EXHIBIT 10.69
DEBTOR-IN-POSSESSION FINANCING AGREEMENT
The CIT Group/Business Credit, Inc.
(as Lender)
And
Uniroyal Technology Corporation
Uniroyal Engineered Products, LLC
Uniroyal Optoelectronics, Inc.
Sterling Semiconductor, Inc.
Uniroyal HPP Holdings, Inc.
UnitechNJ, Inc.
UnitechOH, Inc.
Uniroyal Compound Semiconductors, Inc.
UEP Holdings, Inc.
UNR Service Corporation
UnitechIND, Inc.
Uniroyal Liability Management Company, Inc.
High Performance Plastics, Inc.
ULMC2CORP
And
NorLux Corp.
(as Borrowers)
Dated: August 26, 2002
DEBTOR-IN-POSSESSION FINANCING AGREEMENT
THIS DEBTOR-IN-POSSESSION FINANCING AGREEMENT ("Financing Agreement"), dated as
of August 26, 2002, is by and among THE CIT GROUP/BUSINESS CREDIT, INC.
(hereinafter "CIT"), UNIROYAL TECHNOLOGY CORPORATION (herein "UTC"), UNIROYAL
ENGINEERED PRODUCTS, LLC (herein "UEP"), UNIROYAL OPTOELECTRONICS, INC. (herein
"UOE"), STERLING SEMICONDUCTOR, INC. (herein "Sterling") NORLUX CORP. (herein
"NorLux") UNIROYAL HPP HOLDINGS, INC., UNITECHNJ, INC., UNITECHOH, INC.,
UNIROYAL COMPOUND SEMICONDUCTORS, INC. UEP HOLDINGS, INC., UNR SERVICE
CORPORATION, UNITECHIND, INC., UNIROYAL LIABILITY MANAGEMENT COMPANY,
INC., HIGH PERFORMANCE PLASTICS, INC. AND ULMC2CORP (collectively, the
"Companies").
BACKGROUND
WHEREAS, on August 25, 2002, the Companies filed, with the
United States Bankruptcy Court for the District of Delaware, a voluntary
petition for relief under chapter 11 of title 11 of the United States Code
(collectively, the "Chapter 11 Cases"); and
WHEREAS, the Companies and CIT desire to set forth the terms
and conditions under which CIT will make available to the Companies certain
credit facilities to be used for the purposes specified in this Financing
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound,
the parties hereto agree as follows:
SECTIONSECTION 1. Definitions 1. Definitions
Accounts shall mean all of each of the Companies' now existing and future: (a)
accounts (as defined in the UCC), and any and all other receivables (whether or
not specifically listed on schedules furnished to CIT), including, without
limitation, all accounts created by, or arising from, all of each of the
Companies' sales, leases, rentals of goods or renditions of services to their
customers, including but not limited to, those accounts arising under any of the
Companies' trade names or styles, or through any of the Companies' divisions;
(b) any and all instruments, documents, chattel paper (including electronic
chattel paper) (all as defined in the UCC); (c) unpaid seller's or lessor's
rights (including rescission, replevin, reclamation, repossession and stoppage
in transit) relating to the foregoing or arising therefrom; (d) rights to any
goods represented by any of the foregoing, including rights to returned,
reclaimed or repossessed goods; (e) reserves and credit balances arising in
connection with or pursuant hereto; (f) guarantees, supporting obligations,
payment intangibles and letter of credit rights (all as defined in the UCC); (g)
insurance policies or rights relating to any of the foregoing; (h) general
intangibles pertaining to any and all of the foregoing (including all rights to
payment, including those arising in connection with bank and non-bank credit
cards), and including books and records and any electronic media and software
thereto; (i) notes, deposits or property of account debtors securing the
obligations of any such account debtors to the Companies or any one of them; and
(j) cash and non-cash proceeds (as defined in the UCC) of any and all of the
foregoing.
Administrative Management Fee shall mean the sum of $40,000 which shall be paid
to CIT in accordance with Section 8, paragraph 8.8 hereof to offset the expenses
and costs (excluding Out-of-Pocket Expenses and auditor fees) of CIT in
connection with administration, record keeping, analyzing and evaluating the
Collateral.
Availability shall mean, at any time of calculation, the amount by which: (a)
the Borrowing Companies' Borrowing Base exceeds (b) the outstanding aggregate
amount of all of the Obligations.
Availability Reserve shall mean, the sum of: (a) (i) three (3) months rental
payments or similar charges for any Borrowing Company's leased premises or other
Collateral locations for which such Borrowing Company has not delivered to CIT a
landlord's waiver in form and substance reasonably satisfactory to CIT
(provided, however, that there shall be no reserves under this subpart for
locations other than the Companies' Tampa, Florida, Augusta, Georgia and 201
West Jefferson Street, Stoughton, Wisconsin locations until thirty days after
the date of this Financing Agreement), plus (ii) three (3) months estimated
payments plus any other fees or charges owing by any Borrowing Company to any
applicable warehousemen or third party processor (as determined by CIT in its
reasonable business judgement), provided that any of the foregoing amounts shall
be adjusted from time to time hereafter upon (x) delivery to CIT of any such
acceptable waiver, (y) the opening or closing of a Collateral location, and/or
(z) any change in the amount of rental, storage or processor payments or similar
charges; (b) any reserve which CIT may reasonably require from time to time
pursuant to this Financing Agreement, including without limitation, for Letters
of Credit pursuant to Paragraph 5.1 of Section 5 hereof; (c) a carve-out reserve
in the amount equal to $550,000; (d) the Sterling Sale Reserve; (e) the then
outstanding amount of Pre-Petition Obligations and (f) such other reserves as
CIT deems necessary in its reasonable judgment as a result of (i) negative
forecasts and/or trends in any Company's business, industry, prospects, profits,
operations or financial condition, or (ii) other issues, circumstances or facts
that could otherwise negatively impact the Companies, or any one of them, their
business, prospects, profits, operations, industry, financial condition or
assets, including, but not limited to any environmental liability reserves.
Bankruptcy Cases shall mean the cases, pursuant to chapter 11 of the Bankruptcy
Code, initiated by the Companies in the United States Bankruptcy Court for the
District of Delaware, Docket Numbers: ).
Bankruptcy Code shall mean 11 U.S.C.ss.101 et. seq., as amended from time to
time.
Bankruptcy Court shall mean the United States Bankruptcy Court for the District
of Delaware
Borrowing Base shall mean the sum of (a) eighty five percent (85%) of the
Borrowing Companies' aggregate outstanding Eligible Domestic Accounts Receivable
provided dilution on such Accounts, calculated on a rolling 90-day average does
not exceed five percent (5%), plus (b) the lesser of (i) 70% of Eligible Foreign
Accounts Receivable, provided dilution on such Accounts, calculated on a rolling
90-day average does not exceed five percent (5%) or (ii) $1,000,000, plus (c)
the least of (i) fifty-five percent (55%) of the aggregate value of the
Borrowing Companies' Eligible Inventory, valued at the lower of cost or market,
on a first in, first out basis, (ii) eighty-five percent (85%) of the appraised
net orderly liquidation value recovery percentage of such Eligible Inventory or
(iii) the Inventory Loan Cap, plus (d) the lesser of (i) forty percent (40%) of
the appraised fair market value of UEP's owned real estate or (ii) $1,600,000
plus (e) sixty percent (60%) of the appraised net orderly liquidation value of
eligible machinery and equipment less (f) any applicable Availability Reserves.
Notwithstanding the foregoing, in no event shall the portion of the Borrowing
Base attributable to items (c), (d) and (e) above exceed sixty-five percent
(65%) of the total Borrowing Base. CIT shall have the right, at any time, to
require updated appraisals, such appraisals to be performed by an appraiser
mutually agreed upon who will be retained by CIT but paid for by the Companies
and, based upon such appraisals, increase or reduce the values of assets
included in the Borrowing Base and/or the advance rates with respect to any
assets.
Borrowing Companies shall mean UTC, UEP, UOE, Sterling and NorLux
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Budget shall mean the Budget set forth as Exhibit "A" hereto, as updated each
week in accordance with this Financing Agreement.
Business Day shall mean any day on which CIT and The Chase Manhattan Bank are
open for business.
Capital Expenditures shall mean, for any period, the aggregate of all
expenditures of the Companies during such period on account of property, plant,
equipment or similar fixed assets that, in conformity with GAAP, are required to
be included in or reflected in the Consolidated Balance Sheet of the Companies.
Capital Improvements shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Companies' business operations.
Capital Lease shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure in the balance sheet of the Companies.
Chase Bank Rate shall mean the rate of interest per annum announced by The Chase
Manhattan Bank from time to time as its prime rate in effect at its principal
office in New York City. (The prime rate is not intended to be the lowest rate
of interest charged by The Chase Manhattan Bank to its borrowers).
Chase Bank Rate Loans shall mean any loans or advances pursuant to this
Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.
Closing Date shall mean the date that this Financing Agreement has been duly
executed by the parties hereto and delivered to CIT.
Code shall mean the Internal Revenue Code of 1986, as amended.
Collateral shall mean all of the Companies' real and personal property,
including, but not limited to all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles, Real Estate, pledged stock
of all of the subsidiaries of all of the Companies and Other Collateral of each
of the Companies.
Collection Days shall mean one (1) Business Day to provide for the deposit,
clearance and collection of checks or other instruments representing the
proceeds of Collateral, the amount of which has been credited to the Companies'
Revolving Loan Account, and for which interest may be charged on the aggregate
amount of such deposits, at the rate provided for in Paragraph 8.1 of Section 8
of this Financing Agreement.
Commitment Letter shall mean the Commitment Letter, dated August 6, 2002, issued
by CIT to, and accepted by, the Borrowing Companies.
Consolidated Balance Sheet shall mean a consolidated or compiled, as applicable,
balance sheet for the Companies and their consolidated subsidiaries, eliminating
all inter-company transactions and prepared in accordance with GAAP.
Consolidating Balance Sheet shall mean a Consolidated Balance Sheet plus
individual balance sheets for the Companies and their consolidated subsidiaries,
showing all eliminations of inter-company transactions, including a balance
sheet for each of the Companies exclusively, all prepared in accordance with
GAAP.
Copyrights shall mean all of each of the Companies' present and hereafter
acquired copyrights, copyright registrations, recordings, applications, designs,
styles, licenses, marks, prints and labels bearing any of the foregoing,
goodwill, any and all general intangibles, intellectual property and rights
pertaining thereto, and all cash and non-cash proceeds thereof.
Current Assets shall mean those assets of the Companies which, in accordance
with GAAP, are classified as current.
Current Liabilities shall mean those liabilities of the Companies which, in
accordance with GAAP, are classified as "current," provided however, that,
notwithstanding GAAP, the Revolving Loans and the current portion of Permitted
Indebtedness shall be considered "current liabilities."
Current Ratio shall mean the ratio determined by dividing Current Assets by
Current Liabilities.
Default shall mean any event specified in Section 10 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
Default Rate of Interest shall mean a rate of interest per annum, equal to the
sum of: (a) two percent (2%) and (b) the applicable increment over the Chase
Bank Rate (as set forth in paragraph 8.1 hereof) plus the Chase Bank Rate which
CIT shall be entitled to charge the Companies on all Obligations due CIT by the
Companies, as further set forth in Paragraph 10.2 of Section 10 of this
Financing Agreement.
Depository Accounts shall mean the collection accounts, which are subject to
CIT's instructions, as specified in Paragraph 3.4 of Section 3 of this Financing
Agreement.
Documents of Title shall mean all of each of the Companies' present and future
documents (as defined in the UCC), and any and all warehouse receipts, bills of
lading, shipping documents, chattel paper, instruments and similar documents,
all whether negotiable or not and all goods and Inventory relating thereto and
all cash and non-cash proceeds of the foregoing.
EBITDA shall mean, in any period, all earnings of the Companies for said period
before all interest and tax obligations and depreciation and amortization
expenses of the Companies for said period, determined in accordance with GAAP on
a consistent basis with the latest audited financial statements of the
Companies, but excluding the effect of extraordinary or non reoccurring gains or
losses for such period.
Eligible Accounts Receivable shall mean the sum of the Companies' Eligible
Domestic Accounts Receivable and Eligible Foreign Accounts Receivable.
Eligible Domestic Accounts Receivable shall mean the gross amount of the
Companies' Trade Accounts Receivable that are subject to a valid, exclusive,
first priority and fully perfected security interest in favor of CIT, which
conform to the warranties contained herein and which, at all times, continue to
be acceptable to CIT in the exercise of its reasonable business judgment, less,
without duplication, the sum of: (a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted, claimed or
outstanding), and (b) reserves for any such Trade Accounts Receivable that arise
from or are subject to or include: (i) sales to the United States of America,
any state or other governmental entity or to any agency, department or division
thereof, except for any such sales as to which the Companies have complied with
the Assignment of Claims Act of 1940 or any other applicable statute, rules or
regulation, to CIT's satisfaction in the exercise of its reasonable business
judgment; (ii) foreign sales, (iii) Accounts that remain unpaid more than ninety
(90) days from invoice date; (iv) contra accounts; (v) sales to any other
Company, any subsidiary, or to any company affiliated with the Companies in any
way; (vi) bill and hold (deferred shipment) or consignment sales; (vii) sales to
any customer which is: (A) insolvent, (B) the debtor in any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law, (C) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts, or (D)
financially unacceptable to CIT or has a credit rating unacceptable to CIT;
(viii) all sales to any customer if fifty percent (50%) or more of the aggregate
dollar amount of all outstanding invoices to such customer are unpaid more than
ninety (90) days from invoice date; (ix) pre-billed receivables and receivables
arising from progress billing; (x) an amount representing, historically,
returns, discounts, claims, credits, allowances and applicable terms; (xi) sales
not payable in United States currency; and (xii) any other reasons deemed
necessary by CIT in its reasonable business judgment, including without
limitation those which are customary either in the commercial finance industry
or in the lending practices of CIT.
Eligible Foreign Accounts Receivable shall mean the gross amount of the
Companies' Trade Accounts Receivable from foreign sales that are subject to a
valid, exclusive, first priority and fully perfected security interest in favor
of CIT, which conform to the warranties contained herein and which, at all
times, continue to be acceptable to CIT in the exercise of its reasonable
business judgment and which are secured by letters of credit (in form and
substance satisfactory to CIT) issued or confirmed by, and payable at, banks
having a place of business in the United States of America, less, without
duplication, the sum of: (a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted, claimed or
outstanding), and (b) reserves for any such Trade Accounts Receivable that arise
from or are subject to or include: (i) sales to any governmental entity or to
any agency, department or division thereof, (ii) Accounts that remain unpaid
more than ninety (90) days from invoice date; (iii) contra accounts; (iv) sales
to any other Company, any subsidiary, or to any company affiliated with the
Companies in any way; (v) bill and hold (deferred shipment) or consignment
sales; (vi) sales to any customer which is: (A) insolvent, (B) the debtor in any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any law, (C) negotiating, or has called a meeting of its
creditors for purposes of negotiating, a compromise of its debts, or (D)
financially unacceptable to CIT or has a credit rating unacceptable to CIT;
(vii) all sales to any customer if fifty percent (50%) or more of the aggregate
dollar amount of all outstanding invoices to such customer are unpaid more than
ninety (90) days from invoice date; (viii) pre-billed receivables and
receivables arising from progress billing; (ix) an amount representing,
historically, returns, discounts, claims, credits, allowances and applicable
terms; (x) sales not payable in United States currency; and (xi) any other
reasons deemed necessary by CIT in its reasonable business judgment, including
without limitation those which are customary either in the commercial finance
industry or in the lending practices of CIT.
Eligible Inventory shall mean the gross amount of the Companies' Inventory that
is subject to a valid, exclusive, first priority and fully perfected security
interest in favor of CIT and which conforms to the warranties contained herein
and which, at all times, continues to be acceptable to CIT in the exercise of
its reasonable business judgment, less, without duplication, any (a)
work-in-process, (b) supplies (other than raw materials), (c) Inventory not
present in the United States of America, (d) Inventory returned or rejected by
any of the Company's customers (other than goods that are undamaged and
resalable in the normal course of business) and goods to be returned to a
Company's suppliers, (e) Inventory in transit to third parties (other than a
Company's agents or warehouses), or in the possession of a warehouseman, bailee,
third party processor, or other third party, unless such warehouseman, bailee or
third party has executed a notice of security interest agreement (in form and
substance satisfactory to CIT) and CIT shall have a first priority perfected
security interest in such Inventory, and (f) less any reserves required by CIT
in its reasonable discretion, including without limitation for special order
goods, discontinued, slow-moving and obsolete Inventory, market value declines,
bill and hold (deferred shipment), consignment sales, shrinkage and any
applicable customs, freight, duties and Taxes.
Environmental Laws shall mean the Federal Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.
9601, et. seq., the Federal Resource Conservation and Recovery Act, 42 U.S.C.
6901 et. seq., the Hazardous Materials
Transportation Act, 49 U.S.C. " 1801, et. seq., all other federal, state and
local environmental or health laws applicable to the Companies or their
businesses, operations or assets now or hereafter enacted, and all rules,
regulations, orders and publications adopted or promulgated pursuant thereto
from time to time.
Equipment shall mean all of each Companies' present and hereafter acquired
equipment (as defined in the UCC) including, without limitation, all machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto and all proceeds thereof of whatever sort.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
Event(s) of Default shall have the meaning provided for in Section 10 of this
Financing Agreement.
Excess Availability shall mean, on any date, the amount by which the
Availability exceeds the Revolving Loan Account balance, inclusive of the
cumulative amount of Letter of Credit Guaranties.
Final shall mean, as to any order, that such order is no longer subject to
review, reversal, modification or amendment by appeal or writ of certiorari.
Final Order shall mean an order of the Bankruptcy Court acceptable to CIT in its
sole discretion, substantially in the form of Exhibit "B" attached hereto.
Fiscal Quarter shall mean, with respect to the Companies, each three (3) month
fiscal period of the Companies.
Fiscal Year shall mean each twelve (12) month period ending on the Sunday
following the last Friday in each September.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply, provided that in the event the Companies
modify their accounting principles and procedures as applied as of the Closing
Date, the Companies shall provide such statements of reconciliation as shall be
in form and substance acceptable to CIT.
General Intangibles shall mean all of each of the Companies' present and
hereafter acquired general intangibles (as defined in the UCC), and shall
include, without limitation, all present and future right, title and interest in
and to: (a) all Trademarks, tradenames, corporate names, business names, logos
and any other designs or sources of business identities, (b) Patents, together
with any improvements on said Patents, utility models, industrial models, and
designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and
franchises, (f) all applications with respect to the foregoing, (g) all right,
title and interest in and to any and all extensions and renewals, (h) goodwill
with respect to any of the foregoing, (i) any other forms of similar
intellectual property, (j) all customer lists, distribution agreements, supply
agreements, blue prints, indemnification rights and tax refunds, together with
all monies and claims for monies now or hereafter due and payable in connection
with any of the foregoing or otherwise, and all cash and non-cash proceeds
thereof, including, without limitation, the proceeds or royalties of any
licensing agreements between any Company and any licensee of any such Company's
General Intangibles.
Hazardous Materials shall mean all materials of any kind which are flammable,
explosive, toxic, radioactive or otherwise hazardous to animal or plant life or
the environment, including, without limitation, "hazardous wastes," "hazardous
substances" and "contaminants," as such terms are defined by Environmental Laws.
Indebtedness shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of
borrowed money or for the deferred purchase price of property, services or
assets, other than Inventory, or (b) lease obligations which, in accordance with
GAAP, have been, or which should be capitalized.
Insurance Proceeds shall mean proceeds or payments from an insurance carrier
with respect to any loss, casualty or damage to Collateral.
Inventory shall mean all of each of the Companies' present and hereafter
acquired inventory (as defined in the UCC) and including, without limitation,
all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
Inventory Loan Cap shall mean the amount of $5,000,000.
Interim Order shall mean an Order of the Bankruptcy Court reasonably acceptable
to CIT, in its sole discretion, and substantially in the form of Exhibit "C"
attached hereto.
Interim Period shall mean the period commencing on the day the Interim Order is
entered by the Bankruptcy Court and ending on the earlier to occur of: (i)
thirty (30) days after date of Interim Order or (ii) the date the Final Order
becomes Final.
Investment Property shall mean all now owned and hereafter acquired investment
property (as defined in the UCC) and all proceeds thereof.
Issuing Bank shall mean the bank issuing Letters of Credit for the Borrowing
Companies.
Letters of Credit shall mean all letters of credit issued with the assistance of
CIT in accordance with Section 5 hereof by the Issuing Bank for or on behalf of
a Borrowing Company.
Letter of Credit Guaranty shall mean the guaranty delivered by CIT to the
Issuing Bank of any Borrowing Company's reimbursement obligations under the
Issuing Bank's reimbursement agreement, application for Letter of Credit or
other like document.
Letter of Credit Guaranty Fee shall mean the fee CIT may charge the Companies
under Paragraph 8.3 of Section 8 of this Financing Agreement for: a) issuing a
Letter of Credit Guaranty, and/or b) otherwise aiding the Borrowing Companies,
or any one of them, in obtaining Letters of Credit, all pursuant to Section 5
hereof.
Letter of Credit Sub-Line shall mean the commitment of CIT to assist the
Borrowing Companies in obtaining Letters of Credit, pursuant to Section 5
hereof, in an aggregate amount of $1,500,000; provided, however, that such
Sub-Line shall be limited to $1,000,000 during the Interim Period.
Line of Credit shall mean the aggregate commitment of CIT to (a) make Revolving
Loans pursuant to Section 3 of this Financing Agreement and (b) assist any of
the Borrowing Companies in opening Letters of Credit pursuant to Section 5 of
this Financing Agreement, in the aggregate amount equal to $15,000,000;
provided, however, that the aggregate amount shall be limited to $9,000,000
during the Interim Period.
Line of Credit Fee shall: (a) mean the fee due CIT at the end of each month for
the Line of Credit, and (b) be determined by multiplying the difference between
(i) the Revolving Line of Credit and (ii) the sum, for said month, of (x) the
average daily balance of Revolving Loans plus (y) the average daily balance of
Letters of Credit outstanding for said month, by one-half of one percent (0.5%)
per annum for the number of days in said month.
Loan Documents shall mean this Financing Agreement, the Promissory Note, the
mortgages and/or deeds of trust, the other closing documents and any other
ancillary loan and security agreements executed from time to time in connection
with this Financing Agreement, all as may be renewed, amended, extended,
increased or supplemented from time to time.
Loan Facility Fee shall mean the fee payable to CIT in accordance with, and
pursuant to, the provisions of Paragraph 8.7 of Section 8 of this Financing
Agreement.
Material Adverse Change shall mean from and after the Petition Date: (a) a
material adverse change in the business, operations, condition (financial or
otherwise) of any Borrowing Company or any of their subsidiaries, (b) a material
adverse change in the ability of any Borrowing Company or any of their
subsidiaries to perform or comply with any of the terms and conditions of any
Loan Document, or (c) a material adverse change in the legality, validity,
binding effect, enforceability or admissibility into evidence of any Loan
Document, or the ability of CIT to enforce any rights or remedies under or in
connection with any Loan Document.
Obligations shall mean all loans, advances and extensions of credit made or to
be made by CIT to the Companies, or any one of them, or to others for the
Companies' account (including, without limitation, all Revolving Loans and
Letter of Credit Guaranties) pursuant to or in connection with this Financing
Agreement; any and all indebtedness and obligations which may at any time be
owing by the Companies, or any one of them, to CIT pursuant to or in connection
with this Financing Agreement, whether now in existence or incurred by the
Companies, or any one of them, from time to time hereafter; whether principal,
interest, fees, costs, expenses or otherwise; whether secured by pledge, lien
upon or security interest in any of the Companies' Collateral, assets or
property or the assets or property of any other person, firm, entity or
corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Companies, or
any one of them, are liable to CIT for such indebtedness as principal, surety,
endorser, guarantor or otherwise. Obligations shall also include indebtedness
owing to CIT by the Companies, or any one of them, under any Loan Document or
under any other agreement or arrangement now or hereafter entered into between
the Companies and CIT; indebtedness or obligations incurred by, or imposed on,
CIT as a result of environmental claims arising out of any of the Companies'
operations, premises or waste disposal practices or sites in accordance with
paragraph 7.7 hereof; the Companies' liability to CIT as maker or endorser of
any promissory note or other instrument for the payment of money; any of the
Company's liability to CIT under any instrument of guaranty or indemnity, or
arising under any guaranty, endorsement or undertaking which CIT may make or
issue to others for the Companies' account, including any Letter of Credit
Guaranty or other accommodation extended by CIT with respect to applications for
Letters of Credit, CIT's acceptance of drafts or CIT's endorsement of notes or
other instruments for the Companies' account and benefit.
Operating Leases shall mean all leases of property (whether real, personal or
mixed) other than Capital Leases.
Orders shall mean the Interim Order and the Final Order.
Other Collateral shall mean all of each of the Companies' now owned and
hereafter acquired lockbox, blocked account and any other deposit accounts
maintained with any bank or financial institutions into which the proceeds of
Collateral are or may be deposited; all other deposit accounts and all
Investment Property; all cash and other monies and property in the possession or
control of CIT; all books, records, ledger cards, disks and related data
processing software at any time evidencing or containing information relating to
any of the Collateral described herein or otherwise necessary or helpful in the
collection thereof or realization thereon; and all cash and non-cash proceeds of
the foregoing.
Out-of-Pocket Expenses shall mean all of CIT's present and future reasonable
expenses incurred relative to this Financing Agreement or any other Loan
Documents, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to: all reasonable fees and expenses of its
counsel, in connection with the negotiation, preparation, administration,
amendment, modification, or enforcement of this Financing Agreement and the
documents required hereunder, together with the cost of record searches, all
costs and expenses incurred by CIT in opening bank accounts, depositing checks,
receiving and transferring funds, and wire transfer charges, any charges imposed
on CIT due to returned items and "insufficient funds" of deposited checks and
CIT's standard fees relating thereto, any amounts paid by, incurred by or
charged to, CIT by the Issuing Bank under a Letter of Credit Guaranty or a
Company's reimbursement agreement, application for Letters of Credit or other
like document which pertain either directly or indirectly to such Letters of
Credit, and CIT's standard fees relating to the Letters of Credit and any drafts
thereunder, travel, lodging and similar expenses of CIT's personnel in
connection with inspecting and monitoring the Collateral from time to time
hereunder, title insurance premiums, real estate survey costs, costs of
preparing and recording mortgages/deeds of trust against the Real Estate. Upon
request, supporting documentation for any of the foregoing shall be provided to
the Companies.
Patents shall mean all of each of the Companies' present and hereafter acquired
patents, patent applications, registrations, any reissues or renewals thereof,
licenses, any inventions and improvements claimed thereunder, and all general
intangible, intellectual property and patent rights with respect thereto of the
Companies or any one of them, and all income, royalties, cash and non-cash
proceeds thereof.
Permitted Encumbrances shall mean: (a) liens existing on the date hereof on
specific items of Equipment and other liens expressly permitted, or consented to
in writing by CIT; (b) liens of local or state authorities for franchise or
other like Taxes, provided that the aggregate amounts of such liens shall not
exceed $100,000 in the aggregate at any one time; (c) statutory liens of
landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen
and other like liens imposed by law, created in the ordinary course of business
and for amounts not yet due (or which are being contested in good faith, by
appropriate proceedings or other appropriate actions which are sufficient to
prevent imminent foreclosure of such liens) and with respect to which adequate
reserves or other appropriate provisions are being maintained by the Companies
in accordance with GAAP; (d) deposits made (and the liens thereon) in the
ordinary course of business of the Companies (including, without limitation,
security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; (e)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by any of
the Companies of their business or the property so encumbered and (B) in the
reasonable business judgment of CIT do not materially and adversely affect the
value of such Real Estate; and (f) liens granted to CIT by the Companies or any
one of them; (g) liens of judgment creditors provided such liens do not exceed,
in the aggregate, at any time, $50,000 (other than liens bonded or insured to
the reasonable satisfaction of CIT); (h) tax liens which are not yet due and
payable or which are being diligently contested in good faith by the Companies
by appropriate proceedings, and which liens are not (x) filed on any public
records, (y) other than with respect to Real Estate, senior to the liens of CIT
or (z) for Taxes due the United States of America or any state thereof having
similar priority statutes, as further set forth in paragraph 7.6 hereof; (i)
liens relating to Capital Leases permitted hereunder pursuant to paragraph
7.12(d) hereof; (j) liens (i) junior in all respects to the liens granted to CIT
hereunder or in connection with the Prepetition Credit Agreement, (ii) granted
in connection with any Court approved adequate protection as set forth in
section 361 of the Bankruptcy Code and (iii) consented to by CIT (such consent
not to be unreasonably withheld); (k) the Carve Out and (l) the liens set forth
on Schedule 4.6(a) hereof.
Permitted Indebtedness shall mean: (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, equipment, services, Taxes or labor; (b) Indebtedness arising under
the Letters of Credit and this Financing Agreement; (c) deferred Taxes and other
expenses incurred in the ordinary course of business; (d) other Indebtedness
existing on the date of execution of this Financing Agreement and listed in the
most recent financial statement delivered to CIT or otherwise disclosed to CIT
in writing prior to the Closing Date; and (e) other Indebtedness permitted to be
incurred hereunder.
Petition Date shall mean August 25, 2002.
Pre-Petition Balance shall mean all unpaid, interest, fees and costs owing by
one or more of the Companies to CIT under the Pre-Petition Loan Documents in the
aggregate amount of $6,420,882.57 plus interest fees and costs.
Pre-Petition Credit Agreement shall mean that certain Financing Agreement dated
June 5, 1996 between UTC, UEP and CIT, as amended, restated or otherwise
modified through the date hereof.
Pre-Petition Loan Documents shall mean the Pre-Petition Credit Agreement and
each of the other documents executed in connection therewith.
Pre-Petition Obligations shall mean all loans, advances and extensions of credit
made by CIT to the Companies or to or for the Companies' account, and all other
indebtedness of the Companies to CIT, under the Pre-Petition Loan Documents,
whether or on account of principal, interest, fees, costs or otherwise.
Promissory Note shall mean the note, in the form of Exhibit "D" attached hereto,
delivered by any Company to CIT to evidence the Revolving Loans.
Real Estate shall mean each of the Company's fee and/or leasehold interests in
the real property, including any such real property which has been, or will be,
encumbered, mortgaged, pledged or assigned to CIT or its designee.
Reorganization Plan shall mean a plan of reorganization for one or more of the
Companies proposed pursuant to the Bankruptcy Code.
Revolving Line of Credit shall mean the aggregate commitment of CIT to make
loans and advances pursuant to Section 3 of this Financing Agreement and issue
Letters of Credit Guaranties pursuant to Section 5 hereof to the Borrowing
Companies, in the aggregate amount of $15,000,000; provided, however, that the
aggregate amount shall be limited to $9,000,000 during the Interim Period.
Revolving Loan Account shall mean the account on CIT's books, in the Companies'
name, in which each Company will be jointly and severally charged with all
applicable Obligations under this Financing Agreement.
Revolving Loans shall mean the loans and advances made, from time to time, to or
for the account of the Borrowing Companies by CIT pursuant to Section 3 of this
Financing Agreement.
Sterling Sale Reserve shall have the meaning ascribed to such term in Section
10.2.
Superpriority Claims shall mean Indebtedness or other claims arising out of
credit obtained or debt incurred by one or more of the Companies having priority
in accordance with the provisions of Section 364(c)(1) of the Bankruptcy Code or
any or all administrative expenses of the kind specified in Section 503(b) or
507(b) of the Bankruptcy Code other than the Carve Out.
Taxes shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be due by the Companies
with respect to their business, operations, Collateral or otherwise.
Termination Date shall mean the earlier of August 26, 2003, the date of
substantial consummation of the Companies' Reorganization Plan, or the date the
Companies pay and satisfy in full all Obligations and elect to terminate the
Financing Agreement.
Total Assets shall mean total assets determined in accordance with GAAP, on a
basis consistent with the latest audited financial statements of the Companies.
Total Liabilities shall mean total liabilities determined in accordance with
GAAP, on a basis consistent with the latest audited financial statements of the
Companies.
Trade Accounts Receivable shall mean that portion of each of the Companies'
Accounts which arises from the sale of Inventory or the rendition of services in
the ordinary course of the Companies' business.
Trademarks shall mean all of each of the Companies' present and hereafter
acquired trademarks, trademark registrations, recordings, applications,
tradenames, trade styles, service marks, prints and labels (on which any of the
foregoing may appear), licenses, reissues, renewals, and any other intellectual
property and trademark rights pertaining to any of the foregoing, together with
the goodwill associated therewith, and all cash and non-cash proceeds thereof.
UCC shall mean the Uniform Commercial Code as the same may be amended and in
effect from time to time in the state of New York.
Working Capital shall mean Current Assets in excess of Current Liabilities.
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Working Day shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.
SECTION 2. Conditions Precedent
2.1 Conditions Precedent to Closing
CIT's obligations hereunder are conditioned upon the satisfaction by
the Companies of the following conditions precedent:
(a) Lien Searches - CIT shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CIT for all locations presently
occupied or used by each of the Companies.
(b) Casualty Insurance - Each of the Companies shall have delivered to
CIT evidence satisfactory to CIT that casualty insurance policies listing CIT as
additional insured, loss payee or mortgagee, as the case may be, are in full
force and effect, all as set forth in Paragraph 7.5 of Section 7 of this
Financing Agreement.
(c) UCC Filings - Any financing statements required to be filed in
order to create, in favor of CIT, a first perfected security interest in the
Collateral, subject only to the Permitted Encumbrances, shall have been properly
filed in each office in each jurisdiction required in order to create in favor
of CIT a perfected lien on the Collateral.
(d) Board Resolution - CIT shall have received a copy of the
resolutions of the Board of Directors of each of the Companies authorizing the
execution, delivery and performance of (i) this Financing Agreement, and (ii)
any related agreements, in each case certified by the Secretary or Assistant
Secretary of each of the Companies as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Companies as to the
incumbency and signature of the officers of each of the Companies executing such
Loan Documents and any certificate or other documents to be delivered by them
pursuant hereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(e) Corporate Organization - CIT shall have received (i) a copy of the
Certificate of Incorporation of each of the Companies certified by the Secretary
of State of the states of their incorporation, and (ii) a copy of the By-Laws of
each of the Companies certified by the respective Secretary or Assistant
Secretary thereof, all as amended through the date hereof.
(f) Officer's Certificate - CIT shall have received an executed
Officer's Certificate of each of the Companies, satisfactory in form and
substance to CIT, certifying that (i) the representations and warranties
contained herein are true and correct in all material respects on and as of the
Closing Date; (ii) each of the Companies is in compliance with all of the terms
and provisions set forth herein; and (iii) no Default or Event of Default has
occurred.
(g) Opinions - In-house counsel for the Companies shall have
delivered to CIT opinions satisfactory to CIT.
(h) Absence of Default - No Default or Event of Default shall have
occurred and, since the Petition Date, no Material Adverse Change shall have
occurred.
(i) Legal Restraints/Litigation - As of the Closing Date, there shall
be no (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Companies, or any one of them or their assets,
by any agency, division or department of any county, city, state or federal
government arising out of this Financing Agreement; (y) injunction, writ or
restraining order restraining or prohibiting the financing arrangements
contemplated under this Financing Agreement; or (z) suit, action, investigation
or proceeding (judicial or administrative) pending against the Companies or any
one of them or their assets, which, in the opinion of CIT, if adversely
determined, could have a material adverse effect on the business, operation,
assets, financial condition or Collateral of the Companies or any one of them.
(j) [intentionally omitted]
(k) Budget - CIT shall have received, reviewed and been satisfied with:
(i) a one year monthly cash flow projection and (ii) a thirteen week weekly cash
flow projection prepared by each of the Companies (collectively, the "Budget").
(l) Pledge Agreement - The Companies shall (i) execute and deliver to
CIT a pledge and security agreement pledging to CIT as additional collateral for
the Obligations of the Companies not less than 100% of the issued and
outstanding stock of the Companies (other than the stock of UTC) and not less
than 100% of the stock (or membership interest, as applicable) of all
subsidiaries of the Companies and, (ii) deliver to CIT the stock or other
certificates evidencing such stock or other interest (to the extent such
interest is represented by a certificate) together with duly executed stock
powers or other conveyance documents (undated and in-blank) with respect
thereto, all in form and substance reasonably satisfactory to CIT.
(m) Additional Documents - Each of the Companies shall have executed
and delivered to CIT all Loan Documents necessary to consummate the lending
arrangement contemplated between the Companies and CIT.
(n) Disbursement Authorization - The Companies shall have delivered to
CIT all information necessary for CIT to issue wire transfer instructions on
behalf of the Companies for the initial and subsequent loans and/or advances to
be made under this Financing Agreement including, but not limited to,
disbursement authorizations in form acceptable to CIT.
(o) Examination & Verification - CIT shall have completed, to its
reasonable satisfaction, an examination and verification of the Accounts,
Inventory, machinery and equipment, real estate, financial statements, books and
records of each of the Companies which examination shall indicate that, after
giving effect to all Revolving Loans, advances and extensions of credit to be
made at closing, the Companies shall have an aggregate opening additional
Availability of at least $1,500,000, as evidenced by a Borrowing Base
certificate delivered by each of the Companies to CIT as of the Closing Date,
all as more fully required by the CIT Commitment Letter.
(p) Depository Accounts - Each of the Borrowing Companies shall have
established a system of lockbox and bank accounts with respect to the collection
of Accounts and the deposit of proceeds of Collateral as shall be reasonably
acceptable to CIT in all respects. Such accounts shall be subject to three party
agreements (between the Companies, CIT and the depository bank), which shall be
in form and substance reasonably satisfactory to CIT.
(q) Mortgages/Deeds of Trust - The Companies shall have executed and
delivered to CIT, an agent of CIT or to a title insurance company acceptable to
CIT, such mortgages and/or deeds of trust as CIT may reasonably require to
obtain first liens on the Real Estate.
(r) Schedules - The Companies or their counsel shall provide CIT with
schedules of: (a) any of the Companies' and their subsidiaries (i) Trademarks,
(ii) Patents, and (iii) Copyrights, as applicable and all in such detail as to
provide appropriate recording information with respect thereto, (b) any
tradenames, (c) monthly rental payments for any leased premises or any other
premises where any Collateral may be stored or processed, and (d) Permitted
Liens, all of the foregoing in form and substance satisfactory to CIT.
(s) Plans of Reorganization - CIT's review of and reasonable
satisfaction with any plan of reorganization being filed by the Companies in
conjunction with the bankruptcy petition provided that (i) CIT will not oppose
the plan of reorganization if it provides for the debtor-in-possession financing
to be paid in full in cash under terms and conditions reasonably acceptable to
CIT; and (ii) the Companies are not required to file a plan of reorganization
except as set forth in paragraph 10.1.f(xi) hereof.
(t) Engagement of Consultant - The engagement of a consultant,
satisfactory to CIT, to assist the Companies in the Bankruptcy Cases and in
analyzing strategic alternatives and initiatives, with such engagement to last
until satisfaction in full of the Obligations due to CIT;
(u) CIT Commitment Letter - Each of the Borrowing Companies shall have
fully complied, to the reasonable satisfaction of CIT, with all of the terms and
conditions of the CIT Commitment Letter;
(v) Interim Order Entered - The Interim Order (in form and substance
satisfactory to CIT) shall have been entered by the Bankruptcy Court and not
have been vacated, stayed, modified, appealed (unless CIT shall have determined,
in its sole and absolute discretion, that the Interim Order adequately finds
that CIT will be deemed to have extended the credit contemplated by this
Financing Agreement in good faith and that the Interim Order otherwise
adequately protects the rights of CIT and the extent, validity and priority of
its liens under ss. 364(e) of the Bankruptcy Code).
2.2 Conditions Precedent to Loans During Interim Period. The
obligations of CIT to make Loans during the Interim Period are subject to the
satisfaction of all of the conditions set forth in Section 2.1 of this Financing
Agreement, plus satisfaction of the following conditions:
(a) [Intentionally Omitted];
(b) All Revolving Loans shall be used by Companies, subject to the
Budget, to fund working capital needs and the costs of administration of the
Chapter 11 Cases;
(c) As of the date of the proposed advance, no Event of Default
shall have occurred and be continuing;
(d) All representations and warranties of the Companies contained in
this Financing Agreement, including but not limited to those representations and
warranties set forth in Article 4 hereof shall be true and correct on the date
of the proposed advance;
(e) As of the date of the proposed advance, the Companies shall
be in compliance with all of the covenants set forth herein;
(f) Except as may be otherwise agreed to from time to time by CIT and
the Companies in writing, after giving effect to the extension of credit
requested to be made by any of the Borrowing Companies on such date, the
aggregate outstanding balance of the Revolving Loans and outstanding Letters of
Credit owing by the Companies will not exceed the lesser of (i) the Revolving
Line of Credit less the Sterling Sale Reserve or (ii) the Borrowing Base.
(g) The Companies shall have delivered to CIT a certificate in the form
attached hereto as Exhibit 2.2, executed by the chief executive officer or chief
financial officer of the Companies confirming the statements made in paragraphs
(b), (c), (d), (e) and (f) above to be true, complete and accurate and that the
conditions set forth therein have been satisfied.
(h) CIT's receipt of, and satisfaction with an updated net orderly
liquidation appraisal of the inventory of UOE and Sterling no later than thirty
days after the date of this Financing Agreement. The appraisals must be
performed by an appraiser mutually agreed upon who will be retained by CIT but
paid for by the Companies;
(i) CIT's receipt of, and satisfaction with a net orderly liquidation
appraisal of the inventory of UEP no later than thirty days after the date of
this Financing Agreement. The appraisals must be performed by an appraiser
mutually agreed upon who will be retained by CIT but paid for by the Companies.
(j) CIT's receipt of, and reasonable satisfaction with a desktop net
orderly liquidation appraisal of the machinery and equipment of UEP and a net
orderly liquidation value appraisal, including asset inspection of the machinery
and equipment of UOE and Sterling no later than thirty days after the date of
this Financing Agreement. Prior to receipt of each appraisal, such assets will
not be included in the Borrowing Base. The appraisals must be performed by an
appraiser mutually agreed upon who will be retained by CIT but paid for by the
Companies; and
(k) CIT's receipt of, and reasonable satisfaction with, a fair market
value real estate appraisal of the real property of UEP no later than thirty
days after the date of this Financing Agreement. Prior to receipt of the
appraisal, such real estate will not be included in the Borrowing Base. The
appraisals must be performed by an appraiser mutually agreed upon who will be
retained by CIT but paid for by the Companies with the appraisal assumptions
based on a maximum six month marketing period.
Each borrowing by a Borrowing Company hereunder shall constitute a
representation and warranty by the Companies as of the date of such loan or
advance that each of the representations, warranties and covenants contained in
the Financing Agreement have been satisfied and are true and correct, except as
the Companies and CIT shall otherwise agree herein or in a separate writing.
2.3 Conditions Precedent to Loans After the Interim Period. The
obligations of CIT to make Loans after the Interim Period are subject to the
satisfaction immediately prior to or concurrently with the making of such Loans
of all conditions set forth in Sections 2.1 and 2.2 of this Financing Agreement,
plus the following conditions:
(a) Final Order - The Final Order, substantially in the form of order
annexed hereto as Exhibit B shall have been entered by the Bankruptcy Court and
become Final; and shall include, without limitation, the acknowledgment of the
Companies and any Official Committee of Unsecured Creditors as to the amount of
the Obligations and the validity, priority and extent of CIT's liens on the
Collateral; provided, however, that the Official Committee and any party in
interest other than the Companies shall have a period of 75 days from the date
hereof to commence an action challenging the amount of the Obligations or the
validity, priority and extent of CIT's liens existing on the Petition Date.
(b) Title Insurance Policies - With respect to Real Estate included in
the Borrowing Base CIT shall have received, in respect of each mortgage or deed
of trust, a mortgagee's title policy or marked-up unconditional binder for such
insurance. Each such policy shall (i) be in an amount satisfactory to CIT; (ii)
insure that the mortgage or deed of trust insured thereby creates a valid first
lien on the property covered by such mortgage or deed of trust, free and clear
of all defects and encumbrances except those acceptable to CIT; (iii) name CIT
as the insured thereunder; and (iv) contain such endorsements and effective
coverage as CIT may reasonably request, including, without limitation, the
revolving line of credit endorsement. CIT shall also have received evidence that
all premiums in respect of such policies have been paid and that all charges for
mortgage recording taxes, if any, shall have been paid. Until CIT shall have
received such title insurance, no amounts attributable to the Real Estate shall
be included in the Borrowing Base.
(c) Surveys - With respect to Real Estate included in the Borrowing
Base CIT and the title insurance company issuing each policy referred to in the
immediately preceding paragraph (each, a "Title Insurance Company") shall have
received maps or plats of a perimeter or boundary of the site of each of the
properties covered by the mortgages or deeds of trust, dated a date satisfactory
to CIT and the relevant Title Insurance Company prepared by an independent
professional licensed land surveyor satisfactory to CIT and the relevant Title
Insurance Company, which maps or plats and the surveys on which they are based
shall be made in accordance with the Minimum Standard Detail Requirements for
Land Title Surveys jointly established and adopted by the American Land Title
Association and the American Congress on Surveying and Mapping; and, without
limiting the generality of the foregoing, there shall be surveyed and shown on
the maps or plats or surveys the following: (i) the locations on such sites of
all the buildings, structures and other improvements and the established
building setback lines insofar as the foregoing affect the perimeter or boundary
of such property; (ii) the lines of streets abutting the sites and width
thereof; (iii) all access and other easements appurtenant to the sites or
necessary or desirable to use the sites; (iv) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar encumbrances
affecting the sites, whether recorded, apparent from a physical inspection of
the sites or otherwise known to the surveyor; (v) any encroachments on any
adjoining property by the building, structures and improvements on the sites;
and (vi) if the site is designated as being on a filed map, a legend relating
the survey to said map. Further, the survey shall x) be certified to CIT and the
Title Insurance Company and y) contain a legend reciting as to whether or not
the site is located in a flood zone.
(d) Environmental Report - With respect to Real Estate included in the Borrowing
Base CIT shall have received environmental audit reports on i) all of each of
the Companies' leasehold and fee interests, and ii) the Companies' waste
disposal practices. The reports must x) be satisfactory to CIT and y) not
disclose or indicate any material liability (real or potential) stemming from
the Companies' premises, their operations, their waste disposal practices or
waste disposal sites used by Companies.
(e) Repayment of Pre-Petition Obligations - All Pre-Petition Obligations shall
be paid or satisfied in full, including through utilization of the proceeds of
the Revolving Loans to be made under this Financing Agreement;
SECTION 3. Revolving Loans
3.1 CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time, to make loans and advances to the Borrowing
Companies on a revolving basis (i.e. subject to the limitations set forth
herein, each of the Borrowing Companies may borrow, repay and re-borrow
Revolving Loans) in an amount equal to the lesser of (x) Availability and (y)
the Line of Credit less the Sterling Sale Reserve. Such loans and advances shall
be in amounts not to exceed the Borrowing Base. All requests for loans and
advances must be received by an officer of CIT no later than 2:00 p.m., New York
time, of the Business Day on which any such loans and advances are required.
3.2 In furtherance of the continuing assignment and security interest
in each of the Companies' Accounts and Inventory, each of the Companies will,
upon the creation of Accounts and purchase or acquisition of Inventory, execute
and deliver to CIT in such form and manner as CIT may reasonably require, solely
for CIT's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts and Inventory as CIT may reasonably request, including,
without limitation: (i) weekly sales journals, (ii) weekly schedules of
Accounts; (iii) monthly detailed Accounts agings; (iv) weekly perpetual
Inventory reports (categorized by location, then subcategorized by category and
further subcategorized by type); and (v) weekly calculation of all non-Eligible
Accounts and non-Eligible Inventory, all in form and substance reasonably
satisfactory to CIT, certified as to their accuracy by the Companies' chief
executive officer, chief financial officer or treasurer and reviewed and
approved by the Companies' outside financial consultant engaged in accordance
with Section 2.1(t) of this Financing Agreement, and such other appropriate
reports designating, identifying and describing the Accounts and Inventory as
CIT may reasonably request, and provided further that CIT may request any such
information more frequently, from time to time, upon its reasonable prior
request. In addition, upon CIT's request and reasonable notice, each of the
Companies shall provide CIT with copies of agreements with, or purchase orders,
if available, from, such Companies' customers, and copies of invoices to
customers, proof of shipment or delivery, access to their computers, electronic
media and software programs associated therewith (including any electronic
records, contracts and signatures) and such other documentation and information
relating to said Accounts and other Collateral as CIT may reasonably require.
Failure to provide CIT with any of the foregoing shall in no way affect,
diminish, modify or otherwise limit the security interests granted herein. Each
of the Companies hereby authorizes CIT to regard the Companies' printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent of
a manual signature by one of the Companies' authorized officers or agents.
3.3 Each of the Companies hereby represents and warrants that: each
Trade Account Receivable is based on an actual and bona fide sale and delivery
of Inventory or rendition of services to customers, made by the Companies in the
ordinary course of their business; the Inventory being sold, and the Trade
Accounts Receivable created, are the exclusive property of the Companies and are
not and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of the Companies; and the Companies' customers have accepted the Inventory
or services, owe and are obligated to pay the full amounts stated in the
invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the
ordinary course of business with respect to which the Companies have complied
with the notification requirements of Paragraph 3.5 of this Section 3. The
Companies confirm to CIT that any and all Taxes relating to their business,
their sales, the Accounts or Inventory relating thereto, are their sole
responsibility and that same will be paid by the Companies when due, subject to
Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said
Taxes represent a lien on or claim against the Accounts. The Companies hereby
further represent and warrant that they shall not acquire any Inventory on a
consignment basis, nor co-mingle their Inventory with any of their customers or
any other person, including pursuant to any bill and hold sale or otherwise, and
that their Inventory is marketable to their customers in the ordinary course of
business of the Companies, except as it may otherwise report in writing to CIT
pursuant to Paragraph 3.5 hereof from time to time. The Companies also warrant
and represent that they are duly and validly existing corporations (or other
business organizations as the case may be) and are qualified in all states where
the failure to so qualify would have a material adverse effect on their business
or their ability to enforce collection of a material amount of Accounts due from
customers residing in that state. The Companies agree to maintain such books and
records regarding Accounts and Inventory as CIT may reasonably require and agree
that the books and records of the Companies will reflect CIT's interest in the
Accounts and Inventory. All of the books and records of the Companies will be
available upon reasonable notice to CIT at normal business hours, including any
records handled or maintained for the Companies or any one of them by any other
company or entity.
3.4 (a) Until CIT has advised the Companies to the contrary after the
occurrence of an Event of Default, the Companies, at their expense, will
enforce, collect and receive all amounts owing on their respective Accounts in
the ordinary course of their business and any proceeds they so receive shall be
subject to the terms hereof, and held on behalf of and in trust for CIT. Such
privilege shall terminate at the election of CIT, upon the occurrence and notice
of an Event of Default. Any checks, cash, credit card sales and receipts, notes
or other instruments or property received by a Company with respect to any
Collateral, including Accounts, shall be held by such Company in trust for CIT,
separate from such Company's own or the Companies' property and funds, and
promptly turned over to CIT with proper assignments or endorsements by deposit
to the Depository Accounts. Each of the Companies shall: (i) indicate on all of
its invoices that funds should be delivered to and deposited in a Depository
Account; (ii) direct all of its account debtors to deposit any and all proceeds
of Collateral into the Depository Accounts; (iii) irrevocably authorize and
direct any banks which maintain the Companies' initial receipt of cash, checks
and other items to promptly wire transfer all available funds to a Depository
Account; and (iv) advise all such banks of CIT's security interest in such
funds. The Companies shall provide CIT with prior written notice of any and all
deposit accounts opened or to be opened subsequent to the Closing Date. Subject
to Collection Days, all amounts received by CIT in payment of Accounts will be
credited to the Revolving Loan Account when CIT is advised by its bank of its
receipt of "collected funds" at CIT's bank account in New York, New York on the
Business Day of such advise if advised no later than 2:00 p.m. Eastern Time or
on the next succeeding Business Day if so advised after 2:00 PM Eastern Time. No
checks, drafts or other instrument received by CIT shall constitute final
payment to CIT unless and until such instruments have actually been collected.
(b) The Companies shall establish and maintain, in their name and at
their expense, Deposit Accounts with such banks as are acceptable to CIT (the
"Blocked Accounts") into which each of the Companies shall promptly cause to be
deposited: (i) all proceeds of Collateral received by any of the Companies,
including all amounts payable to the Companies from credit card issuers and
credit card processors, and (ii) all amounts on deposit in deposit accounts used
by the Companies at each of their locations, all as further provided in
Paragraph 3.4(a) above. The banks at which the Blocked Accounts are established
shall enter into an agreement, in form and substance satisfactory to CIT (the
"Blocked Account Agreements"), providing that all cash, checks and items
received or deposited in the Blocked Accounts are the property of CIT, that the
depository bank has no lien upon, or right of set off against, the Blocked
Accounts and any cash, checks, items, wires or other funds from time to time on
deposit therein, except as otherwise provided in the Blocked Account Agreements,
and that automatically, on a daily basis the depository bank will wire, or
otherwise transfer, in immediately available funds, all funds received or
deposited into the Blocked Accounts to such bank account as CIT may from time to
time designate for such purpose. The Companies hereby confirm and agree that all
amounts deposited in such Blocked Accounts and any other funds received and
collected by CIT, whether as proceeds of Inventory or other Collateral or
otherwise, shall be the property of CIT.
3.5 The Companies agree to notify CIT: (a) of any matters affecting the
value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of their Inventory, in their weekly and monthly collateral reports (as
applicable) provided to CIT hereunder, in such detail and format as CIT may
reasonably require from time to time; and (b) promptly of any such matters which
are material, as a whole, to the Accounts and/or the Inventory. The Companies
agree to issue credit memoranda promptly (with duplicates to CIT upon request
after the occurrence of an Event of Default) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is not waived in
writing by CIT) and on notice from CIT, the Companies agree that all returned,
reclaimed or repossessed merchandise or goods shall be set aside by the
Companies, marked with CIT's name (as secured party) and held by the Companies
for CIT's account.
3.6 CIT shall maintain a single Revolving Loan Account on its books in
which each of the Companies will be jointly and severally charged with all loans
and advances made by CIT to the Borrowing Companies, and with any other
Obligations, including any and all costs, expenses and reasonable attorney's
fees which CIT may incur in connection with the exercise by or for CIT of any of
the rights or powers herein conferred upon CIT, or in the prosecution or defense
of any action or proceeding to enforce or protect any rights of CIT in
connection with this Financing Agreement, the other Loan Documents or the
Collateral assigned hereunder, or any Obligations owing by such Company. Subject
to prior payment in full of the Pre-Petition Obligations in accordance with the
Orders, the Companies will be credited with all amounts received by CIT from the
Companies or from others for the Companies' account, including, as above set
forth, all amounts received by CIT in payment of Accounts, and such amounts will
be applied to payment of the Obligations as set forth herein. In no event shall
prior recourse to any Accounts or other security granted to or by the Companies
be a prerequisite to CIT's right to demand payment of any Obligation. Further,
it is understood that CIT shall have no obligation whatsoever to perform in any
respect any of the Companies' contracts or obligations relating to the Accounts.
3.7 After the end of each month, CIT shall promptly send the Companies
a statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Companies during that month. The
monthly statements shall be deemed correct and binding upon the Companies and
shall constitute an account stated between the Companies and CIT unless CIT
receives a written statement of the exceptions within thirty (30) days of the
date of the monthly statement.
3.8 In the event that any requested advance exceeds Availability or
that (a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
outstanding balance of Letters of Credit exceeds (b)(x) the Borrowing Base or
(y) the Revolving Line of Credit less the Sterling Sale Reserve, any such
nonconsensual overadvance shall be due and payable to CIT immediately, without
the requirement of demand therefor.
SECTION 4. Representations And Warranties Of The Companies
In order to induce CIT to execute and deliver this Financing Agreement
and to make the Revolving Loans available to the Borrowing Companies, each
Company represents and warrants to CIT that, as of the date hereof:
4.1 Good Standing of the Companies; Authorization.4.1 Good Standing of
the Borrower; Authorization Each Company is duly incorporated (except UEP),
organized and existing and in good standing (unless due to the failure to pay
franchise taxes, the ability of which is stayed by reason of commencement of the
Chapter 11 Cases) in the State set forth on Schedule 4.1 hereto and is duly
qualified as a foreign corporation and authorized to do business in all other
jurisdictions wherein the nature of its business or property makes such
qualification necessary, and has the corporate power to own its properties and
to carry on its business as now conducted. The execution, delivery and
performance of this Financing Agreement, and the Loan Documents have been duly
authorized by all necessary corporate proceedings on the part of such Company.
4.2 Compliance with Laws and Other Agreements.4.2 Compliance with Laws
and Other Agreements Each Company is in material compliance with all laws,
rules, regulations, judgments, decrees, orders, agreements and requirements
which affect in a material way the Companies, their assets or the operation of
their business and has not received, and has no knowledge of, any order or
notice of any governmental investigation or of any violation or claim of
violation of any law, regulation, judgment, decree, order, agreement, or other
governmental requirement that is not stayed by reason of commencement of the
Chapter 11 Cases.
4.3 No Conflict; Governmental Approvals. The execution, delivery, and
performance of this Financing Agreement and each of the Loan Documents will not
(i) conflict with, violate, constitute a default under, or result in a breach of
any provision of any applicable law, rule, regulation, judgment, decree or
order, or (ii) conflict with or result in a breach of any provision of the
certificate of incorporation or by-laws of such Company. No authorization,
permit, consent or approval of or other action by, and no filing, registration
or declaration with, any governmental authority or regulatory body is required
to be obtained or made by any Company for the due execution, delivery and
performance of this Financing Agreement or any of the Loan Documents, except
such as have been duly obtained or made prior to the date hereof.
4.4 [Intentionally Omitted]
4.5 Taxes. The Companies are not delinquent in payment of any income,
property or other tax, except for any delinquency in the payment of a tax which
is contested in good faith by the applicable Co
mpany that is not stayed by
reason of commencement of the Chapter 11 Cases.
4.6 Encumbrances and Guaranties
(a) All properties and assets of the Companies are owned by the
Companies free and clear of all Encumbrances except (i) those for taxes or other
government charges either not yet delinquent or the nonpayment of which is
permitted pursuant to this Financing Agreement; (ii) those not arising in
connection with indebtedness that do not materially impair the use or value of
the properties or assets of the Companies in the conduct of their businesses;
(iii) those encumbrances otherwise permitted hereunder; and (iv) encumbrances
set forth on Schedule 4.6(a) attached hereto.
(b) No Company is obligated under any guaranty, except as set
forth in Schedule 4.6(b) hereof.
4.7 Margin Securities The assets of the Companies do not include any
"margin securities" within the meaning of Regulations G or U of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, 221), and the Companies
do not have any present intention of acquiring any margin security.
4.8 ERISA4.9 ERISA The provisions of each employee benefit plan as
defined in Section 3(3) of ERISA ("Plan") maintained by the Companies comply
with all applicable requirements of ERISA and of the Code, and with all
applicable rulings and regulations issued under the provisions of ERISA and the
Code setting forth those requirements. No reportable event, as defined in
Section 4043 of ERISA, has occurred with respect to any Plan; no Plan to which
Section 4021 of ERISA applies has been terminated; no Plan has incurred any
liability to PBGC as provided in Section 4062, 4063 and 4064 of ERISA; no Plan
has been involved in any prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code; and there are no unfunded liabilities
with respect to any funded Plan.
4.9 Pending Litigation4.10 Pending Litigation Except as described on
Schedule 4.9 attached hereto, there are no actions, suits, proceedings or
investigations pending, or, to the knowledge of the Companies, threatened
against or affecting any Company, before any court, arbitrator or administrative
or governmental body which, in the aggregate, might adversely affect any action
taken or to be taken by the Companies under this Financing Agreement and the
other Loan Documents or which, in the aggregate, might materially adversely
affect the business, operations, properties or financial position of any
Company, or the ability of any Company to perform its obligations under this
Financing Agreement and the other Loan Documents.
4.10 Valid, Binding and Enforceable This Financing Agreement and the
Loan Documents have been duly and validly executed and delivered by the parties
thereto (other than CIT) and constitute the valid and legally binding
obligations of such parties enforceable in accordance with their respective
terms.
4.11 Environmental Matters
(a) Except as set forth on Schedule 4.11(a) each Company has performed
all of its obligations under, has obtained all necessary approvals, permits,
authorizations and other consents required by, and is not in material violation
of, any Environmental Laws.
(b) Except as set forth on Schedule 4.11(b), no Company has received
any notice, citation, summons, directive, order or other communication, written
or oral, from, and no Company has any knowledge of the filing or giving of any
such notice, citation, summons, directive, order or other communication by, any
governmental or quasi-governmental authority or agency or any other Person
concerning the presence, generation, treatment, storage, transportation,
transfer, disposal, release or other handling of any Hazardous Materials within,
on, from, related to, or affecting any real property owned or occupied by any
Company.
(c) To the best of each Company's knowledge, after reasonable inquiry,
no real property owned or occupied by any Company has ever been used, either by
such Company or any of its predecessors in interest, to generate, treat, store,
transport, transfer, dispose of, release or otherwise handle any Hazardous
Material in violation of any applicable Environmental Laws.
(d) To the best of each Company's knowledge, after due inspection,
there are no Hazardous Materials within, on or under any real property owned or
occupied by such Company in violation of any applicable Environmental Laws.
4.12 Leases Schedule 4.12 attached hereto sets forth a correct and
complete list of leases, of both real property and material personal property,
to which each Company is party.
4.13 No Untrue Statements Neither this Financing Agreement, the Loan
Documents nor any other document, certificate or statement furnished or to be
furnished by the Companies or by any other party to CIT in connection herewith
contains, or at the time of delivery will contain, any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained herein and therein not misleading.
Each request for an advance made by the Companies pursuant
to this Financing Agreement shall constitute (i) a warranty and representation
by the Companies to CIT that there does not then exist an Event of Default or
any event or condition which, with notice, lapse of time or the making of such
advance, would constitute an Event of Default and (ii) a reaffirmation as of the
date of said request of the representations and warranties of the Companies
contained herein (it being understood that any representation or warranty made
as of a specific date shall be true and correct in all material respects as of
such specific date). All representations and warranties of the Companies
contained in this Financing Agreement and the other Loan Documents shall survive
the execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.
SECTION 5. Letters of Credit.
In order to assist the Borrowing Companies, or any one of them, in
establishing or opening Letters of Credit with an Issuing Bank, the Companies
have requested CIT to join in the applications for such Letters of Credit,
and/or guarantee payment or performance of such Letters of Credit and any drafts
or acceptances thereunder through the issuance of the Letters of Credit
Guaranty, thereby lending CIT's credit to the Borrowing Companies and CIT has
agreed to do so. These arrangements shall be handled by CIT subject to the terms
and conditions set forth below.
5.1 Within the Revolving Line of Credit (less the Sterling Sale
Reserve) and Availability, CIT shall assist each of the Borrowing Companies in
obtaining Letter(s) of Credit in an amount not to exceed the outstanding amount
of the Letter of Credit Sub-Line. CIT's assistance for amounts in excess of the
Letter of Credit Sublimit shall at all times and in all respects be in CIT's
sole discretion. It is understood that the term, form and purpose of each Letter
of Credit and all documentation in connection therewith, and any amendments,
modifications or extensions thereof, must be mutually acceptable to CIT, the
Issuing Bank and the Borrowing Companies, provided that Letters of Credit shall
not be used for the purchase of domestic Inventory or to secure present or
future debt of domestic Inventory suppliers. Any and all outstanding Letters of
Credit issued hereunder for any Borrowing Company shall be reserved dollar for
dollar from Availability as an Availability Reserve.
5.2 CIT shall have the right, without notice to any of the Companies,
to charge the Revolving Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind incurred by CIT under the
Letters of Credit Guaranty at the earlier of a) payment by CIT under the Letters
of Credit Guaranty; or b) the occurrence of an Event of Default. Any amount
charged to the Revolving Loan Account shall be deemed a Revolving Loan hereunder
and shall incur interest at the rate provided in Paragraph 8.1 of Section 8 of
this Financing Agreement.
5.3 Each of the Companies agrees to indemnify CIT and hold CIT harmless
from any and all loss, claim or liability incurred by CIT arising from any
transactions or occurrences relating to Letters of Credit established or opened
for any Borrowing Company's account, the collateral relating thereto and any
drafts or acceptances thereunder, and all Obligations thereunder, including any
such loss or claim due to any errors, omissions, negligence, misconduct or
action taken by any Issuing Bank, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct by CIT under
the Letters of Credit Guaranty. This indemnity shall survive termination of this
Financing Agreement. The Companies agree that any charges incurred by CIT for
any of the Companies account by the Issuing Bank shall be conclusive on CIT and
may be charged to the Companies' Revolving Loan Account.
5.4 CIT shall not be responsible for: (a) the existence, character,
quality, quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; (b) any difference or variation in the
character, quality, quantity, condition, packing, value or delivery of the goods
from that expressed in the documents; (c) the validity, sufficiency or
genuineness of any documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; (d) the time, place, manner or order in
which shipment is made; (e) partial or incomplete shipment, or failure or
omission to ship any or all of the goods referred to in the Letters of Credit or
documents; (f) any deviation from instructions; (g) delay, default, or fraud by
the shipper and/or anyone else in connection with the goods or the shipping
thereof; or (h) any breach of contract between the shipper or vendors and the
Companies.
5.5 The Companies agree that any action taken by CIT, if taken in good
faith, or any action taken by any Issuing Bank, under or in connection with the
Letters of Credit, the Letter of Credit Guarantees, the drafts or acceptances,
or the Collateral, shall be binding on each of the Companies and shall not
result in any liability whatsoever of CIT to the Companies. In furtherance
thereof, CIT shall have the full right and authority to: (a) clear and resolve
any questions of non-compliance of documents; (b) give any instructions as to
acceptance or rejection of any documents or goods; (c) execute any and all
steamship or airways guaranties (and applications therefore), indemnities or
delivery orders; (d) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents; and (e)
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in CIT's sole name. The Issuing
Bank shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from CIT, all without any notice to
or any consent from the Companies or any one of them. Notwithstanding any prior
course of conduct or dealing with respect to the foregoing including amendments
and non-compliance with documents and/or any Company's instructions with respect
thereto, CIT may exercise its rights hereunder in its sole and reasonable
business judgement. In addition, without CIT's express consent and endorsement
in writing, the Companies agree: (a) not to execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders; to grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances or documents; or to agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letters of Credit, drafts or acceptances;
and (b) after the occurrence of an Event of Default which is not cured within
any applicable grace period, if any, or waived by CIT, not to (i) clear and
resolve any questions of non-compliance of documents, or (ii) give any
instructions as to acceptances or rejection of any documents or goods.
5.6 The Companies agree that: (a) any necessary import, export or other
licenses or certificates for the import or handling of the Collateral will have
been promptly procured; (b) all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the Collateral, or the
financing thereof will have been promptly and fully complied with; and (c) any
certificates in that regard that CIT may at any time request will be promptly
furnished. In connection herewith, the Companies warrant and represent that all
shipments made under any such Letters of Credit are in accordance with the laws
and regulations of the countries in which the shipments originate and terminate,
and are not prohibited by any such laws and regulations. Each of the Companies
assumes all risk, liability and responsibility for, and agrees to pay and
discharge, all present and future local, state, federal or foreign Taxes,
duties, or levies. Any embargo, restriction, laws, customs or regulations of any
country, state, city, or other political subdivision, where the Collateral is or
may be located, or wherein payments are to be made, or wherein drafts may be
drawn, negotiated, accepted, or paid, shall be solely the Companies' risk,
liability and responsibility.
5.7 Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, CIT shall acquire by subrogation, any rights, remedies, duties
or obligations granted or undertaken by the Companies or any one of them to the
Issuing Bank in any application for Letters of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to have
been granted to CIT and apply in all respects to CIT and shall be in addition to
any rights, remedies, duties or obligations contained herein.
SECTION 6. Collateral
6.1 As security for the prompt payment in full of all Obligations, each
of the Companies hereby pledges and grants to CIT a continuing general lien
upon, and security interest in, all of their real and personal property,
including but not limited to all:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents of Title;
(e) Other Collateral;
(f) Investment Property;
(g) Equipment; and
(h) Real Estate.
6.2 The security interests granted hereunder shall extend and
attach to:
(a) All Collateral which is owned by any of the Companies or in which
the Companies have any interest, whether held by the Companies or others for
their account, and, if any Collateral is Equipment, whether the Companies'
interest in such Equipment is as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, molds, tables, accretions, component parts thereof
and additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CIT or the Companies from the
Companies' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Companies, or to the sale, promotion
or shipment thereof.
6.3 The Companies agree to safeguard, protect and hold all Inventory
for CIT's account and make no disposition thereof except in the ordinary course
of their business of the Companies, as herein provided. The Companies represent
and warrant that Inventory will be sold and shipped by the Companies to their
customers only in the ordinary course of the Companies' business, and then only
on open account and on terms currently being extended by the Companies to their
respective customers, provided that, absent the prior written consent of CIT,
the Companies shall not sell Inventory on a consignment basis nor retain any
lien or security interest in any sold Inventory. Upon the sale, exchange, or
other disposition of Inventory, as herein provided, the security interest in the
Inventory provided for herein shall, without break in continuity and without
further formality or act, continue in, and attach to, all proceeds, including
any instruments for the payment of money, Trade Accounts Receivable, documents
of title, shipping documents, chattel paper and all other cash and non-cash
proceeds of such sale, exchange or disposition. As to any such sale, exchange or
other disposition, CIT shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation. The
Companies hereby agree to immediately forward any and all proceeds of Collateral
to the Depository Account, and to hold any such proceeds (including any notes
and instruments), in trust for CIT pending delivery to CIT. Irrespective of
CIT's perfection status in any and all of the General Intangibles, including,
without limitations, any Patents, Trademarks, Copyrights or licenses with
respect thereto, each of the Companies hereby irrevocably grants CIT a royalty
free license to sell, or otherwise dispose or transfer, in accordance with
Section 10 of this Financing Agreement, and the applicable terms hereof, of any
of the Inventory upon the occurrence of an Event of Default which has not been
waived in writing by CIT.
6.4 The Companies agree at their own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Companies also agree to safeguard, protect and
hold all Equipment in accordance with the terms hereof and subject to CIT's
security interest. Absent CIT's prior written consent, any sale, exchange or
other disposition of any Equipment shall be made by the Companies in the
ordinary course of their business and as set forth herein. The Companies may, in
the ordinary course of their business, sell, exchange or otherwise dispose of
obsolete or surplus Equipment provided, however, that: (a) the then value of the
Equipment so disposed of in any Fiscal Year does not exceed $100,000 in the
aggregate; and (b) the proceeds of any such sales or dispositions shall be held
in trust by the Companies for CIT and shall be immediately delivered to CIT by
deposit to the Depository Account; provided, however, that the aforesaid right
shall automatically cease upon the occurrence of a Default or an Event of
Default which is not waived in writing by CIT. Upon the sale, exchange, or other
disposition of the Equipment, as herein provided, the security interest provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Accounts, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, CIT shall have
all of the rights of an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
6.5 The rights and security interests granted to CIT hereunder are to
continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Accounts may from time
to time be temporarily in a credit position, until the final payment in full to
CIT of all Obligations and the termination of this Financing Agreement. Any
delay, or omission by CIT to exercise any right hereunder shall not be deemed a
waiver thereof, or be deemed a waiver of any other right, unless such waiver
shall be in writing and signed by CIT. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.
6.6 Notwithstanding CIT's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine which rights, liens, security interests or remedies CIT shall at any
time pursue, foreclose upon, relinquish, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of them,
or any of CIT's rights hereunder.
6.7 Any balances to the credit of the Companies and any other property
or assets of the Companies in the possession or control of CIT may be held by
CIT as security for any Obligations and applied in whole or partial satisfaction
of such Obligations when due. The liens and security interests granted herein,
and any other lien or security interest CIT may have in any other assets of the
Companies, shall secure payment and performance of all now existing and future
Obligations. CIT may in its discretion charge any or all of the Obligations to
the Revolving Loan Account when due.
6.8 Each of the Companies possess all General Intangibles and rights
thereto necessary to conduct their business as conducted as of the Closing Date
and the Companies shall maintain their rights in, and the value of, the
foregoing in the ordinary course of their business, including, without
limitation, by making timely payment with respect to any applicable licensed
rights other than payments deferred by reason of commencement of the Chapter 11
Cases. The Companies shall deliver to CIT, and/or shall cause the appropriate
party to deliver to CIT, from time to time such pledge or security agreements
with respect to General Intangibles (now or hereafter acquired) of the Companies
and their subsidiaries as CIT shall require to obtain valid first liens thereon.
In furtherance of the foregoing, the Companies shall provide timely notice to
CIT of any additional Patents, Trademarks, tradenames, service marks,
Copyrights, brand names, trade names, logos and other trade designations
acquired or applied for subsequent to the Closing Date and the Companies shall
execute such documentation as CIT may reasonably require to obtain and perfect
its lien thereon. The Companies hereby confirm that they shall deliver, or cause
to be delivered, any pledged stock issued subsequent to the Closing Date to CIT
in accordance with the applicable terms of the Pledge Agreement and prior to
such delivery, shall hold any such stock in trust for CIT. Each of the Companies
hereby irrevocably grants to CIT a royalty-free, non-exclusive license in the
General Intangibles, including tradenames, Trademarks, Copyrights, Patents,
licenses, and any other proprietary and intellectual property rights and any and
all right, title and interest in any of the foregoing, for the sole purpose,
upon the occurrence of an Event of Default, of the right to: (i) advertise for
sale and sell or transfer any Inventory bearing any of the General Intangibles,
and (ii) make, assemble, prepare for sale or complete, or cause others to do so,
any applicable raw materials or Inventory bearing any of the General
Intangibles, including use of the Equipment and Real Estate for the purpose of
completing the manufacture of unfinished goods, raw materials or work-in-process
comprising Inventory, and apply the proceeds thereof to the Obligations
hereunder, all as further set forth in this Financing Agreement and irrespective
of CIT's lien and perfection in any General Intangibles.
6.9 This Financing Agreement and the obligation of the Companies to
perform all of their covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate.
6.10 The Companies shall give to CIT from time to time such
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate or real estate
acquired after the date hereof as CIT shall require to obtain a valid first lien
thereon subject only to those exceptions of title as set forth in future title
insurance policies that are satisfactory to CIT.
6.11 The Company agrees that all chattel paper created by the Company
will be marked: "This chattel paper has been assigned to The CIT Group/Business
Credit, Inc. Further assignment of this chattel paper violates the rights of The
CIT Group/Business Credit, Inc.
SECTION 7. Covenants
7.1 Each of the Companies hereby warrants, represents and covenants
that: (i) Schedule 4.1 hereto correctly and completely sets forth the Companies'
(A) chief executive office; (B) state of incorporation, (C) Collateral
locations, (D) tradenames, and (E) all the other information listed on said
Schedule; (ii) except for the Permitted Encumbrances, CIT holds a valid,
perfected and first priority security interest in the Collateral and the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral; (iii) except for the Permitted
Encumbrances, the Companies are, or will be, at the time additional Collateral
is acquired by them, the absolute owner of the Collateral with full right to
pledge, sell, consign, transfer and create a security interest therein, free and
clear of any and all claims or liens in favor of others; (iv) the Companies
will, at their expense, forever warrant and, at CIT's request, defend the same
from any and all claims and demands of any other person other than a holder of a
Permitted Encumbrance; (v) the Companies will not grant, create or permit to
exist, any lien upon, or security interest in, the Collateral, or any proceeds
thereof, in favor of any other person other than the holders of the Permitted
Encumbrances; and that the Equipment does not comprise a part of any Company's
Inventory; and (vi) the Equipment is and will only be used by the Companies in
their business and will not be held for sale or lease, or removed from their
premises, or otherwise disposed of by the Companies except as otherwise
permitted in this Financing Agreement.
7.2 Each of the Companies agrees to maintain books and records
pertaining to the Collateral in accordance with GAAP and in such additional
detail, form and scope as CIT shall reasonably require. The Companies agree that
CIT or its agents may upon reasonable notice enter upon any of the Companies'
premises at any time during normal business hours, and from time to time in its
reasonable business judgement, for the purpose of inspecting the Collateral and
any and all records pertaining thereto. The Companies are also to advise CIT
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or on the security interests granted
to CIT therein.
7.3 Each of the Companies agrees to: (a) execute and deliver to CIT,
from time to time, solely for CIT's convenience in maintaining a record of the
Collateral, such written statements, and schedules as CIT may reasonably
require, designating, identifying or describing the Collateral; and (b) provide
CIT, on request, with an appraisal of the Inventory which appraisal shall be at
the Companies' expense and otherwise acceptable to CIT. Any failure, however, to
promptly give CIT such statements, or schedules shall not affect, diminish,
modify or otherwise limit CIT's security interests in the Collateral.
7.4 Each of the Companies agrees to comply with the requirements of all
state and federal laws in order to grant to CIT valid and perfected first
security interests in the Collateral, subject only to the Permitted
Encumbrances. CIT is hereby authorized by the Companies to file (including
pursuant to the applicable terms of the UCC) from time to time any financing
statements, continuations or amendments covering the Collateral. The Companies
hereby consent to and ratify any and all execution and/or filing of financing
statements on or prior to the Closing Date by CIT. The Companies agree to do
whatever CIT may reasonably request, from time to time, by way of: (a) filing
notices of liens, financing statements, amendments, renewals and continuations
thereof; (b) cooperating with CIT's agents and employees; (c) keeping Collateral
records; (d) transferring proceeds of Collateral to CIT's possession; and (e)
performing such further acts as CIT may reasonably require in order to effect
the purposes of this Financing Agreement, including but not limited to obtaining
control agreements with respect to deposit accounts and/or Investment Property.
7.5(a) Each of the Companies agrees to maintain insurance on the Real
Estate, Equipment and Inventory under such policies of insurance, with such
insurance companies, in such reasonable amounts and covering such insurable
risks as are at all times reasonably satisfactory to CIT. All policies covering
the Real Estate, Equipment and Inventory are, subject to the rights of any
holders of Permitted Encumbrances holding claims senior to CIT, to be made
payable to CIT, in case of loss, under a standard non-contributory "mortgagee",
"lender" or "secured party" clause and are to contain such other provisions as
CIT may require reasonably to fully protect CIT's interest in the Real Estate,
Inventory and Equipment and to any payments to be made under such policies. All
original policies or true copies thereof are to be delivered to CIT with the
loss payable endorsement in CIT's favor, and shall provide for not less than
thirty (30) days prior written notice to CIT of the exercise of any right of
cancellation. At the Companies' request, or if the Companies fail to maintain
such insurance, CIT may arrange for such insurance, but at the Companies'
expense and without any responsibility on CIT's part for: (i) obtaining the
insurance; (ii) the solvency of the insurance companies; (iii) the adequacy of
the coverage; or (iv) the collection of claims. Upon the occurrence of an Event
of Default which is not waived in writing by CIT, CIT shall, subject to the
rights of any holders of Permitted Encumbrances holding claims senior to CIT,
have the sole right, in the name of CIT or the Companies, to file claims under
any insurance policies, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
(b) In the event of any loss or damage by fire or other casualty to the
Companies' Inventory, Real Estate or Equipment, CIT shall apply insurance
proceeds relating thereto to reduce the Revolving Loans.
(c) In the event the Companies or any one of them fails to provide CIT
with timely evidence, acceptable to CIT, of its maintenance of insurance
coverage required pursuant to paragraph 7.5(a) above, CIT may purchase, at the
Companies' expense, insurance to protect CIT's interests in the Collateral. The
insurance acquired by CIT may, but need not, protect the Companies' interest in
the Collateral, and therefore such insurance may not pay claims which the
Companies may have with respect to the Collateral or pay any claim which may be
made against the Companies in connection with the Collateral. In the event CIT
purchases, obtains or acquires insurance covering all or any portion of the
Collateral, the Companies shall be responsible for all of the applicable costs
of such insurance, including premiums, interest (at the applicable Chase Bank
Rate for Revolving Loans set forth in paragraph 8.1 of Section 8 hereof), fees
and any other charges with respect thereto, until the effective date of the
cancellation or the expiration of such insurance. CIT may charge all of such
premiums, fees, costs, interest and other charges to the Companies' Revolving
Loan Accounts. The Companies hereby acknowledge that the costs of the premiums
of any insurance acquired by CIT may exceed the costs of insurance which the
Companies may be able to purchase on their own. In the event that CIT purchases
such insurance, CIT will notify the Companies of said purchase within thirty
(30) days of the date of such purchase. If, within thirty (30) days of the date
of such notice, the Companies provide CIT with proof that the Companies had the
insurance coverage required pursuant to 7.5(a) above (in form and substance
satisfactory to CIT) as of the date on which CIT purchased insurance and the
Companies continued at all times to have such insurance, then CIT agrees to
cancel the insurance purchased by CIT and credit the Companies' Revolving Loan
Account with the amount of all costs, interest and other charges associated with
any insurance purchased by CIT, including with any amounts previously charged to
the Revolving Loan Account.
7.6 Subject to Bankruptcy Code limitations, each of the Companies
agrees to pay, when due, all Taxes, including sales taxes, assessments, claims
and other charges lawfully levied or assessed upon the Companies or the
Collateral unless such Taxes are being diligently contested in good faith by the
Companies by appropriate proceedings and adequate reserves are established in
accordance with GAAP. Notwithstanding the foregoing, if any lien shall be filed
or claimed thereunder (a) for Taxes due the United States of America, or (b)
which in CIT's opinion might create a valid obligation having priority over the
rights granted to CIT herein (exclusive of Real Estate), such lien shall not be
deemed to be a Permitted Encumbrance hereunder and, subject to Bankruptcy Code
limitations, the Companies shall immediately pay such tax and remove the lien of
record. If the Companies or any one of them fails to do so promptly, then at
CIT's election, CIT may (i) create an Availability Reserve in such amount as it
may deem appropriate in its business judgement, or (ii) upon the occurrence of a
Default or Event of Default, imminent risk of seizure, filing of any priority
lien, forfeiture, or sale of the Collateral, pay Taxes on the Companies' behalf,
and the amount thereof shall be an Obligation secured hereby and due on demand.
7.7 Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the business or
operations of the Companies or any one of them, provided that the Companies may
contest any acts, rules, regulations, orders and directions of such bodies or
officials in any reasonable manner which will not, in CIT's reasonable opinion,
materially and adversely effect CIT's rights or priority in the Collateral; (b)
agrees to comply with all environmental statutes, acts, rules, regulations or
orders as presently existing or as adopted or amended in the future, applicable
to the Collateral, the ownership and/or use of their real property and operation
of their business, which the failure to comply with would have a material and
adverse impact on the Collateral, or any material part thereof, or on the
operation of the business of the Companies or any one of them; and (c) shall not
be deemed to have breached any provision of this Paragraph 7.7 if (i) the
failure to comply with the requirements of this Paragraph 7.7 resulted from good
faith error or innocent omission, (ii) the Companies promptly commence and
diligently pursue a cure of such breach, and (iii) such failure is cured within
(30) days following the Companies' receipt of notice of such failure, or if such
cannot in good faith be cured within thirty (30) days, then such breach is cured
within a reasonable time frame based upon the extent and nature of the breach
and the necessary remediation, and in conformity with any applicable consent
order, consensual agreement and applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
CIT shall have otherwise consented in writing, each of the Companies will
furnish to CIT: (a) within ninety (90) days after the end of each Fiscal Year of
the Companies, an audited Consolidated Balance Sheet, with a Consolidating
Balance Sheet attached thereto, as at the close of such year, and statements of
profit and loss and cash flow of the Companies and their consolidated
subsidiaries for such year, audited by independent public accountants selected
by the Companies and satisfactory to CIT; (b) within sixty (60) days after the
end of each Fiscal Quarter a Consolidated Balance Sheet and Consolidating
Balance Sheet as at the end of such period and statements of profit and loss and
cash flow of the Companies and their consolidated subsidiaries, certified by an
authorized financial or accounting officer of the Companies; (c) within thirty
(30) days after the end of each month a Consolidated Balance Sheet as at the end
of such period and statements of profit and loss and cash flow of the Companies
and all subsidiaries for such period, certified by an authorized financial or
accounting officer of the Companies; (d) on the date the Companies' monthly
operating reports are filed with the Bankruptcy Court, a copy of such reports;
(e) on Wednesday of each week, an updated weekly cash flow budget, comparing the
Companies' actual weekly cash flows since the Petition Date to the Budget and
providing budgeted weekly cash flows for the following thirteen weeks; and (f)
from time to time, such further information regarding the business affairs and
financial condition of the Companies and their consolidated subsidiaries as CIT
may reasonably request, including, without limitation (i) the accountant's
management practice letter and (ii) annual cash flow projections in form
satisfactory to CIT. Each financial statement which the Companies are required
to submit hereunder must be accompanied by an officer's certificate, signed by
the President, Vice President, Controller, or Treasurer, pursuant to which any
one such officer must certify that: (x) the financial statement(s) fairly and
accurately represent(s) each Companies' financial condition at the end of the
particular accounting period, as well as the Companies' operating results during
such accounting period, subject to year-end audit adjustments; and (y) during
the particular accounting period: (A) there has been no Default or Event of
Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; (B) the Companies have not received any
notice of cancellation with respect to their property insurance policies; (C)
the Companies have not received any notice that could result in a material
adverse effect on the value of the Collateral taken as a whole; and (D) the
exhibits attached to such financial statement(s) constitute detailed
calculations showing compliance with all financial covenants contained in this
Financing Agreement.
7.9 Comply with all terms and conditions of the Orders.
7.10 Cause the Final Order to be entered by the Bankruptcy
Court on or before 30 days after the date of the Interim Order.
7.11 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, each of the Companies agrees that,
without the prior written consent of CIT, except as otherwise herein provided,
the Companies or any one of them will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment,
(whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to
exist on any of the Companies' Collateral or any other
assets, whether now owned or hereafter acquired, except for
the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of all or
any material part of its assets other than in the ordinary
course of business or any significant product line or
process (except for sales approved by the Bankruptcy Court
and consented to by CIT, including, but not limited to a
sale of substantially all of the assets of Sterling upon
terms and conditions acceptable to CIT, which consent by CIT
shall not be unreasonably withheld provided; however, that
the Companies may dispose of up to $50,000 of assets without
prior consent of CIT);
(d) Merge, consolidate or otherwise alter or modify their
respective corporate names, principal places of
business, structure, or existence, re-incorporate or
re-organize, or enter into or engage in any
operation or activity materially different from that
presently being conducted by the Companies or any
one of them, except that the Companies may (A) change
their corporate name or address, or (B) a Company
may merge with and into any other Company (with a Company
being the survivor of such merger); provided
that in any such instance under (A) or (B) above (i) the
Companies shall give CIT thirty (30) days prior
written notice thereof, and (ii) the Companies shall
execute and deliver, prior to or simultaneously
with any such action, any and all documents and agreements
requested by CIT to confirm the continuation
and preservation of all security interests and liens
granted to CIT hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation,
except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the
ordinary course of business;
(f) Declare or pay any dividend or distributions of any kind on,
or purchase, acquire, redeem or retire, any of the capital
stock or equity interest, of any class whatsoever, whether
now or hereafter outstanding;
(g) Make any advance or loan to, or any investment in, any firm,
entity, person or corporation or purchase or acquire all or
substantially all of the stock or assets of any entity,
person or corporation provided, however, the Companies shall
be permitted to transfer funds between and among the
Companies;
(h) Pay any management, consulting or other similar fees to any
person, corporation or other entity affiliated with the
Companies provided, however, the Companies shall be
permitted to transfer funds between and among the Companies;
(i) Incur or apply to the Bankruptcy Court for authority to
incur, or suffer to exist, any indebtedness having the
priority afforded by Section 364(c) or (d) of the Bankruptcy
Code (including any Superpriority Claims) other than the
Carve Out and financing provided for under this Financing
Agreement unless such financing would pay in full the
Obligations under this Agreement and any outstanding
Pre-Petition Indebtedness;
(j) Limit, affect or modify, or apply to the Bankruptcy Court to
limit, affect or modify any of CIT's rights with respect to
the Obligations, including rights with respect to
Pre-Petition Collateral and Post-Petition Collateral (each
as defined in the Orders) and the priority thereof and
payment of various amounts, pursuant to any Reorganization
Plan or otherwise;
(k) Except for the Carveout (as defined in the Orders), apply to
the Bankruptcy Court for the authority or allow to be
incurred, created, assumed, suffered or permitted any claim,
lien or Encumbrance (other than Permitted Liens) against any
Company, any subsidiary of any Company, or any of their
assets in the Bankruptcy Cases to be pari passu with, or
senior to, the liens, encumbrances and claims of CIT granted
and arising hereunder and under the Orders;
(l) Make any payments or transfer any property on account of
claims asserted by the Companies' vendors for reclamation in
accordance with UCC Section 2-702 and Bankruptcy Code
Section 546(c) in excess of an amount to be agreed upon by
CIT;
(m) Enter into any agreements or file any motion seeking a
Bankruptcy Court order for the return of inventory or
supplies to any vendor pursuant to Bankruptcy Code Section
546(c) without the written consent of CIT;
(n) Make or impose any claim of any kind upon or against CIT
or the Collateral pursuant to Section 506(c) of the
Bankruptcy Code or otherwise. The Companies hereby
irrevocably waive all such claims and agrees that
they shall not assert such claims at any time. In addition
the Companies shall cause the priority of
all liens of CIT on the Collateral to be maintained in full
force and effect and in accordance with this
Financing Agreement, the other Loan Documents and the
Orders. The Companies will ensure that except as
otherwise provided in this Financing Agreement, no
person or entity shall be permitted to exercise any
rights or remedies with respect to the Collateral unless
and until all amounts due under this Financing
Agreement and the other Loan Documents have been paid in
full; or
(o) Have any subsidiary (except the other Companies).
7.12 Until termination of the Financing Agreement and
payment and satisfaction in full of all Obligations hereunder, the
Companies, on a consolidated basis, shall have maintained minimum
EBITDA for the period commencing on September 1, 2002 and ending on the
date set forth below of not less than the cumulative amounts set forth
below:
Cumulative
Ending Date Amount
October 27, 2002 $ 402,400
November 24, 2002 $ 411,200
December 29, 2002 $ 573,750
January 26, 2003 $ 882,300
February 23, 2003 $1,337,050
March 30, 2003 $2,107,150
April 27, 2003 $2,952,050
May 25, 2003 $3,910,000
June 29, 2003 $4,881,550
July 27, 2003 $5,805,500
August 24, 2002 $6,927,500
7.13 Each of the Companies agrees to advise CIT in writing of: a) all
expenditures (actual or anticipated) in excess of $50,000 from the budgeted
amount therefor in any Fiscal Year for x) environmental clean-up, y)
environmental compliance or z) environmental testing and the impact of said
expenses on each of the Companies' Working Capital; and b) any notices the
Companies receive from any local, state or federal authority advising the
Companies of any environmental liability (real or potential) stemming from any
of the Companies' operations, their premises, their waste disposal practices, or
waste disposal sites used by any of the Companies and to provide CIT with copies
of all such notices if so required.
7.14 Each of the Companies hereby agrees to indemnify and hold harmless
CIT and its officers, directors, employees, attorneys and agents (each an
"Indemnified Party") from, and holds each of them harmless against, any and all
losses, liabilities, obligations, claims, actions, damages, costs and expenses
(including reasonable attorney's fees) and any payments made by CIT pursuant to
any indemnity provided by CIT with respect to or to which any Indemnified Party
could be subject insofar as such losses, liabilities, obligations, claims,
actions, damages, costs, fees or expenses with respect to the Loan Documents,
including without limitation those which may arise from or relate to: (a) the
Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; and
(b) any and all claims or expenses asserted against CIT as a result of any
environmental pollution, hazardous material or environmental clean-up relating
to the Real Estate; or any claim or expense which results from any of the
Companies' operations (including, but not limited to, any of the Companies'
off-site disposal practices) and use of the Real Estate, which CIT may sustain
or incur (other than solely as a result of the physical actions of CIT on the
Companies' premises which are determined to constitute gross negligence or
willful misconduct by a court of competent jurisdiction), all whether through
the alleged or actual negligence of such person or otherwise, except and to the
extent that the same results solely and directly from the gross negligence or
willful misconduct of such Indemnified Party as finally determined by a court of
competent jurisdiction. The Companies hereby agree that this indemnity shall
survive termination of this Financing Agreement, as well as payments of
Obligations which may be due hereunder. CIT may, in its reasonable business
judgement, establish such Availability Reserves with respect thereto as it may
deem advisable under the circumstances and, upon any termination hereof, hold
such reserves as cash reserves for any such contingent liabilities.
7.15 Without the prior written consent of CIT, the Companies agree that
they will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any subsidiary or
affiliate of the Companies, provided that, except as otherwise set forth in this
Financing Agreement, the Companies or any one of them may (i) enter into sale
and service transactions in the ordinary course of their business and pursuant
to the reasonable requirements of any such Company, and upon standard terms and
conditions and fair and reasonable terms, no less favorable to such Company than
such Company could obtain in a comparable arms length transaction with an
unrelated third party, provided further that no Default or Event of Default
exists or will occur hereunder prior to and after giving effect to any such
transaction; and (ii) transfer funds between and among the Companies.
7.16 (a) The Companies' actual expenses from and after the Petition
Date, measured on a weekly basis, shall not exceed 115% of the cumulative
projected expenses set forth in the Budget for such time period. In addition, no
actual expense of the Companies from and after the Petition Date, measured on a
line item by line item basis on a rolling four-week basis shall exceed, by more
than 25%, the projected amount set forth in the Budget for such item during such
period.
(b) Subject to subsection (c) below, the Companies' actual
total cash receipts for any rolling four-week period shall not be less than 85%
of the projected cash receipts set forth in the Budget for such time period.
(c) At all times, the outstanding balance of Revolving Loans
plus Letter of Credit Guaranties plus Pre-Petition Obligations shall be no more
than 115% of the aggregate amount of Revolving Loans plus Letter of Credit
Guaranties plus Pre-Petition Obligations estimated to be outstanding under the
Budget as of such date.
(d) The Budget compliance covenants set forth in this Section
shall be measured by CIT upon CIT's receipt of the weekly budget to actual
report required to be delivered by the Borrower pursuant to this Agreement.
7.17 The Companies shall maintain, at all times, Excess Availability of not less
than $500,000 unless a lesser amount is otherwise consented to by CIT.
7.18 Notwithstanding anything to the contrary contained in this Financing
Agreement, if the assets of Sterling are sold pursuant to a transaction
consented to by CIT, which consent shall not be unreasonably withheld, (i)
Sterling shall cease to be a party to the Financing Agreement and shall be
released from all of its obligations and liabilities hereunder, (ii) all
Collateral owned by Sterling will be released from any lien, encumbrance or
security interest created by this Financing Agreement, (iii) CIT will promptly
execute and deliver to Sterling such instruments (including UCC termination
statements on form UCC-3) acknowledging the release of such Collateral and (iv)
any shares of stock of Sterling pledged to secure the Obligations under the
Financing Agreement shall be released from such pledge, provided that upon the
consummation of any such sale of the assets of Sterling, all net cash proceeds
of such sale shall be delivered to CIT: (i) first, to repay Revolving Loans in
amount equal to the portion of the Borrowing Base attributable to Sterling; (ii)
and second, to the extent of any excess (30% of such excess shall be referred to
herein as the "Sterling Sale Reserve"), to repay Revolving Loans; and (iii)
third, to be held in the Companies' bank accounts which are subject to CIT's
liens, to be used by the Companies in accordance with the Budget.
SECTION 8. Interest, Fees and Expenses
8.1(a) Interest on the Revolving Loans shall be payable monthly as of
the end of each month. Interest shall accrue and be payable in an amount equal
to the Chase Bank Rate plus two percent (2%) per annum on the average of the net
balances owing by the Companies to CIT at the close of each day during such
month. In the event of any change in said Chase Bank Rate, the rate hereunder
for Revolving Loans shall change, as of the date of such change, so as to remain
two percent (2%) above the Chase Bank Rate. The rate hereunder for Revolving
Loans shall be calculated based on a 360-day year. CIT shall be entitled to
charge the Companies' Revolving Loan Account at the rate provided for herein
when due until all Obligations have been paid in full.
(b) Upon and after the occurrence and during the continuation of an
Event of Default and the giving of any required notice by CIT in accordance with
the provisions of Section 10, Paragraph 10.2 hereof, all Obligations shall bear
interest at the Default Rate of Interest.
8.2 [Intentionally Omitted]
8.3 In consideration of the Letter of Credit Guaranty of CIT, the
Companies shall pay CIT the Letter of Credit Guaranty Fee which shall be an
amount equal to (a) one and one-half percent (1.5%) on the face amount of each
documentary Letter of Credit payable upon issuance thereof and (b) two and
one-half percent (2.5%) per annum, payable monthly, on the face amount of each
standby Letter of Credit less the amount of any and all amounts previously drawn
under such standby Letter of Credit.
8.4 Any and all charges, fees, commissions, costs and expenses charged
to CIT for the Companies' account by any Issuing Bank in connection with, or
arising out of, Letters of Credit or out of transactions relating thereto will
be charged to the Revolving Loan Account in full when charged to, or paid by
CIT, or as may be due upon any termination of this Financing Agreement hereof,
and when made by any such Issuing Bank shall be conclusive on CIT.
8.5 Each of the Companies shall reimburse or pay CIT, as the
case may be, for all Out-of-Pocket Expenses.
8.6 Upon the last Business Day of each month, commencing on August 31,
2002, the Companies shall pay to CIT (i) the Line of Credit Fee, and (ii)
interest on the Collection Days.
8.7 To induce CIT to enter into this Financing Agreement and to extend
to the Borrowing Companies the Revolving Loans and Letters of Credit Guaranties
the Companies shall pay to CIT a Loan Facility Fee in the amount of $300,000
payable upon initial funding hereunder.
8.8 On the Closing Date and, if the Termination Date is, with CIT's
written consent, extended, on the yearly anniversary of the Termination Date,
the Companies shall pay to CIT the Administrative Management Fee in the amount
of $40,000, which shall be deemed fully earned on the Closing Date and the
annual anniversary of the Closing Date thereafter.
8.9 The Companies shall pay CIT's standard charges and reasonable fees
for CIT's personnel used by CIT for reviewing the books and records of the
Companies and for verifying, testing, protecting, safeguarding, preserving or
disposing of all or any part of the Collateral (which fees shall be in addition
to the Administrative Management Fee and any Out-of-Pocket Expenses).
8.10 Each of the Companies hereby authorizes CIT to charge the
Revolving Loan Account with the amount of all their Obligations due hereunder as
such payments become due. The Companies hereby confirm and agree that they shall
promptly pay any Obligations to CIT upon its request therefor. Each of the
Companies confirms that (a) its liability for any and all of the fee obligations
(including without limitation, those set forth in 8.6 through 8.9 above) and
Out-of-Pocket Expenses, set forth in this Financing Agreement and in any of the
other Loan Documents is joint and several, and (b) the Companies, as between
themselves, shall determine how to pro-rate any such payments due hereunder.
8.11 In the event that CIT or any participant hereunder (or any
financial institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgement that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by CIT or such
participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on CIT's or such participant's capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
CIT or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by CIT or such participant to be material, then, from
time to time, the Companies shall pay no later than five (5) days following
demand to CIT or such participant such additional amount or amounts as will
compensate CIT's or such participant's for such reduction. In determining such
amount or amounts, CIT or such participant may use any reasonable averaging or
attribution methods. The protection of this Paragraph 8.11 shall be available to
CIT or such participant regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition. A
certificate of CIT or such participant setting forth such amount or amounts as
shall be necessary to compensate CIT or such participant with respect to this
Section 8 and the calculation thereof when delivered to the Companies shall be
conclusive on the Companies absent manifest error. Notwithstanding anything in
this paragraph to the contrary, in the event CIT or such participant has
exercised its rights pursuant to this paragraph, and subsequent thereto
determines that the additional amounts paid by the Companies in whole or in part
exceed the amount which CIT or such participant actually required to be made
whole, the excess, if any, shall be returned to the Companies by CIT or such
participant, as applicable.
8.12 In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:
(a) subject CIT or such participant to any tax of any kind whatsoever
with respect to this Financing Agreement or change the basis of taxation of
payments to CIT or such participant of principal, fees, interest or any other
amount payable hereunder or under any other documents (except for changes in the
rate of tax on the overall net income of CIT or such participant by the federal
government or the jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by CIT or such
participant by reason of or in respect to this Financing Agreement and the Loan
Documents, including (without limitation) pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or
(c) impose on CIT or such participant any other condition with respect
to this Financing Agreement or any other document, and the result of any of the
foregoing is to increase the cost to CIT or such participant of making, renewing
or maintaining its loans hereunder by an amount that CIT or such participant
deems to be material in the exercise of its reasonable business judgement or to
reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the loans by an amount that CIT or such participant deems
to be material in the exercise of its reasonable business judgement, then, in
any case the Companies shall pay CIT or such participant, within five (5) days
following its demand, such additional cost or such reduction, as the case may
be. CIT or such participant shall certify the amount of such additional cost or
reduced amount to the Companies and the calculation thereof and such
certification shall be conclusive upon the Companies absent manifest error.
Notwithstanding anything in this paragraph to the contrary, in the event CIT or
such participant has exercised its rights pursuant to this paragraph, and
subsequent thereto determine that the additional amounts paid by the Companies
in whole or in part exceed the amount which CIT or such participant actually
required pursuant hereto, the excess, if any, shall be returned to the Companies
by CIT or such participant.
8.13 For purposes of this Financing Agreement and Section 8 thereof,
any reference to CIT shall include any financial institution which may become
co-lender subsequent to the Closing Date.
SECTIONSECTION 9. Powers 9. Powers
Each Company hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney-in-fact, at each Companies' cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of CIT or the Companies or any one of them, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Companies
or any one of them and to notify postal authorities to change the address for
delivery thereof to such address as CIT may designate;
(c) To request from customers indebted on Accounts at any
time, in the name of CIT information concerning the amounts owing on the
Accounts;
(d) To request from customers indebted on Accounts at any time, in the
name of the Companies or any one of them, in the name of certified public
accountant designated by CIT or in the name of CIT's designee, information
concerning the amounts owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of CIT's
interest therein and to notify customers indebted on Accounts to make payment
directly to CIT for the Companies' account; and
(f) To take or bring, in the name of CIT or the Companies or any one of
them, all steps, actions, suits or proceedings deemed by CIT necessary or
desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (e) and (f) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by CIT.
SECTION 10. Events of Default and Remedies
10.1 Events of Default. An event of default ("Event of
Default") under this Financing Agreement shall be deemed to exist if any one or
more of the following events occurs and is continuing, whatever the reason
therefor:
(a) Companies' Failure to Pay. The Companies
fail to pay any amount of principal, interest, fees or other sums as and when
due under this Financing Agreement or any of the Loan Documents, or any other
Obligations, or any stipulation between the Companies and CIT whether upon
stated maturity, acceleration, or otherwise.
(b) Breach of Covenants or Conditions.
Any Company fails to perform or observe any term, covenant, agreement or
condition in this Financing Agreement or any of the other
Loan Documents or is in violation of or non-compliance with any provision of
this Financing Agreement or any of the Loan Documents or any stipulation between
any Company and CIT.
(c) Defaults in Other Agreements. Any
Company fails to perform or observe any material
term, covenant, agreement or condition contained in, or there shall occur any
default under or as defined in, any other post-petition agreement involving a
material liability of any Company which shall not be remedied within the period
of time (if any) within which such other post-petition agreement permits such
default to be remedied, unless such default is waived by the other party thereto
or excused as a matter of law.
(d) Agreements Invalid. The validity,
binding nature of, or enforceability of any material term or provision of any
of the Loan Documents is disputed by, on behalf of, or in the right or name of
any Company or any material term or provision of any such Loan Document is
found or declared to be invalid, avoidable, or non-enforceable by any court of
competent jurisdiction.
(e) False Warranties; Breach of
Representations. Any warranty or representation made by any
Company in this Financing Agreement or any other Loan Document or in any
certificate or other writing delivered under or pursuant to this Financing
Agreement or any other Loan Document, or in connection with any provision of
this Financing Agreement or related to the transactions contemplated hereby
shall prove to have been knowingly or intentionally false or incorrect or
breached in any material respect on the date as of which made.
(f) Bankruptcy Related Defaults.
(i) The Bankruptcy Court shall
enter an order with respect to any Company
dismissing its Bankruptcy Case or converting it to a case under chapter 7 of the
Bankruptcy Code, or appointing a trustee in its Bankruptcy Case (other than at
the request of CIT)) or appointing a responsible officer or an examiner with
expanded powers (other than at the request of CIT); or
(ii) The Bankruptcy Court shall
enter an order granting relief from the
automatic stay applicable under Section 362 of the Bankruptcy Code to the holder
of any lien or encumbrance other than liens and encumbrances in favor of CIT in
any assets of any Company having an aggregate value in excess of $50,000; or
(iii) An order of the Bankruptcy
Court shall be entered in the Bankruptcy Case
amending, supplementing, staying, vacating or otherwise modifying any of the
Orders, or any Company shall apply for authority to do so; provided, that no
Event of Default shall occur under this clause to the extent that any such
amendment, supplement or other modification is made in compliance with this
Financing Agreement and is not adverse, in the sole and absolute judgment of
CIT, to the rights and interests of CIT under this Financing Agreement and the
Loan Documents; or
(iv) Any Company shall support
(in any such case by way of any motion or other
pleading filed with the Bankruptcy Court or any other writing to another
party-in-interest executed by or on behalf of any Company or by way of other
written or unwritten statements to the Bankruptcy Court) any other Person's
opposition of any motion made in the Bankruptcy Court by CIT seeking
confirmation of the amount of CIT's claim or the validity and enforceability of
the liens and encumbrances in favor of CIT; or
(v) From and after the date of
entry thereof, the Interim Order shall cease to
be in full force and effect (or shall have been vacated, stayed, reversed,
modified or amended), in each case without the consent of CIT, and the Final
Order shall not have been entered prior to such cessation (or vacatur, stay,
reversal, modification or amendment); or
(vi) The Final Order shall not have
been entered by the Bankruptcy Court on or
before thirty days after entry of the Interim Order; or
(vii) From and after the date of
entry thereof, the Final Order shall cease to be
in full force and effect (or shall have been vacated, stayed, reversed,
modified or amended), in each case without the consent of CIT; or
(viii) Any Company shall make any
payments on any Indebtedness of any Company
(other than with respect to amounts permitted pursuant to First Day Orders and
accounted for in the Budget or permitted hereunder) arising before the Petition
Date; or
(ix) Any Company shall fail to
comply with the terms of the Orders in all material respects; or
(x) One or more judgments or
decrees shall be entered against (i) any Company
involving in the aggregate a post-Petition Date liability (not paid or fully
covered by insurance) of $1,000,000 or more or (ii) any subsidiary of any
Company which would have a material adverse effect, and all such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending appeal
within the time required by the terms of such judgment; or
(xi) The Companies shall have
failed to file a Reorganization Plan and/or a
written disclosure statement, within the meaning of Section 1125 of the
Bankruptcy Code, each in form and substance reasonably acceptable to CIT, on or
before December 31, 2002; or
(xii) Any of the Collateral is
attached, seized, or repossessed or transferred,
actually or constructively, to the possession of a trustee, receiver, custodian
or similar client; or
(xiii) Any motion shall have been
filed or any claim shall have been asserted by
the Companies against the Collateral under Section 506(c) or 552 of the
Bankruptcy Code; or
(xiv) Any objections and other
challenges shall have been filed by any party with
respect to the validity, priority, secured status or amount of any CIT's post
petition liens or claims as provided for herein that has not been overruled,
withdrawn or otherwise dismissed within thirty (30) days of such filing; or
(xv) Any Company (i) shall be
unable to pay its debts as they become due other
than debts as to which such Company either (a) is relieved from paying by
operation of the Bankruptcy Code or order of the Bankruptcy Court, or (b) has
made an application to the Bankruptcy Court for an extension of time to pay (and
such application has not been denied), or (ii) shall cease to do business as a
going concern; or
(xvi) A Reorganization Plan to
which CIT has not consented is filed by the
Companies with the Bankruptcy Court.
(g) Material Adverse Change. The occurrence of a
Material Adverse Change.
(h) Cessation of Business. Any Borrowing Company, by or
through action of its board of directors, shall resolve to close all or
substantially all of its business, and such Borrowing Company shall have taken
affirmative steps to effectuate such resolution.
10.2 Remedies.
(a) Cessation of Loans; Acceleration; Default Rate Interest. Upon the
occurrence of a Default and/or an Event of Default and at the option of CIT, all
loans, advances and extensions of credit provided for in Sections 3 and 5 of
this Financing Agreement shall be thereafter in CIT's sole discretion and the
obligation of CIT to make Revolving Loans, open Letters of Credit and provide
Letters of Credit Guaranties, shall cease unless such Default is cured to CIT's
reasonable satisfaction or Event of Default is waived in writing by CIT, and at
the option of CIT upon the occurrence of an Event of Default: (i) without
further order of the Bankruptcy Court, all Obligations shall become immediately
due and payable; (ii) CIT may charge the Companies the Default Rate of Interest
on all then outstanding or thereafter incurred Obligations in lieu of the
interest provided for in Section 8 of this Financing Agreement. The exercise of
any option is not exclusive of any other option, which may be exercised at any
time by CIT.
(b) Relief from Stay. Three (3) business days after written notice to
the Companies, the U.S. Trustee and counsel to any statutory committee appointed
in the Chapter 11 Cases provided by CIT of the occurrence of any one or more
Events of Default and without further permission of the Bankruptcy Court, CIT
shall be deemed to have been granted relief from the automatic stay imposed by
Section 362 of the Bankruptcy Code in order to enforce the rights and remedies
available to them under this Financing Agreement and the other Loan Documents.
(c) Appointment of Chapter 11 Trustee. Upon the occurrence of any one
or more Events of Default, CIT shall have the right to an expedited hearing to
have a chapter 11 trustee acceptable to CIT appointed for the Companies by the
Bankruptcy Court in accordance with Section 1104 of the Bankruptcy Code.
(d) Sale of Property. Upon the occurrence of any one or more Events of
Default, CIT shall have the right to an expedited hearing to request authority
under Section 363 of the Bankruptcy Code, on behalf of the Companies for the
benefit of itself, for CIT to conduct absolute auction sales in accordance with
Section 363 of the Bankruptcy Code of the Companies' interests in any of the
Collateral. To the extent that (i) any such property interests are encumbered by
a lien securing an obligation owed to a creditor other than CIT, and (ii) such
lien ranks prior to the lien securing the Obligations, then the proceeds of any
such auction sale shall be used to pay such obligation owed to such creditor
prior to the payment of the Obligations.
(e) Further RemediesFurther Remedies. Three (3) business days after
written notice to the Companies, U.S. Trustee and counsel to any statutory
committee appointed in the Chapter 11 Cases by CIT of the occurrence of any one
or more Events of Default (which 5 days may be coterminous with the notice
period set forth in Section 10.2(b) hereof) and without further permission of
the Bankruptcy Court, CIT may proceed to protect and enforce its rights under
this Financing Agreement and the other Loan Documents by exercising such
remedies as are available to CIT in respect thereof under applicable law, either
by suit in equity or by action at law, or both, whether for specific performance
of any provision contained in this Financing Agreement or any of the other Loan
Documents or in aid of the exercise of any power granted in this Financing
Agreement or any of the other Loan Documents.
SECTION 11. Termination
This Financing Agreement shall automatically terminate on the
Termination Date. Additionally, CIT may terminate the Financing Agreement
immediately upon the occurrence of an Event of Default. All Obligations shall
become due and payable as of any termination hereunder or under Section 10
hereof and, pending a final accounting, CIT may withhold any balances in the
Companies' account (unless supplied with an indemnity satisfactory to CIT) to
cover all of the Obligations, whether absolute or contingent, including, but not
limited to, cash reserves for any contingent Obligations, including an amount of
110% of the face amount of any outstanding Letters of Credit. All of CIT's
rights, liens and security interests shall continue after any termination until
all Obligations have been paid and satisfied in full.
SECTION 12. Miscellaneous
12.1 Each of the Companies hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment except as otherwise set forth
herein. No delay or omission of CIT or the Companies to exercise any right or
remedy hereunder, whether before or after the happening of any Event of Default,
shall impair any such right or shall operate as a waiver thereof or as a waiver
of any such Event of Default. No single or partial exercise by CIT of any right
or remedy precludes any other or further exercise thereof, or precludes any
other right or remedy.
12.2 This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the
Companies and CIT; supersede any prior agreements; can be changed only by a
writing signed by both the Companies and CIT; and shall bind and benefit the
Companies and CIT and their respective successors and assigns.
12.3 In no event shall the Companies, upon demand by CIT for payment of
any Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Companies. This paragraph shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.
12.4 If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining provisions of the applicable agreement
shall remain in full force and effect and shall not be affected by such
provision's severance. Furthermore, in lieu of any such provision, there shall
be added automatically as a part of the applicable agreement a legal and
enforceable provision as similar in terms to the severed provision as may be
possible.
12.5 EACH OF THE COMPANIES AND CIT EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREUNDER. EACH OF THE COMPANIES HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT
WILL CIT BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
12.6 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (provided that, any
electronic communications from any of the Companies with respect to any request,
transmission, document, electronic signature, electronic mail or facsimile
transmission shall be deemed binding on the Companies for purposes of this
Financing Agreement, provided further that any such transmission shall not
relieve the Companies from any other obligation hereunder to communicate further
in writing), and shall be deemed to have been validly served, given or delivered
when hand delivered or sent by facsimile, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified or to such other address as any party hereto may designate
for itself by like notice, as follows:
(A) if to CIT, at:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas - 22nd Floor
New York, NY 10036
Attn: Nicholas Malatestinic
Vice President, Team Leader
Nicholas.Malatestinic@cit.com
Fax No.: 212-536-1295
with a copy to:
Reed Smith LLP
2500 One Liberty Place
Philadelphia, PA 19103
Attn: Matthew E. Tashman, Esquire
mtashman@reedsmith.com
Fax No.: 215-851-1420
(B) if to the Companies at:
2 North Tamiami Trail, Suite 900
Sarasota, FL 34236-5568
Attn: George Zulanas, Jr.
Oliver J. Janney, Esquire
-
Fax No.: 941-361-2218
with a copy to:
White & Case LLP
200 South Biscayne Boulevard
Miami, FL 33131
Attn: Thomas E. Lauria, Esquire
Gerard Uzzi, Esquire
tlauria@whitecase.com
guzzi@whitecase.com
Fax No.: 305-358-5744
provided, however, that the failure of CIT to provide the Companies' counsel
with a copy of such notice shall not invalidate any notice given to the
Companies and shall not give the Companies any rights, claims or defenses due to
the failure of CIT to provide such additional notice.
12.7 General Acknowledgments. Each Company acknowledges
and agrees that:
(a) Neither this Financing Agreement nor any other agreement
entered in connection herewith or pursuant to the terms hereof shall be deemed
or construed to be a compromise, satisfaction, reinstatement, accord and
satisfaction, novation or release of any of the Pre-Petition Loan Documents, or
any rights or obligations thereunder, or a waiver by CIT of any of its rights
under the Pre-Petition Loan Documents or at law or in equity.
(b) All liens, security interests, rights and remedies granted
to CIT in the Pre-Petition Loan Documents are hereby renewed, confirmed and
continued, and shall also secure the performance by the Companies of their
Obligations hereunder.
(c) The Companies have no defense, set-off, counterclaim or
challenge against the payment of any sums owing under the Pre-Petition Loan
Documents, or the enforcement of any of the terms or conditions thereof.
(d) Each Company hereby confirms and acknowledges that the
Pre-Petition Balance is validly and duly owing under the Pre-Petition Loan
Documents to CIT, including all sums included therein for accrued and unpaid
interest, legal fees and expenses and earned and unpaid fees due to CIT under
the Pre-Petition Loan Documents.
12.8 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN
EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
12.9 EACH COMPANY, ON BEHALF OF ITSELF, AND ANY PERSON OR ENTITY
CLAIMING BY OR THROUGH IT (COLLECTIVELY REFERRED TO AS THE "RELEASORS"), HEREBY
UNCONDITIONALLY REMISE, RELEASE AND FOREVER DISCHARGE CIT, EACH OF ITS PAST AND
PRESENT OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS, PARENT CORPORATIONS,
SUBSIDIARIES, AFFILIATES, TRUSTEE, ADMINISTRATORS, ATTORNEYS, PREDECESSORS,
SUCCESSORS AND ASSIGNS AND THE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND
ASSIGNS OF ANY SUCH PERSON OR ENTITY, AS RELEASEES (COLLECTIVELY REFERRED TO AS
THE "RELEASEES"), OF AND FROM ANY AND ALL MANNER OF ACTIONS, CAUSES OF ACTION,
SUITS, DEBTS, DUES, ACCOUNTS, BONDS, COVENANTS, CONTRACTS, AGREEMENTS, PROMISES,
WARRANTIES, GUARANTIES, REPRESENTATIONS, LIENS, MECHANICS' LIENS, JUDGMENTS,
CLAIMS, COUNTERCLAIMS, CROSSCLAIMS, DEFENSES AND/OR DEMANDS WHATSOEVER,
INCLUDING CLAIMS FOR CONTRIBUTION AND/OR INDEMNITY, WHETHER NOW KNOWN OR
UNKNOWN, PAST OR PRESENT, ASSERTED OR UNASSERTED, CONTINGENT OR LIQUIDATED, AT
LAW OR IN EQUITY, OR RESULTING FROM ANY ASSIGNMENT, IF ANY (COLLECTIVELY
REFERRED TO AS "CLAIMS"), WHICH ANY OF RELEASORS EVER HAD, NOW HAVE, OR MAY HAVE
AGAINST ANY OF THE RELEASEES, FOR OR BY REASON OF ANY CAUSE, MATTER OR THING
WHATSOEVER, ARISING FROM THE BEGINNING OF TIME TO THE DATE OF EXECUTION OF THIS
FINANCING AGREEMENT, INCLUDING BUT NOT LIMITED TO, ANY AND ALL CLAIMS RELATING
TO OR ARISING FROM THE LENDING OR ANY OTHER RELATIONSHIP BETWEEN CIT AND ANY OF
THE COMPANIES. EACH OF THE COMPANIES WARRANTS AND REPRESENTS THAT IT HAS NOT
ASSIGNED, PLEDGED, HYPOTHECATED AND/OR OTHERWISE DIVESTED ITSELF AND/OR
ENCUMBERED ALL OR ANY PART OF THE CLAIMS BEING RELEASED HEREBY AND THAT IT
HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY AND ALL OF RELEASEES AGAINST
WHOM ANY CLAIM SO ASSIGNED, PLEDGED, HYPOTHECATED, DIVESTED AND/OR ENCUMBERED IS
ASSERTED.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Debtor-In-Possession Financing Agreement to be effective, executed, accepted and
delivered by their proper and duly authorized officers as of the date set forth
above.
UNIROYAL TECHNOLOGY CORPORATION
By: /s/ Howard R. Curd
Title: Chairman and Chief Executive Officer
UNIROYAL ENGINEERED
PRODUCTS, LLC
By: /s/ Howard R. Curd
Title: Chairman
UNIROYAL OPTOELECTRONICS, INC.
By: /s/ Howard R. Curd
Title: Chairman
STERLING SEMICONDUCTOR, INC.
By: /s/ Howard R. Curd
Title: Chairman
NORLUX CORP.
By: /s/ Howard R. Curd
Title: Chairman
UNIROYAL HPP HOLDINGS, INC.
By: /s/ Howard R. Curd
Title: Chairman
UNITECHNJ, INC.
By: /s/ Howard R. Curd
Title: Chairman
UNITECHOH, INC.
By: /s/ Howard R. Curd
Title: Chairman
UNIROYAL COMPOUND SEMICONDUCTORS, INC.
By: /s/ Howard R. Curd
Title: Chairman
UEP HOLDINGS, INC.
By: /s/ Howard R. Curd
Title: Chairman
UNR SERVICE CORPORATION
By: /s/ Howard R. Curd
Title: Chairman
UNITECHIND, INC.
By: /s/ Howard R. Curd
Title: Chairman
UNIROYAL LIABILITY MANAGEMENT COMPANY, INC.
By: /s/ Howard R. Curd
Title: Chairman
HIGH PERFORMANCE PLASTICS, INC.
By: /s/ Howard R. Curd
Title: Chairman
ULMC2CORP
By: /s/ Howard R. Curd
Title: Chairman
THE CIT GROUP/BUSINESS CREDIT, INC.
By: __________________________
Title: