Default;
(iv) promptly after Borrower's learning thereof, of any material
default by Borrower under any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating
to any Indebtedness of Borrower; (vii) promptly after the
occurrence thereof, of any default by any obligor under a note or
other evidence of Indebtedness payable to Borrower; and
(vii) promptly after the rendition thereof, of any judgment
rendered against Borrower or any of its Subsidiaries. Borrower
shall provide written notice to Lender of (1) all jurisdictions in
which Borrower or any Subsidiary becomes qualified after the
Closing Date to transact business, (2) any material change after
the Closing Date in the authorized and issued Capital Stock or
other equity interests of Borrower or any Subsidiary or any other
material amendment to their charter, by-laws or other organization
documents and (3) any Subsidiary created or acquired by Borrower or
any Subsidiary after the Closing Date, (presuming a consent is
obtained in respect thereof pursuant hereto), such notice, in each
case, to identify the applicable jurisdictions, capital structures
or Subsidiaries, as applicable.
(12) Debt Subordination Agreements. Provide Lender with
a debt subordination agreement, in form and substance satisfactory
to Lender, executed by Borrower and any Person who is an officer,
director or Affiliate of Borrower to whom Borrower is or hereafter
becomes indebted for Money Borrowed, subordinating in right of
payment and claim for all of such Indebtedness and any future
advance thereon to the full and final payment and performance of
the Obligations.
(13) Further Assurances. At Lender's request, promptly
execute or cause to be executed and deliver to Lender any and all
documents, instruments and agreements deemed necessary by Lender to
give effect to or carry out the terms or intent of this Agreement
or any of the other Loan Documents.
(14) Supplemented Schedules. As soon as practicable
after Borrower becomes aware thereof, but in any event concurrently
with delivery by Borrower of the monthly financial statements
required to be delivered by Section 5.1(H)(ii), supplement in writ-
ing and deliver to Lender revisions of the Schedules, to the extent
necessary to disclose new or changed facts or circumstances oc-
curring within any Fiscal Month after the Closing Date in respect
of any material data set forth in, or which are the subject of, any
such Schedules; provided that subsequent disclosures shall not
constitute a cure or waiver of any Default or Event of Default
resulting from the matters disclosed therein.
(15) Insurance. In addition to the insurance required
herein with respect to the Collateral, maintain, with financially
sound and reputable insurers, insurance with respect to its
Properties and business against such casualties and contingencies
of such type (including product liability insurance) and in such
amounts as is customary in the business or as otherwise reasonably
required by Lender.
5.2. Negative Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations owing to
Lender, Borrower shall not (and shall not permit any Subsidiary
to):
(1) Merger. Merge or consolidate with any Person; or
acquire all or any substantial part of the Properties of any
Person.
(2) Loans. Make any loans or other advances of money
(other than for salary, travel advances, advances against
commissions and other similar advances in the ordinary course of
business) to any Person, including, any Affiliates, officers or
employees.
(3) Indebtedness. Create, incur, assume, or suffer to
exist, any Indebtedness, except Permitted Indebtedness, or any
Contingent Obligation, except by endorsement of instruments or
items of payment for deposit or collection in the ordinary course
of its business.
(4) Affiliates. Enter into, or be a party to any
transaction with any Affiliate or stockholder, officer or employee,
except in the ordinary course of and pursuant to the reasonable
requirements of its business and upon fair and reasonable terms
which are fully disclosed to Lender and are no less favorable than
would obtain in a comparable arm's length transaction with a Person
not an Affiliate or stockholder, officer or employee of Borrower or
such Subsidiary.
(5) Partnerships. Become or agree to become a general
or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
(6) Material Contracts. Enter into any transaction
which materially and adversely affects or may materially and
adversely affect the Collateral or Borrower's ability to repay the
Obligations or permit or agree to any material extension,
compromise or settlement or make any change or modification of any
kind or nature with respect to any Account, including any of the
terms relating thereto, other than discounts and allowances in the
ordinary course of business, all of which is to be reflected in the
Schedules of Accounts submitted to Lender as required herein.
(7) Liens. Create or suffer to exist any Lien upon any
of its Property, income or profits, whether now owned or hereafter
acquired, except Permitted Liens.
(8) Subordinated Debt. Make any payment (whether of
principal, interest, premium or otherwise) on any Subordinated Debt
unless and except to the extent, if any, expressly permitted by the
terms of subordination governing such Subordinated Debt; or, in any
event, make any prepayment of any part or all of any Subordinated
Debt, or otherwise repurchase, redeem or retire any instrument
evidencing any such Subordinated Debt prior to maturity; or enter
into any agreement which could in any way be construed to amend,
modify, alter or terminate any one or more instruments or
agreements evidencing or relating to any Subordinated Debt.
(9) Distributions. Declare or make any Distributions;
provided, however, that so long as no Default or Event of Default
has occurred or otherwise would be caused thereby, Borrower may
make cash Distributions to Owner of (i) up to Two Hundred Seventy-
Five Thousand Dollars ($275,000), in the aggregate, in each Fiscal
Year, in respect of management fees, and (ii) payments on
Subordinated Debt, if and to the extent then expressly permitted to
be made by the terms of subordination governing such Subordinated
Debt.
(10) Subsidiaries. Create any Subsidiary or divest
itself of any assets by transferring them to any Subsidiary.
(11) Place of Business. Transfer its principal place of
business or chief executive office, or open new manufacturing
plants, or transfer existing manufacturing plants, to any locations
other than those at which the same are presently kept or
maintained, as set forth on the Location and Real Property
Schedule, except upon at least sixty (60) days prior written notice
to Lender and after the delivery to Lender of financing statements,
if required by Lender, in form satisfactory to Lender to perfect or
continue the perfection of Lender's Lien and security interest
hereunder.
(12) Business Purposes. Enter into any new business or
make any material change in any of Borrower's or any Subsidiary's
business objectives, purposes and operations.
(13) Sale of Assets. Sell, lease or otherwise dispose of
any of its Properties, including any disposition of Property as
part of a sale and leaseback transaction, to or in favor of any
Person, except (i) sales of Inventory in the ordinary course of
business for so long as no Event of Default exists hereunder,
(ii) a transfer of Property to Borrower by a Subsidiary or
(iii) any other dispositions expressly authorized by this
Agreement; provided, however, that the foregoing restriction is not
to apply, for so long as no Default or Event of Default exists, to
(i) dispositions of Equipment which, in the aggregate during any
consecutive twelve-month period, has a fair market value or book
value, whichever is more, of Ten Thousand Dollars ($10,000) or
less, provided that all Net Proceeds thereof are remitted to Lender
for application to the Obligations, (ii) dispositions of obsolete
Equipment, provided that all Net Proceeds are remitted to Lender
for application to the Obligations, or (iii) replacements of
Equipment that is substantially worn or damaged with Equipment of
like kind, function and value, provided that the replacement
Equipment shall be acquired prior to or concurrently with any
disposition of the Equipment that is to be replaced and the
replacement Equipment is to be free and clear of Liens (except for
Permitted Liens that are not Purchase Money Liens), Borrower shall
give Lender at least five (5) Business Days prior written notice of
such disposition and Borrower shall turn over to Lender all Net
Proceeds realized from any such disposition.
(14) Corporate Name. Use any corporate name (other than
its own) or any fictitious name, trade style or "d/b/a" except for
any names disclosed on the Corporate Information Schedule.
(15) Margin Security. Own, purchase or acquire (or enter
into any contract to purchase or acquire) any "margin security" as
defined by any regulation of the Board of Governors as now in
effect or as the same may hereafter be in effect unless, prior to
any such purchase or acquisition or entering into any such
contract, Lender is to have received an opinion of counsel
satisfactory to Lender to the effect that such purchase or
acquisition will not cause the Agreement to violate Regulations G
or U or any other regulation of the Board of Governors then in
effect.
(16) Restricted Investment. Make or have any Restricted
Investment.
(17) Bank Accounts; Commingling. Establish any deposit
accounts for the deposit of any Proceeds of Collateral not
expressly contemplated herein or commingle any funds not
constituting Proceeds of Collateral in any deposit account
established pursuant hereto for the depositing of Proceeds of
Collateral.
(18) Fiscal Year. Change its Fiscal Year, or permit any
Subsidiary to have a Fiscal Year different from that of Borrower.
(19) Capital Stock. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary, or permit any Subsidiary
to issue any additional shares of its capital stock except
director's qualifying shares.
(20) Consolidated Tax Return. File or consent to the
filing of any consolidated income tax return with any Person other
than Owner or a Subsidiary.
5.3. Financial Covenants. During the term of this Agreement,
and thereafter for so long as there are any Obligations owing to
Lender, Borrower shall:
(1) Net Worth. Maintain a Net Worth of not less than
the amount shown below at all times during the period corresponding
thereto (measured monthly at the end of each Fiscal Month):
Period Amount
Closing Date through June 30, 1997 $1,150,000
July 1, 1997 through June 30, 1998 $1,400,000
From and after July 1, 1998 $1,700,000
(2) Debt Service Coverage. Maintain a Debt Service
Coverage of not less than the ratio shown below at all times during
the period corresponding thereto (measured monthly at the end of
each Fiscal Month):
Period Ratio
Closing Date through June 30, 1997 1.15:1
From and after July 1, 1997 1.20:1
(3) Capital Expenditures. Limit the aggregate amount of
all Capital Expenditures (including without limitation, Capital
Leases) of Borrower to not more than Twenty-Five Thousand Dollars
($25,000) during any Fiscal Year of Borrower.
SECTION 6. COLLATERAL
6.1. Grant of Security Interest. To secure the prompt payment
and performance of the Obligations, Borrower hereby grants to
Lender a continuing security interest in, security title to and
Lien upon all the Collateral.
6.2. Representations, Warranties and Covenants -- Collateral
Generally. To induce Lender to enter into this Agreement, Borrower
represents and warrants to, and covenants with, Lender as follows:
(1) The Collateral is now and will continue to be owned
solely by Borrower. No other Person has or will have any right,
title, interest, claim, or Lien therein, thereon or thereto other
than a Permitted Lien.
(2) The Liens granted to Lender are to be first and
prior Liens on the Collateral. No further action need be taken to
perfect the Liens granted to Lender, other than the filing of
financing statements and continuation statements under the Code or
other Applicable Law, continued possession by Lender of that
portion of the Collateral constituting Instruments or Documents and
the processing of Lien notations on motor vehicle title
certificates.
(3) All goods evidenced by the Collateral constituting
Chattel Paper, Documents or Instruments, the possession of which
has been given to Lender, are owned by Borrower and the same are
free and clear of any prior Lien.
6.3. Lien Perfection. Borrower agrees to execute financing
statements provided for by the Code or other Applicable Law
together with any and all other instruments, assignments or
documents and is to take such other action as may be required to
perfect or to continue the perfection of Lender's security interest
in the Collateral, including, without limitation, the execution at
Lender's request of all documents deemed necessary by Lender to
cause Lender's Lien to be noted on any motor vehicle title
certificates for motor vehicles forming a part of the Collateral.
Unless prohibited by Applicable Law, Borrower hereby authorizes
Lender to execute and file any such financing statement on
Borrower's behalf. The parties agree that a carbon, photographic
or other reproduction of this Agreement is to be sufficient as a
financing statement and may be filed in any appropriate office in
lieu thereof.
6.4. Location of Collateral. All tangible Collateral, other
than Inventory in transit and motor vehicles and any Collateral in
possession of Lender, will at all times be kept by Borrower at one
or more of the Collateral Locations set forth in the Location and
Real Property Schedule and, unless otherwise approved by Lender,
shall not be moved therefrom except, prior to an Event of Default,
for (A) sales of Inventory in the ordinary course of business;
(B) the storage of Inventory at locations within the continental
United States other than those shown on the Location and Real
Property Schedule if (i) Borrower gives Lender written notice of
the new storage location at least sixty (60) days prior to storing
Inventory at such location, (ii) Lender's security interest in such
Inventory is and continues to be a duly perfected, first priority
Lien thereon, (iii) Borrower's right of entry upon the premises
where such Inventory is stored, or its right to remove the
Inventory therefrom, is not in any way restricted, (iv) the owner
of such premises executes a Lien Waiver and (v) all negotiable
documents and receipts in respect of any Collateral maintained at
such premises are promptly delivered to Lender; and (C) removals in
connection with dispositions of Equipment that are authorized
herein.
6.5. Insurance of Collateral. Borrower shall maintain and pay
for insurance upon all Collateral wherever located, in storage or
in transit in vehicles, including goods evidenced by documents,
covering casualty, hazard, public liability and such other risks
and in such amounts and with such insurance companies as is to be
reasonably satisfactory to Lender to insure Lender's interest in
the Collateral. Borrower is to deliver the originals of such
policies to Lender with satisfactory lender's loss payable
endorsements naming Lender loss payee. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give
not less than thirty (30) days prior written notice to Lender in
the event of cancellation of the policy for any reason whatsoever
and a clause that the interest of Lender is not to be impaired or
invalidated by any act or neglect of Borrower or owner of the
Property nor by the occupation of the premises for purposes more
hazardous than are permitted by said policy. If Borrower fails to
provide and pay for such insurance, Lender may, at Borrower's
expense, procure the same, but is not to be required to do so. In
addition to the insurance required herein with respect to the
Collateral, Borrower shall maintain, with financially sound and
reputable insurers, insurance with respect to its Properties and
business against such casualties and contingencies of such type
(including product liability, larceny, embezzlement, or other
criminal misappropriation insurance) and in such amounts as is
customary in the business or as otherwise shall be reasonably
required by Lender.
6.6. Protection of Collateral. All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping
Collateral (including, without limitation, all rent payable by
Borrower to any landlord of any premises where any of the
Collateral may be located), and any and all Charges are to be borne
and paid by Borrower. All sums paid or incurred by Lender in
enforcing or protecting its Lien on or rights and interest in the
Collateral or any of its rights or remedies under this or any other
agreement between the parties hereto or in respect of any of the
transactions to be had hereunder until paid by Borrower to Lender
with interest at the Default Rate, are to be considered
Obligations, secured by all Collateral and by any and all other
collateral, security, assets, reserves, or funds of Borrower in or
coming into the hands or inuring to the benefit of Lender. Lender
shall not be liable or responsible in any way for the safekeeping
of any of the Collateral or for any loss or damage thereto (except
for reasonable care in the custody thereof while any Collateral is
in Lender's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier,
forwarding agency, or other Person whomsoever, but the same shall
be at Borrower's sole risk.
6.7. Special Provisions Relating to Accounts.
(1) Representations, Warranties and Covenants. With
respect to all Accounts, Lender may rely, in determining which
Accounts are Eligible Accounts, on all statements and
representations made by Borrower or any Authorized Officer on its
behalf, whether hereunder or under any other Loan Document, with
respect to any Account or Accounts. With respect to each Account,
Borrower represents and warrants: (i) it is genuine and in all
respects what it purports to be, and it is not evidenced by a
judgment; (ii) it arose out of a completed, bona fide sale and
delivery of goods or rendition of services by Borrower in the
ordinary course of its business and in accordance with the terms
and conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between
Borrower and the Account Debtor; (iii) to Borrower's knowledge, the
Account Debtor thereunder had the capacity to contract at the time
any contract or other document giving rise to the Account was
executed, (iv) to Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor
thereunder which could reasonably be expected to result in any
material adverse change in such Account Debtor's financial
condition or the collectibility of such Account; (v) the Account is
for a liquidated amount maturing as stated in the duplicate invoice
covering such sale or rendition of services, a copy of which has
been furnished or is available to Lender; (vi) to Borrower's
knowledge, at the time of sale, such Account, and Lender's security
interest therein, was not subject to any offset, Lien, deduction,
defense, dispute, counterclaim or any other adverse condition
except for disputes resulting in returned goods where the amount in
controversy is deemed by Lender to be immaterial, and each such
Account is absolutely owing to Borrower and was not contingent in
any respect or for any reason, and there are no facts, events or
occurrences which in any way impair the validity or enforceability
thereof or tend to reduce the amount payable thereunder from the
face amount of the invoice and statements delivered to Lender with
respect thereto; and (vii) Borrower has made no agreement with any
Account Debtor for any deduction therefrom, except discounts or
allowances which are granted by Borrower in the ordinary course of
its business for prompt payment and which are reflected in the
calculation of the net amount of each respective invoice related
thereto.
(2) Administration of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and
collections thereon. Borrower shall promptly report any discounts,
allowances or credits, as the case may be, to Lender and in no
event later than the time of its submission to Lender of the next
Schedule of Accounts. Borrower shall provide Lender with written
notice of any amounts in excess of Fifty Thousand Dollars ($50,000)
in dispute between Borrower and an Account Debtor, explaining in
detail the reason for such dispute, all claims related thereto and
the specific amount in controversy. If an Account includes a
charge for any tax payable to any governmental taxing authority,
Lender may pay the amount thereof to the proper taxing authority
for the account of Borrower and charge the Loan Account therefor.
Borrower is to notify Lender if any Account includes any tax due to
any governmental taxing authority and, in the absence of such
notice, Lender is to have the right to retain the full proceeds of
the Account and is not to be liable for any taxes to any
governmental taxing authority that may be due by Borrower by reason
of the sale and delivery creating the Account. Any of Lender's
officers, employees or agents are to have the right, at any time,
in the name of Lender or any designee of Lender or Borrower, to
verify the validity, amount or any other matter relating to any
Accounts by mail, telephone or otherwise. Borrower is to cooperate
fully with Lender to facilitate any such verification process.
(3) Collection of Accounts. Borrower shall deposit all
proceeds of the Collateral, including, without limitation, all
remittances received by Borrower on account of Accounts, or cause
the same to be deposited in kind in a Dominion Account pursuant to
a Bank Agency Agreement. Borrower shall issue to any such bank, an
irrevocable letter of instruction directing such banks to deposit
all payments or other remittances received in the lockbox to the
Dominion Account for application on account of the Obligations.
All funds deposited in the Dominion Account are immediately to
become the property of Lender and Borrower shall obtain the
agreement by such banks to waive any offset rights against the
funds so deposited. Lender assumes no responsibility for such
lockbox arrangement, including, without limitation, any claim of
accord and satisfaction or release with respect to deposits
accepted by any bank thereunder.
(4) Governmental Accounts. If any of the Accounts, the
face value of which exceeds One Thousand Dollars ($1,000), arises
out of a contract with the United States of America, or any
department, agency, subdivision or instrumentality thereof,
Borrower shall promptly notify Lender thereof in writing and is to
execute any instruments and take any other action required or
requested by Lender to comply with the provisions of the Federal
Assignment of Claims Act or any other Applicable Law.
6.8. Special Provisions Relating to Inventory.
(1) Representations, Warranties and Covenants. With
respect to Inventory, Borrower represents and warrants to Lender
that Lender may rely on all statements and representations made by
Borrower or any Authorized Officer on its behalf, whether hereunder
or under any other Loan Document, with respect to any Inventory and
that: (i) all Inventory is presently and will continue to be
located at Borrower's places of business listed in the Location and
Real Property Schedule and will not be removed therefrom except as
authorized by this Agreement; and (ii) no Inventory is or will be
produced in violation of the Fair Labor Standards Act or any other
Applicable Law.
(2) Returns of Inventory. If at any time or times
hereafter any Account Debtor returns any Inventory to Borrower the
shipment of which generated a then Eligible Account obligating such
Account Debtor in excess of Fifty Thousand Dollars ($50,000),
Borrower shall notify Lender of the same immediately, specifying
the reason for such return and the location and condition of the
returned Inventory.
6.9. Special Provisions Relating to Supply Contracts. With
respect to the Supply Contracts, Borrower represents, warrants and
covenants to and with Lender that: (i) the Supply Contracts listed
on the Supply Contracts Schedule are the only Supply Contracts
existing on the Closing Date; (ii) true, correct and complete
copies of such existing Supply Contracts (including any
supplements, additions, modifications and amendments thereto) are
attached to the Supply Contracts Schedule; (iii) any Supply
Contracts which Borrower proposes to enter into subsequent to the
Closing Date and be considered as Eligible Supply Contracts
hereunder shall be submitted to Lender for its review and prior
approval of all terms thereof, including particularly all terms
relating to Lender's rights therein and compliance with all terms
of this Agreement relevant thereto; (iv) promptly upon their
receipt or delivery by Borrower, Borrower shall deliver to Lender
copies of any notices concerning any Eligible Supply Contract
issued by either party thereto in respect of any actual or proposed
supplement, addition, modification, amendment, termination,
revocation, rescission or cancellation thereof, or of any portion
thereof; (v) Borrower shall not enter into, consent to or acquiesce
in, any supplement, addition, modification or amendment to any
Eligible Supply Contract (whether existing at or subsequent to the
Closing Date), or any waiver of any terms thereof, nor shall
Borrower institute, consent to, or acquiesce in, any termination,
revocation, rescission or cancellation of any such Eligible Supply
Contract, or portion thereof, except, in each case after its review
and prior approval by Lender.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES ON DEFAULT
7.1. Events of Default. The occurrence of any one or more of
the following conditions or events is to constitute an "Event of
Default," whatever the reason for such event or condition and
whether it be voluntary or involuntary, or within or without the
control of Borrower, any Guarantor or any Subsidiary, or be
effected by operation of law or pursuant to any order or judgment
of a court or otherwise:
(1) Non-Payment. Borrower fails to pay any of the
following Obligations, including, without limitation, any
installment of principal or interest owing on any Revolver Note on
the due date thereof (whether due at stated maturity, on demand,
upon acceleration or otherwise).
(2) Misrepresentation. Any warranty, representation, or
other statement made or furnished to Lender by or on behalf of
Borrower or any Guarantor or in any instrument, certificate or
financial statement furnished in compliance with or in reference to
this Agreement or any of the other Loan Documents proves to have
been false or misleading in any material respect when made or
furnished.
(3) Covenants. Borrower fails or neglect to perform,
keep or observe (i) any covenants to comply with Applicable Law or
furnish financial information as provided herein, or any of the
covenants set forth in Sections 5.2, 5.3 or Article 6 or (ii) any
other covenant contained in this Agreement (not dealt with
specifically elsewhere in this Section) and the breach of such
other covenant covered by this clause (ii) is not cured to Lender's
satisfaction within ten (10) days after the sooner to occur of
Borrower's receipt of notice of such breach from Lender or the date
on which such failure or neglect first becomes known to any officer
of Borrower.
(4) Loan Documents. Any event of default occurs under,
or default by Borrower in the performance or observance of any
term, condition or agreement contained in, any of the other Loan
Documents and such default continues beyond any applicable period
of grace.
(5) Cross-Default. Any default or event of default
occurs on the part of Borrower (including specifically, but without
limitation, due to non-payment) under any agreement, document or
instrument to which Borrower is a party or by which Borrower or any
of its Property is bound, creating or relating to any Indebtedness
(other than the Obligations) if the payment or maturity of such
Indebtedness is accelerated in consequence of such event of default
or demand for payment of such Indebtedness is made.
(6) Material Loss. There occurs any material loss,
theft, damage or destruction not fully covered by insurance, or any
sale, lease or encumbrance or any of the Collateral or the making
of any levy, seizure, or attachment thereof or thereon, except in
all cases as may be specifically permitted by other provisions of
this Agreement.
(7) Solvency. Borrower or any Guarantor ceases to be
Solvent or suffers the appointment of a receiver, trustee,
custodian or similar fiduciary, or makes an assignment for the
benefit of creditors, or any petition for an order for relief is
filed by or against Borrower or any Guarantor under the Bankruptcy
Code (if against Borrower or any Guarantor, the continuation of
such proceeding for more than sixty (60) days), or Borrower or any
Guarantor makes any offer of settlement, extension or composition
to their respective unsecured creditors generally, or any motion,
complaint or other pleading is filed in any bankruptcy case of any
Person other than Borrower and such motion, complaint or pleading
seeks the consolidation of Borrower's assets and liabilities with
the assets and liabilities of such Persons.
(8) Cessation of Business. Any Eligible Supply Contract
is terminated, cancelled, revoked or rescinded, in whole or in any
material part; a cessation of a substantial part of the business of
Borrower for a period which significantly affects Borrower's
capacity to continue its business on a profitable basis occurs; or
Borrower suffers the loss or revocation of any license or permit
now held or hereafter acquired by Borrower which is necessary to
the continued or lawful operation of its business; or Borrower is
enjoined, restrained or in any way prevented by court, governmental
or administrative order from conducting all or any material part of
its business affairs; or any material lease or agreement pursuant
to which Borrower leases, uses or occupies any Property necessary
to its continued compliance with the requirements of any Eligible
Supply Contract is canceled or terminated prior to the expiration
of its stated term; or all, any material part, of the Collateral is
taken through confiscation, condemnation or other, similar action
of Governmental Authority or the value of such Property is
materially impaired thereby.
(9) Change of Control. Either (i) the Owner shall cease
to own and control, beneficially and of record, all of the issued
and outstanding Voting Stock of Borrower; or (ii) fifty percent
(50%) or more of the Voting Stock of Owner is owned or controlled
by any Person (or group of Persons acting in concert) which is not
a shareholder of Owner on the Closing Date.
(10) Contest of Loan Documents. Borrower or any
Guarantor, or any Affiliate of either, challenges or contests in
any action, suit or proceeding the validity or enforceability of
this Agreement or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
(11) Guaranty. Any Guarantor revokes or attempts to
revoke the Guaranty Agreement signed by such Guarantor, or
repudiates such Guarantor's liability thereunder or becomes in
default under the terms thereof.
(12) Money Judgment. Any money judgment, writ of
attachment or similar process is entered or filed against Borrower
in the amount of One Hundred Thousand Dollars ($100,000) or more or
any of its Property which results in the creation or imposition of
any Lien that is not a Permitted Lien.
7.2. Acceleration of the Obligations. Upon the occurrence of
any Event of Default described in Section 7.1(G), all Obligations
shall automatically become immediately due and payable, without
presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other requirements of any kind, all of
which are hereby expressly waived by Borrower. Upon the occurrence
and during the continuance of any other Event of Default, Lender
may, by written notice to Borrower declare all or any portion of
the Loans and all or some of the other Obligations to be, and the
same shall forthwith become, immediately due and payable together
with accrued interest thereon.
7.3. Other Remedies. Upon or at any time after the occurrence
of an Event of Default, Lender may exercise from time to time the
following rights and remedies:
(1) Terminate. The right to terminate the Revolver
Facility without further notice to Borrower.
(2) Notify Account Debtors. The right to notify all
Persons in any way liable on any Accounts, Instruments or Chattel
Paper to make remittances to Lender of all sums due or to become
due thereon and to collect and enforce payment of all Accounts,
Instruments and Chattel Paper directly from the Persons liable
thereon, by legal proceedings or otherwise, and generally exercise
all of Borrower's rights and remedies with respect to the
collection of the Accounts.
(3) Repossession. The right (i) to take immediate
possession of the Inventory and Equipment, or alternatively to
require Borrower to assemble the Inventory and Equipment, at
Borrower's expense, and make it available to Lender at a place
designated by Lender that is reasonably convenient to both parties,
and (ii) to enter any of the premises of Borrower or wherever any
of the Inventory or Equipment is located, and to keep and store the
same on said premises until sold (and if said premises be the
Property of Borrower, Borrower agrees not to charge Lender for
storage thereof).
(4) Eligible Supply Contract. The right to exercise any
right or remedy accorded to Lender under any Eligible Supply
Contract, including the right to require that such contract be
terminated and that the customer of Borrower thereunder purchase
Inventory identified to said contract in connection therewith.
(5) Dispose of Collateral. With respect to any or all
of the Collateral, the right to sell or otherwise dispose of all or
any of such Collateral in its then condition, or after any further
manufacturing or processing thereof, at public or private sale or
sales, with such notice as may be required by applicable law, in
lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Ten (10) days written notice to
Borrower of any public or private sale or other disposition of any
such Collateral shall be reasonable notice thereof; provided,
however, that no notice of Lender's intended disposition of such
Collateral shall be required with respect to any portion of such
Collateral that is perishable, threatens to decline speedily in
value or is of a type customarily sold on a recognized market, nor
is any such notice to be required hereunder if not otherwise
required under Applicable Law. Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor,
and such sales may be adjourned from time to time in accordance
with Applicable Law. Lender shall have the right to sell, lease or
otherwise dispose of any such Collateral, or any part thereof, for
cash, credit or any combination thereof, and Lender may purchase
all or any part of any such Collateral at public or, if permitted
by applicable law, private sale and, in lieu of actual payment of
such purchase price, may set off the amount of such price against
the Obligations.
(6) Setoff. The right at any time or times, to the
fullest extent permitted by Applicable Law and without notice to
Borrower, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and
other Indebtedness at any time owing by Lender to or for the credit
or the account of Borrower or any Guarantor against any and all of
the Obligations, if and to the extent then due.
(7) Other Rights. All of the rights and remedies of a
secured party under the Code or under other Applicable Law and all
other legal and equitable rights to which Lender may be entitled.
7.4. License to Use. Lender is hereby further granted a
license or other right to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks and advertising matter, or any Property or
a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and Borrower's rights and
under all licenses and all franchise agreements are to inure to
Lender's benefit. The proceeds realized from the sale or other
disposition of any Collateral may be applied, after allowing two
(2) Business Days for collection, first to the costs, expenses and
attorneys' fees incurred by Lender in collecting the Obligations,
in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing,
advertising for sale, selling and delivering any of the Collateral;
secondly, to interest due upon any of the Obligations; and thirdly,
to the principal amount of the Obligations. If any deficiency
arises, Borrower and each Guarantor will remain jointly and
severally liable to Lender therefor.
7.5. Remedies Cumulative; No Waiver. All covenants,
conditions, provisions, warranties, guaranties, indemnities, and
other undertakings of Borrower contained in this Agreement and the
other Loan Documents, or in any other agreement between Lender and
Borrower, heretofore, concurrently, or hereafter entered into, are
to be deemed cumulative to and not in derogation or substitution of
any of the terms, covenants, conditions, or agreements of Borrower
herein contained.
SECTION 8. MISCELLANEOUS
8.1. Power of Attorney. Borrower hereby irrevocably
designates, makes, constitutes and appoints Lender (and all Persons
designated by Lender) as Borrower's true and lawful attorney (and
agent-in-fact) and Lender, or Lender's agent, may, without notice
to Borrower and in either Borrower's or Lender's name, but at the
cost and expense of Borrower:
(1) At any time, endorse Borrower's name on any checks,
Revolving Notes, acceptances, drafts, money orders or any other
evidence of payment or proceeds of Collateral which come into the
possession of Lender or under Lender's control; and
(2) At such time or times upon or after the occurrence
of, and during the continuation of, any Event of Default:
(i) settle, adjust, compromise, discharge or release any of the
Accounts or other Collateral or any legal proceedings brought to
collect any of the Accounts or other Collateral; (ii) sell or
assign any of the Accounts and other Collateral upon such terms,
for such amounts and at such time or times as Lender deems
advisable; (iii) take control, in any manner, of any item of
payment or proceeds relating to any Collateral; (iv) prepare, file
and sign Borrower's name to a proof of claim in bankruptcy or
similar document against any Account Debtor or to any notice of
Lien, assignment or satisfaction of Lien or similar document in
connection with any of the Collateral; (v) receive, open and
dispose of all mail addressed to borrower and notify postal
authorities to change the address for delivery thereof to such
address as Lender may designate; (vi) endorse the name of Borrower
upon any of the items of payment or proceeds relating to any
Collateral and deposit the same to the account of Lender for
application to the obligations; (vii) endorse the name of Borrower
upon any chattel paper, document, instrument, invoice, freight
▇▇▇▇, ▇▇▇▇ of lading or similar document or agreement relating to
the Accounts, Inventory and any other Collateral; (viii) use
Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account
Debtors; (ix) use the information recorded on or contained in any
data processing equipment and computer hardware and software
relating to the Accounts, Inventory, Equipment and any other
Collateral and to which Borrower has access; (x) make and adjust
claims under policies of insurance; and (xi) do all other acts and
things necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement or any of the other Loan
Documents.
8.2. Indemnity. Borrower hereby indemnifies Lender and agrees
to hold Lender harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by
Lender as the result of Borrower's failure to observe, perform or
discharge Borrower's duties hereunder. Without limiting the
generality of the foregoing, this indemnity is to extend to any
claims asserted against Lender by any Person under any
Environmental Laws. Additionally, if any taxes (excluding taxes
imposed upon or measured by the net income of Lender, but
including, without limitation, any intangibles tax, stamp tax,
recording tax or franchise tax) are payable by Lender, Borrower or
any Guarantor on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any
of the other Loan Documents, or the creation of any of the
Obligations hereunder, by reason of any existing or hereafter
enacted federal, state, foreign or local statute, rule or
regulation, Borrower will pay (or will promptly reimburse Lender
for the payment of) all such taxes, including, but not limited to,
any interest and penalties thereon, and will indemnify and hold
Lender harmless from and against liability in connection therewith.
Notwithstanding any contrary provision of this Agreement, any
obligation of Borrower under this Agreement to indemnify Lender for
any expense or liability incurred by Lender (i) shall survive the
payment in full of the Obligations and the termination of this
Agreement; and (ii) shall not extend to or include any such expense
or liability incurred by Lender as a direct result of its gross
negligence or wilful misconduct.
8.3. Modification of Agreement; Sale of Interest. This
Agreement may not be modified, altered or amended, except by an
agreement in writing signed by Borrower and Lender. Borrower may
not sell, assign or transfer any interest in this Agreement or any
of the other Loan Documents, or any portion thereof, including
Borrower's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. Lender shall have the right to sell,
assign, transfer or otherwise dispose of its right, title,
interests. remedies, powers and duties hereunder and under any
other Loan Documents, or to sell participation interests therein,
at any time or from time to time, without first giving notice to,
or obtaining the prior written consent of, Borrower, so long as (i)
Lender retains at least a majority in interest in the rights,
titles, interests, remedies, power and duties so conveyed, (ii) the
Participating Lender is a Permitted Assignee (as hereinafter
defined) and (iii) upon receiving such sale, assignment or
participation, the Participating Lender becomes subject to the same
terms, covenants and conditions as to which Lender is then subject
hereunder, to the extent of sale, assignment or participation. As
used herein, the term "Eligible Assignee" shall mean: (i) North
Carolina Bank, Tennessee Bank or any other affiliate of Lender;
(ii) any national bank or state-chartered bank domiciled in the
United States of America, or any affiliate thereof, having total
assets of at least $1,000,000,000; or (iii) any other Person(s) to
which Borrower shall have consented in writing at any time. In the
event of any such participation, sale, assignment, transfer or
other disposition, Lender is authorized to provide to each
Participating Lender, assignee or transferee all information in
Lender's possession regarding Borrower and the Collateral. In the
case of any such assignment, the Person receiving such assignment,
shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were an original Lender
hereunder, and Lender shall be relieved of its obligations
hereunder with respect to its assigned portion thereof. Borrower
hereby acknowledges and agrees that any such assignment will give
rise to a direct obligation of Borrower to the Person receiving
such assignment and that such Person, upon such assignment becoming
effective, shall be considered to be a "Lender" or the "Lender" for
all purposes of this Agreement and the Loan Documents.
8.4. Reimbursement of Expenses. If, at any time or times
prior or subsequent to the date hereof, regardless of whether or
not an Event of Default then exists or any of the transactions
contemplated hereunder are concluded, Lender employs counsel for
advice or other representation, or incurs legal expenses or other
costs or out-of-pocket expenses in connection with: (A) the
negotiation and preparation of this Agreement or any of the other
Loan Documents or any amendment of or modification of this
Agreement or any of the other Loan Documents; (B) the
administration of this Agreement or any of the other Loan Documents
and the transactions contemplated hereby and thereby; (C) periodic
audits and appraisals performed by Lender; (D) any litigation,
contest, dispute, suit, proceeding or action (whether instituted by
Lender, Borrower or any other Person) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or
Borrower's affairs; (E) any attempt to enforce any rights or
remedies of Lender or any Participating Lender against Borrower or
any other Person which may be obligated to Lender by virtue of this
Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (F) any attempt to inspect,
verify, protect, preserve, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Collateral; then, in any
such event, the attorneys' fees arising from such services and all
expenses, costs, charges and other fees of such counsel or of
Lender or relating to any of the events or actions described in
this Section are to be payable, on demand, by Borrower to Lender or
to such Participating Lender, as the case may be and are to be
additional obligations hereunder secured by the Collateral.
Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include accountants' fees, costs and
expenses; costs and expenses incurred by Lender's loan
administration staff, audit staff and appraisal staff; court
reporter fees, costs and expenses; photocopying and duplicating
expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram charges;
secretarial over-time charges; and expenses for travel, lodging and
food paid or incurred in connection with the performance of such
legal services. Borrower acknowledges and agrees that legal
counsel to Lender does not represent Borrower as Borrower's
attorney, that Borrower has retained counsel of its own choice and
has not and will not rely upon any advice from Lender's counsel and
that Borrower's reimbursement of expenses pursuant to this
Agreement (even if effected by payment directly by Borrower to
Lender's counsel) shall not be deemed to establish an
attorney-client relationship between Borrower and Lender's counsel.
8.5. Indulgences Not Waivers. Lender's failure, at any time
or times hereafter, to require strict performance by Borrower of
any provision of this Agreement is not to waive, affect or diminish
any right of Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Lender of an
Event of Default by Borrower under this Agreement or any of the
other Loan Documents is not to suspend, waive or affect any other
Event of Default by Borrower under this Agreement or any of the
other Loan Documents, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of
the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of
the other Loan Documents and no Event of Default by Borrower under
this Agreement or any of the other Loan Documents are to be deemed
to have been suspended or waived by Lender, unless such suspension
or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of
Lender and directed to Borrower. Lender may, by written notice to
Borrower, at any time and from time to time, waive any Default or
any Event of Default and its consequences, but any such waivers are
to be for such period and subject to such conditions as are to be
specified in any such notice. In the case of any such waiver,
Borrower and Lender are to be restored to their former positions
and rights hereunder and under the other Loan Documents and any
Default or Event of Default so waived is to be deemed to be cured
and not continuing during the period specified in such written
notice. No such waiver is to extend to any subsequent or other
Default or Event of Default or impair any right or remedy
consequent thereon.
8.6. Severability. Wherever possible, each provision of this
Agreement is to be interpreted in such manner as to be effective
and valid under Applicable Law, but if any provision of this
Agreement is to be prohibited by or invalid under Applicable Law,
such provision is to be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
8.7. Successors and Assigns. This Agreement, the Other
Agreements and the Security Documents are to be binding upon and
inure to the benefit of the successors and assigns of Borrower and
Lender. This provision, however, is not to be deemed to permit
Borrower to sell, assign or transfer this Agreement or any of the
other Loan Documents.
8.8. Cumulative Effect. The provisions of the Other
Agreements and the Security Documents are cumulative with the
provisions of this Agreement.
8.9. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered are to be deemed to be an original and all of which
counterparts taken together are to constitute but one and the same
instrument. In proving this Agreement in any judicial proceeding,
it is not to be necessary to produce or account for more than one
such counterpart signed by the party against whom such enforcement
is sought.
8.10. Notices. Unless otherwise specifically provided
herein, any notice or other communication required or permitted to
be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied, telexed
or sent by overnight courier service or United States mail and
shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy or telex, on the date
of transmission if transmitted before 4:00 p.m. EDT on a Business
Day or, if not, on the next succeeding Business Day; (c) if de-
livered by overnight courier, two (2) Business Days after delivery
to such courier properly addressed; or (d) if by U.S. Mail, five
(5) Business Days after depositing in the United States mail, by
certified mail, return receipt requested, with postage prepaid and
properly addressed. Notices shall be addressed care of the
addresses of Borrower and Lender set forth below or to such other
address as the party addressed shall have previously designated by
written notice to the serving party, given in accordance with this
Section. A notice not given as provided above shall, if it is in
writing, be deemed given if and when actually received by the party
to whom given.
8.11. Lender's Consent. Whenever Lender's consent is
required to be obtained under this Agreement, any of the Other
Agreements or any of the Security Documents as a condition to any
action, inaction, condition or event, Lender is authorized to give
or withhold such consent in its sole and absolute discretion and to
condition its consent upon the giving of additional collateral
security for the Obligations, the payment of money or any other
manner.
8.12. Time of Essence. Time is of the essence in this
Agreement, the Other Agreements and the Security Documents.
8.13. Entire Agreement. This Agreement and the other Loan
Documents, together with all other instruments, agreements and
certificates executed by the parties in connection therewith or
with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to
the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or
implied, oral or written.
8.14. Interpretation. No provision of this Agreement or
any of the other Loan Documents is to be construed against or
interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such
provision.
8.15. Marshalling; Payments Set Aside. Lender shall be
under no obligation to ▇▇▇▇▇▇▇▇ any assets or securities in favor
of Borrower or any Guarantor or any other Person or against or in
payment of any or all of the obligations. To the extent that
Borrower makes a payment or payments to Lender, or Lender enforces
its security interest or exercises its rights or setoff, and such
payment or payments for the proceeds of such enforcement or setoff
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally
intended to be satisfied, and all Liens, rights and remedies
therefor, are to be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff
had not occurred.
8.16. Construction. Lender and Borrower acknowledge that
each of them has had the benefit of legal counsel of its own choice
and has been afforded an opportunity to review this Agreement and
the other Loan Documents with its legal counsel and that this
Agreement and the other Loan Documents shall be construed as if
jointly drafted by Lender and Borrower.
8.17. GOVERNING LAW. THIS AGREEMENT AND, UNLESS OTHERWISE
EXPRESSLY PROVIDED THEREIN, ALL OTHER LOAN DOCUMENTS, SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
8.18. WAIVER OF JURY TRIAL. IF AND TO THE EXTENT THEN
PERMITTED BY APPLICABLE LAW AT THE TIME OF THE COMMENCEMENT
THEREOF, BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION AND THE RELATIONSHIP THAT IS BEING ESTABLISHED HEREUN-
DER. BORROWER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF LENDER. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. BORROWER AND LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTER-
ING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS OR ANY LETTERS OF CREDIT. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
8.19. ARBITRATION AND PRESERVATION OF REMEDIES. WITHOUT
IN ANY WAY LIMITING ANY PROVISIONS OF THE FOREGOING SECTION 8.17,
UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER
INSTITUTION OF ANY JUDICIAL ACTION, ANY DISPUTE, CLAIM OR
CONTROVERSY ("DISPUTES") ARISING OUT OF OR CONNECTED WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS SHALL BE RESOLVED BY BINDING
ARBITRATION AS PROVIDED HEREIN. DISPUTES MAY INCLUDE, WITHOUT
LIMITATION, TORT CLAIMS, COUNTERCLAIMS, CLAIMS BROUGHT AS CLASS
ACTIONS, AND CLAIMS ARISING FROM LOAN DOCUMENTS EXECUTED IN THE
FUTURE. ARBITRATION SHALL BE CONDUCTED UNDER THE COMMERCIAL
FINANCIAL DISPUTES ARBITRATION RULES (THE "ARBITRATION RULES") OF
THE AMERICAN ARBITRATION ASSOCIATION AND TITLE 9 OF THE U.S. CODE.
ALL ARBITRATION HEARINGS SHALL BE CONDUCTED IN ATLANTA, GEORGIA OR
ANY PLACE AGREED TO IN WRITING BY THE PARTIES. THE EXPEDITED
PROCEDURES SET FORTH IN RULE 51 ET SEQ. OF THE ARBITRATION RULES
SHALL BE APPLICABLE TO CLAIMS OF LESS THAN ONE MILLION DOLLARS
($1,000,000). ALL APPLICABLE STATUTES OF LIMITATION SHALL APPLY TO
ANY DISPUTE. A JUDGMENT UPON THE AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. THE PANEL FROM WHICH ALL ARBITRATORS ARE
SELECTED SHALL BE COMPRISED OF LICENSED ATTORNEYS. THE SINGLE
ARBITRATOR SELECTED FOR EXPEDITED PROCEDURE SHALL BE A RETIRED
JUDGE FROM THE HIGHEST COURT OF GENERAL JURISDICTION, STATE OR
FEDERAL, OF THE STATE WHERE THE HEARING WILL BE CONDUCTED. THE
ARBITRATORS SHALL BE APPOINTED AS PROVIDED IN THE ARBITRATION
RULES. NOTWITHSTANDING THE PRECEDING BINDING ARBITRATION PRO-
VISION, EACH PARTY HERETO HEREBY PRESERVES CERTAIN REMEDIES THAT
ANY PARTY HERETO MAY EXERCISE FREELY, EITHER ALONE OR DURING A
DISPUTE. ANY PARTY HERETO SHALL HAVE THE RIGHT TO PROCEED IN ANY
COURT OF PROPER JURISDICTION OR BY SELF HELP TO EXERCISE OR PROS-
ECUTE THE FOLLOWING REMEDIES, AS APPLICABLE: (I) ALL RIGHTS TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY OR OTHER SECURITY
BY EXERCISING A POWER OF SALE GRANTED IN THE LOAN DOCUMENTS OR
UNDER APPLICABLE LAW, (II) ALL RIGHTS OF SELF HELP INCLUDING
PEACEFUL OCCUPATION OF REAL PROPERTY AND COLLECTION OF RENTS, SET-
OFF, AND PEACEFUL POSSESSION OF PERSONAL PROPERTY, AND (III)
OBTAINING PROVISIONAL OR ANCILLARY REMEDIES INCLUDING INJUNCTIVE
RELIEF, SEQUESTRATION, GARNISHMENT, ATTACHMENT AND APPOINTMENT OF
RECEIVER. PRESERVATION OF THESE REMEDIES DOES NOT LIMIT THE POWER
OF AN ARBITRATOR TO GRANT SIMILAR REMEDIES THAT MAY BE REQUESTED BY
A PARTY IN A DISPUTE. EACH PARTY HERETO AGREES THAT IT SHALL NOT
HAVE A REMEDY OF PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER IN
ANY DISPUTE AND HEREBY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR
EXEMPLARY DAMAGES THEY MAY HAVE NOW OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH ANY DISPUTE, WHETHER THE DISPUTE IS
RESOLVED BY ARBITRATION OR JUDICIALLY. NOTWITHSTANDING THE
FOREGOING, THIS ARBITRATION PROVISION DOES NOT APPLY TO DISPUTES
UNDER OR RELATED TO INTEREST RATE AGREEMENTS.
8.20. Publicity. Borrower authorizes Lender to publicize
and place "tombstone" advertisements with respect to the financing
arrangements set forth in this Agreement and the transactions
contemplated hereby, provided that, to the extent that Borrower's
identity or that of any customer of Borrower is being disclosed
therein, Lender first shall have reviewed such advertisements with
Borrower and obtained its prior written consent thereto.
8.21. Effectiveness. This Agreement and each Loan
Document shall become effective upon the execution of a counterpart
hereof and thereof by each of the parties hereto, and the delivery
thereof to Lender in Atlanta, Georgia.
8.22. Sole Benefit. The rights and benefits set forth
in this Agreement and in all the other Loan Documents are for the
sole and exclusive benefit of the parties hereto and thereto, and
may be relied upon only by such parties.
8.23. Certain Waivers by Borrower. To the fullest extent
permitted by Applicable Law, Borrower waives (i) presentment,
demand and protest and notice of presentment, protest, default,
nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights,
documents, instruments, chattel paper and guaranties at any time
held by Lender on which Borrower may in any way be liable and
hereby ratifies and confirms whatever Lender may do in this regard
(ii) notice prior to Lender's taking possession or control of any
of the Collateral or any bond or security which might be required
by any court prior to allowing Lender to exercise any of Lender's
remedies, including the issuance of an immediate writ of
possession; (iii) the benefit of all valuation, appraisement and
exemption laws; (iv) any right Borrower may have upon payment in
full of the obligations to require Lender to terminate its security
interest in the Collateral or in any other property of Borrower
until the execution by Borrower, and by any Person whose loans to
Borrower are used in whole or in part to satisfy the Obligations,
of an agreement indemnifying Lender from any loss or damage which
Lender may incur as the result of dishonored checks or other items
of payment received by Lender from Borrower or any Account Debtor
and applied to the Obligations; and (v) notice of Lender's
acceptance hereof.
8.24. Independence of Covenants. All covenants hereunder
shall be given in any jurisdiction independent effect so that if a
particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if
such action is taken or condition exists.
8.25. Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or
obligation under this Agreement, the Revolving Notes or other Loan
Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under
this Agreement, the Revolving Notes or other Loan Documents or of
such provision or obligation in any other jurisdiction.
8.26. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose
or be given any substantive effect.
8.27. No Fiduciary Relationship. No provision in this
Agreement or in any of the other Loan Documents and no course of
dealing between the parties shall be deemed to create any fiduciary
duty on the part of Lender to Borrower.
8.28. Limitation of Lender's Liability. Neither Lender
nor any Affiliate, officer, director, employee, attorney, or agent
of Lender shall have any liability with respect to, and Borrower
hereby waives, releases, and agrees not to ▇▇▇ any of them upon,
any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, aris-
ing out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by
this Agreement or any of the other Loan Documents.
8.29. No Duty. All attorneys, accountants, appraisers,
and other professional Persons and consultants retained by Lender
shall have the right to act exclusively in the interest of Lender
and shall have no duty of disclosure, duty of loyalty, duty of
care, or other duty or obligation of any type or nature whatsoever
to Borrower or any of Borrower's shareholders or to any other
Person.
8.30. Maximum Interest. Regardless of any provision
contained in this Agreement or any of the other Loan Documents, the
aggregate of all amounts that are contracted for, charged or
collected pursuant to the terms of this Agreement or any of the
other Loan Documents and that are deemed interest are not to exceed
the Maximum Rate under Applicable Law. No agreement, condition,
provision or stipulation contained in this Agreement or any of the
other Loan Documents or the exercise by Lender of any right or
option whatsoever contained therein, or the prepayment by Borrower
of any of the Obligations, or the occurrence of any contingency
whatsoever, is to entitle Lender to charge or receive or to
obligate Borrower to pay, interest or any charges, amounts,
premiums or fees deemed interest by Applicable Law (referred to
herein collectively as "Interest") in excess of the Maximum Rate.
Borrower acknowledges and stipulates that any Interest charged or
received in excess of the Maximum Rate ("Excess") is to be the
result of an accident and bona fide error and that, with
fluctuations in the rates of interest set forth in this Agreement
and the Maximum Rate, such an unintentional result could
inadvertently occur. To the extent received, any Excess shall be
applied first to reduce the principal Obligations and the balance,
if any, returned to Borrower, it being the intent of the parties
hereto not to enter into a usurious or otherwise illegal
relationship. The right to accelerate the maturity of any of the
Obligations does not include the right to accelerate any interest
that has not otherwise accrued on the date of such acceleration,
and Lender does not intend to collect any unearned interest in the
event of any such acceleration. The credit or return of any Excess
shall constitute the acceptance by Borrower of such Excess, and
Borrower is not to seek or pursue any other remedy, legal or
equitable, against Lender, based in whole or in part upon
contracting for, charging or receiving any Interest in excess of
the Maximum Rate. For purposes of determining whether or not any
Excess has been contracted for, charged or received by Lender, all
interest at any time contracted for, charged or received from
Borrower in connection with any of the Loan Documents, to the
extent permitted by Applicable Law, is to be amortized, prorated,
allocated and spread in equal parts throughout the full term of the
Obligations. Borrower and Lender, to the maximum extent permitted
under Applicable Law, will (i) characterize any non -principal
payment as an expense, fee or premium rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof. The
provisions of this Section are to be deemed to be incorporated into
every Loan Document, whether or not any provision of this Section
is specifically referred to therein.
SECTION 9. CONDITIONS PRECEDENT
The obligations of Lender to make Loans are subject to
satisfaction of all of the applicable conditions precedent set
forth below.
9.1. Conditions to Initial Loans. The obligations of Lender
to make the initial Loan is in addition to the conditions precedent
specified in Section 9.2, subject to the prior or concurrent sat-
isfaction of the conditions set forth below.
(1) Financial Statements. Borrower shall have delivered
to Lender (i) its (and the Owner's) audited Financial Statements
for the Fiscal Year ended June 30, 1996, (ii) the Owner's 10-K
report for the Fiscal Year ended June 30, 1996 and (iii) Borrower's
Projections, on a month-to-month basis, for its current Fiscal
Year, and Lender shall be satisfied in all respects therewith.
(2) Evidence of Perfection and Priority of Liens.
Lender shall have received copies of all filing receipts or
acknowledgments issued by any Governmental Authority to evidence
any filing or recordation necessary to perfect the Liens of Lender
in the Collateral and evidence in form satisfactory to Lender that
such Liens constitute valid and perfected first priority security
interests and Liens, and that there are no other Liens upon any
Collateral, except for Permitted Liens.
(3) No Labor Disputes. Lender shall have received
assurances satisfactory to it that there are no threats of strikes
or work stoppages by any employees, or organization of employees,
of Borrower.
(4) Compliance with Laws and Other Agreements. Lender
shall have determined or received assurances satisfactory to it
that none of the Loan Documents or any of the transactions
contemplated thereby violate any Applicable Law or agreement
binding upon any Obligor.
(5) No Material Adverse Change. No material adverse
change in the financial condition of Borrower or the quality or
value of any Collateral shall have occurred since the date of the
last audited financial statement of Borrower described in the
Financial and Contingency Schedule.
(6) Loan Documents. On or before the Closing Date,
Borrower shall have delivered, or caused to have been delivered, to
Lender the documents listed on the Closing Documents Schedule,
each, unless otherwise noted, dated the Closing Date, duly
executed, in form and substance satisfactory to Lender and in
quantities designated by Lender.
9.2. Conditions to All Loans. The obligations of Lender to
make any Loan on each Funding Date are subject to the further
conditions precedent set forth below.
(1) Notice of Borrowing. Lender shall have received, in
accordance with the provisions of subsection 2.1, a Notice of Bor-
rowing.
(2) Representations Still True. The representations and
warranties contained herein and in the Loan Documents shall be
true, correct and complete in all material respects on and as of
the funding date to the same extent as though made on and as of the
Closing Date, except for any representation or warranty limited by
its terms to a specific date and taking into account any updates to
the Schedules or Exhibits and any events which would cause any such
representations and warranties no longer to be true, correct or
complete, in each case as disclosed in writing by Borrower to
Lender after the Closing Date, and, if not consistent with the cov-
enants corresponding thereto, approved by Lender.
(3) No Suspension or Termination of Commitments. The
commitment(s) of Lender shall not have been suspended or terminated
pursuant to the operation of Section 7.2.
(4) No Restraining Order. Lender shall not have re-
ceived notice or knowledge of any pending or threatened order,
judgment or decree of any court, arbitrator or Governmental Au-
thority which purports to enjoin or restrain Lender from making any
Loans.
(5) Taxes. Borrower shall have paid, or reimbursed
Lender for the payment of, any intangible, recording or similar tax
imposed by any Governmental Authority in respect of the incurrence
of such indebtedness or the securing of the payment thereof, and
joined with Lender in filing any tax return, UCC financing
statement amendment or like document in respect of such tax.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the Closing Date.
"BORROWER"
TITAN SERVICES, INC.
By:________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President
Address: 815 USA Today Way
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: 615/890-2914
"LENDER"
FIRST UNION COMMERCIAL
CORPORATION
By:________________________________
Title:____________________________
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇