Exhibit 4.1
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REVOLVING CREDIT
AND SECURITY AGREEMENT
This Revolving Credit and Security Agreement is made as of July 27,
2001 by and between GMAC COMMERCIAL CREDIT LLC ("Lender"), having offices at
1290 Avenue of the Americas, New York, New York 10104 and MORGAN DRIVE AWAY,
INC. and TDI, INC. (individually and collectively, jointly and severally the
"Borrower"), having its principal place of business at 2746 Old U.S. 20 West
Elkhart, Indiana 46515.
WHEREAS, the Borrower has requested that Lender make loans and advances
available to Borrower; and
WHEREAS, Lender has agreed to make such loans and advances to Borrower,
as Borrower's sole Working Capital Lender, on the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings and the terms and conditions contained herein, the parties hereto
agree as follows:
1. General Definitions. When used in this Agreement, the following
terms shall have the following meanings:
"Accession" means and includes goods that are physically united with
other goods in such a manner that the identity of the original goods is not
lost.
"Account" ,except as used in "account for", means and includes a right
to payment of a monetary obligation, whether or not earned by performance, (i)
for property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a
policy of insurance issued or to be issued, (iv) for a secondary obligation
incurred or to be incurred, (v) for energy provided or to be provided, (vi) for
the use or hire of a vessel under a charter or other contract, (vii) arising out
of the use of a credit or charge card or information contained on or for use
with the card, or (viii) as winnings in a lottery or other game of chance
operated or sponsored by a state, governmental unit of a State, or person
licensed or authorized to operate the game by a State or governmental unit of a
State. The term includes health-care-insurance receivables. The term does not
include (i) rights to payment evidenced by chattel paper or an instrument, (ii)
commercial tort claims, (iii) deposit accounts, (iv) investment property, (v)
letter-of-credit rights or letters of credit, or (vi) rights to payment for
money or funds advanced or sold, other than rights arising out of the use of a
credit or charge card or information contained on or for use with the card.
"Advance Rates" means the T-Bill Advance Rate and the Receivables
Advance Rate.
"Affiliate" of any Person means (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i) of such Person,
(ii) of any Subsidiary of such Person or (iii) of any Person described in clause
(a) above. For purposes of this definition, control of a Person shall mean the
power, direct or indirect, (i) to vote 5% or more of the securities having
ordinary voting power for the election of directors of such Person, or (ii) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate in effect on such day and (ii) the Federal Funds
Rate in effect on such day plus 1/2 of 1%.
"Ancillary Agreements" means all agreements, instruments, and documents
including, without limitation, mortgages, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, trust agreements whether
heretofore, concurrently, or hereafter executed by or on behalf of Borrower or
delivered to Lender, relating to this Agreement or to the transactions
contemplated by this Agreement.
"Bank" means The Bank of New York.
"Borrowing Base Certificate" shall have the meaning set forth in
Section 9.
"Business Day" means any day other than a day on which commercial banks
in New York are authorized or required by law to close.
"Change of Ownership" means (a) any transfer (whether in one or more
transactions) of ownership of not less than 50% of the common stock of Borrower
held by the Original Owners (including for the purposes of the calculation of
percentage ownership, any shares of common stock into which any capital stock of
Borrower held by any of the Original Owners is convertible or for which any such
shares of the capital stock of Borrower or of any other Person may be exchanged
and any shares of common stock issuable to such Original Owners upon exercise of
any warrants, options or similar rights which may at the time of calculation be
held by such Original Owners) to a Person who is neither an Original Owner nor
an Affiliate of an Original Owner or (b) any merger, consolidation or sale of
substantially all of the property or assets of Borrower.
"Closing Date" means the date set forth in the first paragraph of this
Agreement or such other date as may be agreed upon by the parties hereto.
"Chattel Paper" means and includes a record or records that evidence
both a monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security interest
in specific goods and license of software used in the goods, a lease of specific
goods, or a lease of specific goods and license of software used in the goods.
In this paragraph, "monetary obligation" means a monetary obligation secured by
the goods or owed under a lease of the goods and includes a monetary obligation
with respect to software used in the goods. The term does not include (i)
charters or other contracts involving the use or hire of a vessel or (ii)
records that evidence a right to payment arising out of the use of a credit or
charge card or information contained on or for use with the card. If a
transaction is evidenced by records that include an instrument or series of
instruments, the group of records taken together constitutes Chattel Paper.
"Collateral" means and includes:
(A) all Accounts;
(B) all Goods, all Inventory, all Equipment, and all Software;
(C) all General Intangibles;
(D) all Investment Property, and all Instruments;
(E) all Deposit Accounts, and all Documents;
(F) all Chattel Paper, all Tangible Chattel Paper, and all
Electronic Chattel Paper;
(G) all Commodity Contracts, all Commodity Accounts, all
Letter-of-Credit Rights;
(H) all Supporting Obligations pertaining to, arising in
connection with or relating to (A), (B), (C), (D), (E), (F), and (G);
(I) all books, records, ledgercards, files, correspondence,
computer programs, tapes, disks and related data processing software (owned by
Borrower or in which it has an interest) which at any time evidence or contain
information relating to (A), (B), (C), (D), (E), (F), (G) and (H) above or are
otherwise necessary or helpful in the collection thereof or realization
thereupon;
(J) all cash held as cash collateral to the extent not
otherwise constituting Collateral, all other cash or property at any time on
deposit with or held by Lender for the account of Borrower (whether for
safekeeping, custody, pledge, transmission or otherwise), (ii) all investments
and reinvestments (however evidenced) of amounts from time to time credited to
such accounts, and (iii) all interest, dividends, distributions and other
proceeds payable on or with respect to (x) such investments and reinvestments
and (y) such accounts; and
(K) all products and Proceeds of, and all Accessions to, (A),
(B), (C), (D), (E), (F), (G), (H), (I) and (J) above (including, but not limited
to, all claims to items referred to in (A), (B), (C), (D), (E), (F), (G), (H),
(I) and (J) above) and all claims of Borrower against third parties for (x) (i)
loss of, damage to, or destruction of, and (ii) payments due or to become due
under leases, rentals and hires of, any or all of (A), (B), (C), (D), (E), (F),
(G), (H), (I) and (J) above and (y) proceeds payable under, or unearned premiums
with respect to, policies of insurance in whatever form.
"Commodity Account" means and includes an account maintained by a
commodity intermediary in which a commodity contract is carried for a commodity
customer.
"Commodity Contract" means and includes a commodity futures contract,
an option on a commodity futures contract, a commodity option, or another
contract if the contract or option is:
(A) traded on or subject to the rules of a board of trade that has been
designated as a contract market for such a contract pursuant to federal
commodities laws; or
(B) traded on a foreign commodity board of trade, exchange, or market,
and is carried on the books of a commodity intermediary for a commodity
customer.
"Contract Rate" means an interest rate per annum equal to (i) Alternate
Base Rate plus (ii) one half percent (1/2%), or (ii) provided there does not
exist an Event of Default and provided Borrower on 3 days prior written notice
to Lender requests Lender to do so, interest shall be calculated at a rate equal
to three percent (3%) in excess the LIBOR as published in the Wall Street
Journal averaged monthly; provided, however, the Contract Rate shall not at any
time be less than six percent (6%), and further provided that if the LIBOR is
not published in the Wall Street Journal or Lender in good faith determines that
LIBOR may no longer be used to calculate the Contract Rate the Contract Rate
shall in such event be calculated on the basis of the Alternate Base Rate.
Provided there does not then exist an Event of Default, after the first
anniversary of the Closing Date Lender shall adjust the Contract Rate with
respect to Revolving Credit Advances on a quarterly basis, to the rates set
forth on the grid below, pursuant to the applicable corresponding calculation of
the ratio of Funded Debt to EBITDA computed on a rolling four quarter basis:
Funded Debt (including the face amount of Average LIBOR Alternate Base
outstanding Letters of Credit/EBITDA) plus Margin Rate plus Margin
- ------------------------------------------- -------------- ----------------
Greater than 4.5 3.5% 1.00%
Greater than 3.0 but less than 4.5 3.0% .50%
Greater than 2.0 but less than 3.0 2.75% .25%
Less than 2.0 2.5% 0.00%
"Current Assets" at a particular date, means all cash, cash
equivalents, accounts and inventory of Borrower and all other items which would,
in conformity with GAAP, be included under current assets on a balance sheet of
Borrower as at such date; provided, however, that such amounts shall not include
(a) any amounts for any indebtedness owing by an Affiliate of Borrower to
Borrower, unless such indebtedness arose in connection with the sale of goods or
other property in the ordinary course of business and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of Borrower, (c) the cash surrender value of any life insurance
policy, or (d) any assets which would be classified as intangible assets under
GAAP.
"Current Liabilities" at a particular date, means all amounts which
would, in conformity with GAAP, be included under current liabilities on a
balance sheet of Borrower as at such date, but in any event including, without
limitation, the amounts of (a) all indebtedness payable on demand, or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any indebtedness
(whether installment, serial maturity, sinking fund payment or otherwise)
required to be made not more than twelve (12) months after such date, (c) all
reserves in respect of liabilities or indebtedness payable on demand or, at the
option of the Person to whom such indebtedness is owed, not more than twelve
(12) months after such date, the validity of which is contested at such date,
and (d) all accruals for federal or other taxes measured by income payable
within a twelve (12) month period.
"Customer" means and includes the account debtor with respect to any
Receivable, the prospective purchaser of goods, services or both with respect to
any contract or contract right, and/or any party who enters into or proposes to
enter into any contract or other arrangement with Borrower, pursuant to which
Borrower is to deliver any personal property or perform any services.
"Default Rate" means a rate equal to two percent (2%) per annum in
excess of the Contract Rate or the Overadvance Rate, as the case may be.
"Deposit Account" means and includes a demand, time, savings, passbook,
or similar account maintained with a bank. The term does not include investment
property or accounts evidenced by an instrument.
"Dispute" means any cause that has been asserted for nonpayment of one
or more particular Receivables, including, without limitation, any alleged
defense, counterclaim, offset, dispute or other claim (real or merely asserted)
whether arising from or relating to the sale of goods or rendition of services
or arising from or relating to any other transaction or occurrence.
"Document" means and includes a document of title or a receipt of the
type described in Section 7--201(2) of the Uniform Commercial Code.
"EBITDA" shall mean for any given period (a) net income (or loss) of
Borrower determined in accordance with GAAP, less (b) all extraordinary gains,
plus (c) all extraordinary losses, plus (d) cash payments of taxes, plus (e)
cash payments of interest expense, plus (f) depreciation and amortization and
other non-cash expenses during such period.
"Electronic Chattel Paper" means and includes chattel paper evidenced
by a record or records consisting of information stored in an electronic medium.
"Eligible Receivables" means and includes each Receivable which
conforms to the following criteria: (a) shipment of the merchandise or the
rendition of services has been completed; (b) no return, rejection or
repossession of the merchandise has occurred; (c) merchandise or services shall
not have been rejected or subject to a Dispute by the Customer and there shall
not have been asserted any Dispute; (d) continues to be in full conformity with
the representations and warranties made by Borrower to Lender with respect
thereto; (e) Lender is, and continues to be, satisfied with the credit standing
of the Customer in relation to the amount of credit extended; (f) is documented
by an invoice in a form approved by Lender and shall not be unpaid more than
ninety (90) days from invoice date nor more than sixty days from due date; (g)
is owed by a customer from whom less than fifty percent (50%) of the unpaid
amount of invoices due from such Customer remain unpaid more than ninety (90)
days from invoice date nor more than (60) days from due date; (h) is not
evidenced by chattel paper or an instrument of any kind with respect to or in
payment of the Receivable unless such instrument is duly endorsed to and in
possession of Lender or represents a check in payment of a Receivable; (i) if
the Customer is located outside of the United States or Canada, the goods which
gave rise to such Receivable were shipped after receipt by Borrower from or on
behalf of the Customer of an irrevocable letter of credit, assigned and
delivered to Lender and confirmed by a financial institution acceptable to
Lender and is in form and substance acceptable to Lender, payable in the full
amount of the Receivable in United States dollars at a place of payment located
within the United States; (j) is not subject to any lien, other than Permitted
liens; (k) does not arise out of transactions with any employee, officer, agent,
director, stockholder or Affiliate of Borrower; (l) is payable to Borrower; (m)
does not arise out of a bill and hold sale prior to shipment and, if the
Receivable arises out of a sale to any Person to which Borrower is indebted, the
amount of such indebtedness, and any anticipated indebtedness, is deducted in
determining the face amount of such Receivable; (n) is net of any returns,
discounts, claims, credits and allowances; (o) if the Receivable arises out of
contracts between Borrower and the United States, any state, or any department,
agency or instrumentality of any of them, Borrower has so notified Lender, in
writing, prior to the creation of such Receivable, and such Receivable is in
excess of similar Receivables in the aggregate amount of $250,000 at any time
outstanding and, if Lender so requests, there has been compliance with any
governmental notice or approval requirements, including, without limitation,
compliance with the Federal Assignment of Claims Act; (p) is a good and valid
account representing an undisputed bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to an unconditional sale and delivery upon the stated terms
of goods sold by Borrower, or work, labor and/or services rendered by Borrower;
and (q) is otherwise satisfactory to Lender as determined in good faith by
Lender in the reasonable exercise of its discretion.
"Equipment" means and includes all of Borrower's now owned or hereafter
acquired equipment, machinery and goods (excluding Inventory), whether or not
constituting fixtures, including, without limitation, plant and office
equipment, tools, dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefor and all accessions thereto.
"Event of Default" means the occurrence of any of the events set forth
in Section 18.
"Federal Funds Rate" means, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by The Bank of New York from three Federal funds brokers
of recognized standing selected by The Bank of New York.
"Fixed Charge Coverage" shall mean and include, with respect to any
fiscal period, an amount equal to the product of (a) EBITDA less Capital
Expenditures, divided by (b) cash interest paid, plus principal paid, plus taxes
paid, plus dividends paid.
"Formula Amount" shall have the meaning set forth in Section 2(a).
"Funded Debt" shall mean for Borrower, liabilities for borrowed money,
including without limitation, the Revolving Advances, undrawn or unreimbursed
letters of credit, capitalized lease obligations and notes payable to any
affiliate, subsidiary or related party.
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time.
"General Intangible" means and includes any personal property,
including things in action, other than Accounts, Chattel Paper, commercial tort
claims, deposit accounts, Documents, goods, instruments, investment property,
Letter-of-Credit Rights, letters of credit, money, and oil, gas, or other
minerals before extraction. The term includes payment intangibles and software.
"Goods" means and includes all things that are movable when a security
interest attaches. The term includes (i) fixtures, (ii) standing timber that is
to be cut and removed under a conveyance or contract for sale, (iii) the unborn
young of animals, (iv) crops grown, growing, or to be grown, even if the crops
are produced on trees, vines, or bushes, and (v) manufactured homes. The term
also includes a computer program embedded in goods and any supporting
information provided in connection with a transaction relating to the program if
(i) the program is associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by becoming the owner of
the goods, a person acquires a right to use the program in connection with the
goods. The term does not include a computer program embedded in goods that
consists solely of the medium in which the program is embedded. The term also
does not include accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, instruments, investment property,
letter-of-credit rights, letters of credit, money, or oil, gas, or other
minerals before extraction.
"Guarantor" means individually, The Morgan Group, Inc. and any other
Person who may hereafter guarantee payment or performance of the whole or any
part of the Obligations and "Guarantors" means collectively all such Persons.
"Guaranty Agreements" means collectively the Guaranties which are
executed by each Guarantor in favor of Lender.
"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated byphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
environmental law and in the regulations adopted pursuant thereto.
"Incipient Event of Default" means any act or event which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
"Inventory" means and includes all of Borrower's now owned or hereafter
acquired goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them.
"Investment Property" means and includes a security, whether
certificated or uncertificated, security entitlement, securities account,
commodity contract, or commodity account.
"LIBOR" means the London Interbank Offering Rate for 30 day funds as
published daily in the Wall Street Journal and averaged for the month of
calculation.
"Letters of Credit" means the letters of credit caused to be opened by
Lender for the benefit of Borrower in an aggregate amount at any time
outstanding not to exceed $10,000,000.
"Letter-of-Credit Right" means and includes a right to payment or
performance under a letter of credit, whether or not the beneficiary has
demanded or is at the time entitled to demand payment or performance. The term
does not include the right of a beneficiary to demand payment or performance
under a letter of credit
"Loans" means the Revolving Credit Advances and all other extensions of
credit hereunder.
"Maximum Revolving Amount" means $12,500,000.
"Minimum Excess Borrowing Availability" means the amount by which the
lesser of the (i) the Maximum Revolving Amount or the (ii) Formula Amount
exceeds the Loans.
"Net Face Amount" of Receivables means the gross face invoice amount
thereof, less returns, discounts allowed under any terms of the invoice (the
calculation of which shall be determined by Lender where optional terms are
given), anticipation or any other unilateral deductions taken by Customers, and
credits and allowances to Customers of any nature.
"Net Worth" at a particular date, shall mean the aggregate amount of
all Stockholder's Equity of Borrower, as may properly be classified as such in
accordance with GAAP consistently applied.
"Obligations" means and includes all Loans, all advances, debts,
liabilities, obligations, covenants and duties owing by Borrower to Lender of
every kind and description (whether or not evidenced by any note or other
instrument and whether or not for the payment of money or the performance or
non-performance of any act), direct or indirect, absolute or contingent, due or
to become due, contractual or tortious, liquidated or unliquidated, whether
existing by operation of law or otherwise now existing or hereafter arising
including, without limitation, any debt, liability or obligation owing from
Borrower to others which Lender may have obtained by assignment or otherwise and
further including, without limitation, all interest, charges or any other
payments Borrower is required to make by law or otherwise arising under or as a
result of this Agreement and the Ancillary Agreements, together with all
reasonable expenses and reasonable attorneys' fees chargeable to Borrower's
account or incurred by Lender in connection with Borrower's account whether
provided for herein or in any Ancillary Agreement.
"Original Owners" means The Morgan Group, Inc.
"Overadvance Rate" means a rate equal to one percent (1%) per annum in
excess of the Contract Rate.
"Permitted Liens" means (i) statutory liens consisting of liens of
carriers, warehousemen, mechanics and materialmen incurred in the ordinary
course of business securing sums not overdue; (ii) liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits,
relating to employees, securing sums (a) not overdue or (b) being diligently
contested in good faith provided that adequate reserves with respect thereto are
maintained on the books of Borrower in conformity with GAAP; (iii) liens in
favor of Lender; (iv) liens for taxes (a) not yet due or (b) being diligently
contested in good faith, provided that adequate reserves with respect thereto
are maintained on the books of Borrower in conformity with GAAP; (v) liens
incurred in the ordinary course of business to secure the performance of
tenders, statutory obligations, appeal bonds, bids, leases, government
contracts, and other similar obligations provided they are not senior to the
lien of Lender in any of the Collateral; (vi) easements, restrictions,
rights-of-way and other similar matters of records provided they do not
materially impair the use or value of the Collateral; (vii) any attachment or
judgement lien (including judgement or appeal bonds) which shall within 15 days
after the entry thereof have been discharged, bonded or the execution thereof
stayed pending appeal, or which shall have been discharged or bonded within 15
days after the expiration of such stay provided such lien is not senior to the
lien of Lender in the Collateral; (viii) any interest, title or lien of a lessor
under any operating lease of Equipment; and (ix) liens specified on Schedule
1(A) hereto.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prime Rate" means the prime commercial lending rate of the Bank as
publicly announced in New York, New York to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time and
is neither tied to any external rate of interest or index nor does it
necessarily reflect the lowest rate of interest actually charged to any
particular class or category of customers.
"Receivables" means and includes all of Borrower's now owned or
hereafter acquired Accounts and contract rights, Instruments, insurance
proceeds, Documents, Chattel Paper, Letters-of-Credit Rights and Borrower's
rights to receive payment under the letters of credit, any and all rights to the
payment or receipt of money or other forms of consideration of any kind at any
time now or hereafter owing or to be owing to Borrower, all proceeds thereof and
all files in which Borrower has any interest whatsoever containing information
identifying or pertaining to any of Borrower's Receivables, together with all of
Borrower's rights to any merchandise which is represented thereby, and all
Borrower's right, title, security and guaranties with respect to each
Receivable, including, without limitation, all rights of stoppage in transit,
replevin and reclamation and all rights as an unpaid vendor.
"Receivables Advance Rate" shall have the meaning set forth in the
definition of Receivables Availability.
"Receivables Availability" means the amount of Revolving Credit
Advances against Eligible Receivables Lender may from time to time during the
term of this Agreement make available to Borrower up to 85% ("Receivables
Advance Rate") of the Net Face Amount of Borrower's Eligible Receivables.
"Reports" shall have the meaning set forth in Section 14.
"Retained Goods" shall have the meaning set forth in Section 8(h).
"Revolving Credit Advances" shall have the meaning set forth in Section
2(a).
"Sanction/Embargo Programs" shall mean economic and other sanctions and
embargo program restrictions promulgated by the government of the United States
of America or any office or agency thereof including but not limited to the
President and the Office of Foreign Assets Control of the Treasury Department,
or either of them.
"Settlement Date" means one (1) Business Day after the day on which the
applicable Receivable is actually collected by Lender.
"Software" means and includes a computer program and any supporting
information provided in connection with a transaction relating to the program.
The term does not include a computer program that is included in the definition
of goods.
"Supporting Obligation" means and includes a letter-of-credit right or
secondary obligation that supports the payment or performance of an account,
chattel paper, a document, a general intangible, an instrument, or investment
property.
"Subsidiary" of any Person means a corporation or other entity of whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"T-Bill Advance Rate" shall have the meaning set forth in the
definition of T-Bill Availability.
"T-Bill Availability" means an amount equal to ninety-five percent
(95%) ("T-Bill Advance Rate") of the face amount of Treasury Bills which are
pledged to Lender as to which Lender has a perfected first security interest and
if any such Treasury Bill held by a brokerage firm or bank such Treasury Bill is
subject to a control agreement with such holder in form and substance
satisfactory to, and in favor of, Lender.
"Tangible Net Worth" at a particular date, shall mean the aggregate
amount of all Stockholder's Equity of Borrower less Goodwill, as may properly be
classified as such in accordance with GAAP consistently applied.
"Term" means the Closing Date to the third anniversary of the Closing
Date subject to acceleration upon the occurrence of an Event of Default or other
termination hereunder.
"Total Liabilities" at a particular date means all Indebtedness of
Borrower as at such date.
"Working Capital" at a particular date means the excess, if any, of
Current Assets over Current Liabilities at such date.
(A) Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with GAAP.
(B) Other Terms. All other terms used in this Agreement and
defined in the Uniform Commercial Code as adopted in the State of New York,
shall have the meaning given therein unless otherwise defined herein.
2. Loans.
(a) Subject to the terms and conditions set forth herein and in the
Ancillary Agreements, Lender shall make revolving credit advances (the
"Revolving Credit Advances") to Borrower from time to time during the Term
which, in the aggregate at any time outstanding, will not exceed the lesser of
(x) the Maximum Revolving Amount or (y) an amount equal to the sum of:
(i) Receivables Availability, plus
(ii) T-Bill Availability, minus
(iii) the face amount of any outstanding Letters of Credit, minus
(iv) such reserves as Lender may in its sole and absolute
discretion deem proper and necessary from time to time.
The sum of 2(a)(i) plus 2(a)(ii) minus 2(a)(iii) minus 2(a)(iv) shall
be referred to as the "Formula Amount". In this regard, Borrower agrees that it
shall submit a Borrowing Base Certificate to Lender, in form and substance and
with such frequency, as more fully described in Section 9 below, to include such
calculations, in each instance that Lender may deem necessary or desirable in
order to verify whether Borrower is in compliance with the preceding limitations
pertaining to Revolving Credit Advances.
(b) Notwithstanding the limitations set forth above, Lender retains the
right to lend Borrower from time to time such amounts in excess of such
limitations as Lender may determine in its sole discretion.
(c) Borrower acknowledges that the exercise of Lender's discretionary
rights hereunder may result during the term of this Agreement in one or more
increases or decreases in the Advance Rates and Borrower hereby consents to any
such increases or decreases which may limit or restrict advances requested by
Borrower, provided that the Lender shall notify Borrower not less than 5
Business Days prior to the effective date of any decrease in Advance Rates.
(d) If Borrower does not pay any interest, fees, costs, charges or
commissions to Lender when due, Borrower shall thereby be deemed to have
requested, and Lender is hereby authorized at its discretion to make and charge
to Borrower's account, a Revolving Credit Advance to Borrower as of such date in
an amount equal to such unpaid interest, fees, costs, charges or commissions.
(e) Any sums expended by Lender due to Borrower's failure to perform or
comply with its obligations under this Agreement, including but not limited to
the payment of taxes, insurance premiums or leasehold obligations, shall be
charged to Borrower's account as a Revolving Credit Advance and added to the
Obligations.
(f) Lender will account to Borrower monthly with a statement of all
Loans and other advances, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive unless Lender is notified by Borrower in writing to the contrary
within sixty (60) days of the date each account was rendered specifying the item
or items to which objection is made.
(g) During the Term, Borrower may borrow, prepay and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.
(h) The aggregate balance of Loans outstanding at any time shall not
exceed the Maximum Revolving Amount. The aggregate balance of Revolving Credit
Advances outstanding at any time shall not exceed the Formula Amount.
3. Repayment of Loans. Borrower shall be required to (i) make a
mandatory prepayment hereunder at any time that the aggregate outstanding
principal balance of the Loans made by Lender to Borrower hereunder is in excess
of the Maximum Revolving Amount or the Formula Amount in an amount equal to such
excess, and (ii) repay on the expiration of the Term (x) the then aggregate
outstanding principal balance of Revolving Credit Advances made by Lender to
Borrower hereunder together with accrued and unpaid interest, fees, charges and
commissions and (y) all other amounts owed Lender under this Agreement and the
Ancillary Agreements.
4. Procedure for Revolving Credit Advances. The Borrower may by written
notice request a borrowing of Revolving Credit Advances prior to 1:00 P.M. New
York time on the Business Day of its request to incur, on that day, a Revolving
Credit Advance. All Revolving Credit Advances shall be disbursed from whichever
office or other place Lender may designate from time to time and, together with
any and all other Obligations of Borrower to Lender, shall be charged to the
Borrower's account on Lender's books. The proceeds of each Revolving Credit
Advance made by the Lender shall be made available to the Borrower on the day so
requested by way of credit to the Borrower's operating account maintained with
such bank as Borrower designated to Lender. Any and all Obligations due and
owing hereunder may be charged to Borrower's account and shall constitute
Revolving Credit Advances.
5. Interest; Fees; Commissions.
(a) Interest.
(i) Except as modified by Section 5(a)(iii) below, interest on
Revolving Credit Advances shall be payable in arrears on the last day of each
month. Interest payments hereunder may, at Lender's option, be charged by Lender
to Borrower's account. Interest charges shall be computed on the unpaid balance
of the Revolving Credit Advances for each day they are outstanding at a rate per
annum equal to (i) with respect to Revolving Credit Advances, the Contract Rate.
In the event the aggregate amount of Revolving Credit Advances exceeds the
Formula Amount for five (5) or more days in any month during the Term, the
average daily balance of Revolving Credit Advances in that month shall bear
interest at the Overadvance Rate.
(ii) Interest shall be computed on the basis of actual days
elapsed over a 360-day year.
(iii) Upon the occurrence and during the continuance of an Event
of Default, interest shall be payable at the Default Rate.
(iv) Notwithstanding the foregoing, in no event shall interest
exceed the maximum rate permitted under any applicable law or regulation, and if
any provision of this Agreement or an Ancillary Agreement is in contravention of
any such law or regulation, such provision shall be deemed amended to provide
for interest at said maximum rate and any excess amount shall either be applied,
at Lender's option, to the outstanding Loans in such order as Lender shall
determine or refunded by Lender to Borrower.
(v) Borrower shall pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any set-off or
counterclaim.
(b) Fees.
(i) Closing Fee. Upon execution of this Agreement by Borrower and
Lender, Borrower shall pay to Lender a closing fee in an amount equal to
$25,000.
(ii) Administrative Fee. Borrower shall pay to Lender on the
Closing Date and on the first day of each month thereafter a monthly fee in an
amount equal to $1,500 per month for each month or part thereof that this
Agreement is in effect.
(iii) Unused Line Fee. In the event the average closing daily
unpaid balances of all Revolving Credit Advances hereunder during any calendar
month is less than the Maximum Revolving Amount, Borrower shall pay to Lender a
fee at a rate per annum equal to one-half of one percent (1/2%) on the amount by
which the Maximum Revolving Amount exceeds such average daily unpaid balance.
Such fee shall be calculated on the basis of a year of 360 days and actual days
elapsed, and shall be charged to Borrower's account on the first day of each
month with respect to the prior month.
(iv) Collateral Monitoring Fee. Upon Lender's performance of any
collateral monitoring, including but not limited to any field examination,
collateral analysis or other business analysis, the need for which is to be
determined by Lender and which monitoring is undertaken by Lender or for
Lender's benefit, a per diem amount equal to Lender's then standard rate per
person, for each person employed to perform such monitoring, together with all
the reasonable costs, disbursements and expenses incurred by the Lender and the
person performing such collateral monitoring, shall be charged to Borrower's
account.
(c) Increased Costs. 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 Lender (for purposes of this Section 5(c),
the term "Lender" shall include Lender and any corporation or bank controlling
Lender) 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:
(i) subject Lender to any tax of any kind whatsoever with respect
to this Agreement or change the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable hereunder or under any
Ancillary Agreements (except for changes in the rate of tax on the overall net
income of Lender by the jurisdiction in which it maintains its principal
office);
(ii) 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, any
office of Lender, including without limitation pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with respect to this
Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans hereunder by an amount that Lender
deems to be material 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 Lender deems to be material, then, in any case Borrower shall promptly pay
Lender, upon its demand, such additional amount as will compensate Lender for
such additional cost or such reduction, as the case may be. Lender shall certify
the amount of such additional cost or reduction and its calculation of such
amount in reasonable detail to Borrower, and such certification shall be
conclusive absent manifest error.
(d) Capital Adequacy.
(i) In the event that Lender shall have determined that any
applicable law, rule, regulation or guideline regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender (for purposes
of this Section 5(d), the term "Lender" shall include Lender and any corporation
or bank controlling Lender) with any 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 Lender's capital as a consequence of its obligations hereunder to a
level below that which Lender could have achieved but for such adoption, change
or compliance (taking into consideration Lender's policies with respect to
capital adequacy) by an amount deemed by Lender to be material, then, from time
to time, Borrower shall pay upon demand to Lender such additional amount or
amounts as will compensate Lender for such reduction. In determining such amount
or amounts, Lender may use any reasonable averaging or attribution methods. The
protection of this Section shall be available to Lender regardless of any
possible contention of invalidity or inapplicability with respect to the
applicable law, regulation or condition.
(ii) A certificate of Lender setting forth such amount or amounts
as shall be necessary to compensate Lender with respect to Section 5(d) hereof
and Lender's calculation of such amount in reasonable detail, when delivered to
Borrower shall be conclusive absent manifest error.
6. Security Interest.
(a) To secure the prompt payment to Lender of the Obligations, Borrower
hereby assigns, pledges and grants to Lender a continuing security interest in
and to the Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located (whether or not the same is subject to Article 9
of the Uniform Commercial Code). All of the Borrower's ledger sheets, files,
records, books of account, business papers and documents relating to the
Collateral shall, until delivered to or removed by Lender, be kept by Borrower
in trust for Lender until all Obligations have been paid in full. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by Borrower shall be deemed to include the foregoing grant, whether or not the
same appears therein.
(b) Lender may file one or more financing statements disclosing
Lender's security interest in the Collateral without Borrower's signature
appearing thereon or Lender may sign on Borrower's behalf as provided in Section
13 hereof. The parties agree that a carbon, photographic or other reproduction
of this Agreement shall be sufficient as a financing statement. If any
Receivable becomes evidenced by a promissory note or any other instrument for
the payment of money, Borrower will promptly deliver such instrument to Lender
appropriately endorsed.
7. Representations Concerning the Collateral. Borrower represents and
warrants (each of which such representations and warranties shall be deemed
repeated upon the making of each request for a Revolving Credit Advance and made
as of the time of each and every Revolving Credit Advance hereunder):
(a) all the Collateral (i) is owned by Borrower free and clear of all
claims, liens, security interests and encumbrances (including without limitation
any claims of infringement) except (A) those in Lender's favor and (B) Permitted
Liens and (ii) is not subject to any agreement prohibiting the granting of a
security interest or requiring notice of or consent to the granting of a
security interest;
(b) all Receivables (i) represent bona fide transactions which require
no further act under any circumstances on Borrower's part to make such
Receivables payable by Customers, (ii) to Borrower's knowledge at the time, are
not subject to any Disputes; (iii) do not represent bill and hold sales,
consignment sales, guaranteed sales, sale or return or other similar
understandings or obligations of any Affiliate or Subsidiary of Borrower; (iv)
included in any Borrowing Base Certificate as an Eligible Receivable meets all
criteria specified in the definition of Eligible Receivables, except as may
otherwise be specifically disclosed in such Borrowing Base Certificate or as
otherwise theretofore disclosed in writing to Lender; and (v) Borrower has no
knowledge of any fact or circumstance particular to any customer not disclosed
to Lender in the pertinent Borrowing Base Certificate or otherwise in writing,
which would impair the validity or collectibility of any Receivable and that all
documents in connection with each Receivable are genuine.
(c) in the event any amounts due and owing from any account debtor to
Borrower on any Eligible Receivable shall become subject to any Dispute, or to
any other adjustment otherwise permitted to be made in accordance with the terms
and provisions hereof in the ordinary course of business and prior to the
occurrence of an Event of Default hereunder, Borrower agrees that it shall, at
the time of the submission of the next Borrowing Base Certificate required to be
delivered to Lender immediately following the date on which Borrower learns
thereof, provide Lender with notice thereof. Borrower further agrees that it
shall also notify Lender promptly of all returns and credits in respect of any
Receivables included within a Borrowing Base Certificate, which notice shall
specify the Receivables affected.
8. Covenants Concerning the Collateral. During the Term, Borrower
covenants that it shall:
(a) not dispose of any of the Collateral whether by sale, lease or
otherwise except for (i) the sale of Inventory in the ordinary course of
business, and (ii) the disposition or transfer of obsolete and wornout Equipment
in the ordinary course of business during any fiscal year having an aggregate
fair market value of not more than $100,000 and only to the extent that (x) the
proceeds of any such disposition are used to acquire replacement Equipment which
is subject to Lender's first priority security interest or (y) the proceeds of
which are remitted to Lender in reduction of the Obligations;
(b) not encumber, mortgage, pledge, assign or grant any security
interest in any Collateral or any of Borrower's other assets to anyone other
than Lender except as set forth on Schedule 1(A) attached hereto and made a part
hereof;
(c) place notations upon Borrower's books of account and any financial
statement (or the notes thereto) prepared by Borrower to disclose Lender's
security interest in the Collateral;
(d) defend the Collateral against the claims and demands of all
parties.
(e) keep and maintain the Equipment in good operating condition, except
for ordinary wear and tear, and shall make repairs and replacements thereof in
accordance with Borrower's current practices. Borrower shall not permit any such
items to become a fixture to real estate or accessions to other personal
property;
(f) not extend the payment terms of any Receivable without prompt
notice thereof to Lender;
(g) perform all other steps requested by Lender to create and maintain
in Lender's favor a valid perfected first security interest in all Collateral;
and
(h) promptly provide Lender with duplicate originals of all credits
which Borrower issues to its Customers and promptly notify Lender of any
material Disputes. Borrower shall settle all Disputes at no cost or expense to
Lender in accordance with its past practices. Should Lender so elect, upon the
occurrence of any Event of Default, Lender may at any time in its discretion (i)
withdraw Borrower's authority to issue credits to its Customers without Lender's
prior written consent; (ii) litigate Disputes or settle them directly with
Customers on terms acceptable to Lender; or (iii) direct Borrower to set aside
and identify as Lender's property any returned or repossessed merchandise or
other goods which by sale resulted in Receivables theretofore assigned to Lender
("Retained Goods"). All Retained Goods (and the proceeds thereof) shall be (A)
held by Borrower in trust for Lender as Lender's property, (B) subject to
Lender's security interest hereunder, and (C) disposed of only in accordance
with Lender's express written instructions.
9. Collection and Maintenance of Collateral and Records. Lender may at
any time verify Borrower's Receivables utilizing an audit control company or any
other agent of Lender. Lender or Lender's designee may notify Customers, at any
time at Lender's sole discretion during the occurrence and continuance of any
Event of Default, of Lender's security interest in Receivables, collect them
directly and charge the collection costs and expenses to Borrower's account,
but, unless and until Lender does so or gives Borrower other instructions,
Borrower shall instruct all of its Customers to make payments on account of
Receivables to an account under Lender's dominion and control at such bank as
Lender may designate, as provided by the terms of Section 23. To the extent
Borrower receives any payments on account of Receivables, it shall hold such
payments for Lender's benefit in trust as Lender's trustee and promptly deliver
them to Lender in their original form with all necessary endorsements or, as
directed by Lender, deposit such payments as directed by Lender pursuant to
Section 22 hereof. Lender will credit (conditional upon final collection) all
such payments to Borrower's account on the Settlement Date. Promptly after the
creation of any Receivables, Borrower shall provide Lender with schedules
describing all Receivables created or acquired by Borrower and shall promptly
upon Lender's request, execute and deliver confirmatory written assignments of
such Receivables to Lender, but Borrower's failure to execute and deliver such
schedules or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies of contracts,
invoices or the equivalent, and any original shipping and delivery receipts for
all merchandise sold or services rendered and such other documents and
information as Lender may require. All of Borrower's invoices shall bear the
terms stated on the applicable customer order, and no change from the original
terms of such customer order shall be made without the prior written consent of
Lender. Borrower shall provide Lender on a monthly (within fifteen (15) days
after the end of each month), or more frequent basis, as requested by Lender, a
summary report of Borrower's current Inventory, certified as true and accurate
by Borrower's President or Chief Financial Officer, as well as an aged trial
balance of Borrower's existing accounts payable. Borrower shall provide Lender,
as requested by Lender, such other schedules, documents and/or information
regarding the Collateral as Lender may require. Without limiting the foregoing,
Borrower shall provide to Lender a borrowing base certificate at least once
weekly ("Borrowing Base Certificate"), which must be in form and substance
acceptable to Lender and which Borrowing Base Certificate shall certify to
Lender, and shall contain sufficient information and calculations as Lender may
deem necessary or desirable, in order to verify any Receivables Availability,
T-Bill Availability the applicable Formula Amount and whether or not Receivables
included therein are Eligible Receivables. Without limiting the foregoing, a
Borrowing Base Certificate must be executed and delivered by Borrower to Lender
at least weekly but Lender may at any time request that such be executed and
delivered at the time of or prior to each request for Revolving Credit Advances
pursuant to Section 4. Each such Borrowing Base Certificate shall be delivered
to Lender at its office described in Section 25 below, on each relevant Business
Day.
10. Inspections. At all times during normal business hours, Lender
shall have the right to (a) visit and inspect Borrower's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's relevant books
and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants, Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects. Borrower will deliver
to Lender any instrument necessary for Lender to obtain records from any service
bureau maintaining records for Borrower.
11. Financial Information. Borrower shall provide Lender (a) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, Borrower's and Original Owner's (in the case of
Original Owner consolidated and consolidating) balance sheet as at the end of
such fiscal year and the related statements of income, retained earnings and
statement of cash flow for such fiscal year, setting forth in comparative form
the figures as at the end of and for the previous fiscal year, which shall have
been reported on by Ernst & Young LLP or other independent certified public
accountants who shall be reasonably satisfactory to Lender and shall be
accompanied by an unqualified audit report issued by such independent certified
public accountants; (b) as soon as available, drafts of Borrower's and Original
Owner's (in the case of Original Owner consolidated and consolidating) balance
sheet as at the end of each of Borrower's fiscal years and the related
statements of income, retained earnings and statement of cash flow for such
fiscal year, which have been internally prepared by Borrower; (c) as soon as
available, but in any event within thirty (30) days after the close of each
month and quarter, the balance sheet as at the end of such month and quarter and
the related statements of income, retained earnings and changes in statement of
cash flow for such month and quarter, which have been internally prepared by
Borrower and Original Owner's (in the case of Original Owner consolidated and
consolidating). All financial statements required under (a), (b) and (c) above
shall be prepared in accordance with GAAP, subject to year end adjustments in
the case of monthly and quarterly statements. Together with the financial
statements furnished pursuant to (a) above, Borrower shall deliver a certificate
of Borrower's certified public accountants addressed to Lender stating that (i)
they have caused this Agreement and the Ancillary Agreements to be reviewed and
(ii) in making the examination necessary for the issuance of such financial
statements, nothing has come to their attention to lead them to believe that any
Event of Default or Incipient Event of Default exists and, in particular, they
have no knowledge of any Event of Default or Incipient Event of Default or, if
such is not the case, specifying such Event of Default or Incipient Event of
Default and its nature, when it occurred and whether it is continuing. At the
times the financial statements are furnished pursuant to (a), (b) and (c) above,
a certificate of Borrower's President or Chief Financial Officer shall be
delivered to Lender stating that, based on an examination sufficient to enable
him to make an informed statement, no Event of Default or Incipient Event of
Default exists, or, if such is not the case, specifying such Event of Default or
Incipient Event of Default and its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event. If
any internally prepared financial information, including that required under
this section, is unsatisfactory in any manner to Lender, Lender may request that
Borrower's independent certified public accountants review same.
In addition to the foregoing financial statements, Borrower shall
furnish Lender no less than thirty (30) days prior to the beginning of each
fiscal year commencing with fiscal year 2002, a month by month projected
operating budget and cash flow for such fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter), such projections to be accompanied by a certificate signed
by Borrower's President or Chief Financial Officer to the effect that such
projections have been prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and that such officer has
no reason to question the reasonableness of any material assumptions on which
such projections were prepared.
12. Additional Representations, Warranties and Covenants. Borrower
represents and warrants (each of which such representations and warranties shall
be deemed repeated upon the making of a request for a Revolving Credit Advance
and made as of the time of each Revolving Credit Advance made hereunder), and
covenants that:
(a) Borrower is a corporation duly organized and validly existing under
the laws of the State of Indiana and duly qualified and in good standing in
every other state or jurisdiction in which the nature of Borrower's business
requires such qualification, except where failure to so qualify would not have a
material adverse affect on Borrower or the Collateral;
(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of Borrower's certificate of incorporation, by-laws or of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower is bound and (iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements executed and delivered
by Borrower are Borrower's legal, valid and binding obligations, enforceable in
accordance with their terms;
(d) it keeps and will continue to keep all of its books and records
concerning the Collateral at Borrower's executive offices located at the address
set forth in the introductory paragraph of this Agreement and will not move such
books and records without giving Lender at least thirty (30) days prior written
notice;
(e) (i) the operation of Borrower's business is and will continue to be
in compliance in all material respects with all applicable federal, state and
local laws, including but not limited to all applicable environmental laws and
regulations and Sanction/Embargo Programs.
(ii) in the event the Borrower obtains, gives or receives notice
of any release or threat of release of a reportable quantity of any Hazardous
Substances on its property (any such event being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions on its property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of any environmental laws affecting its property or
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental matters in the state in which
such property is located or the United States Environmental Protection Agency
(any such person or entity hereinafter the "Authority"), then the Borrower
shall, within five (5) Business Days, give written notice of same to the Lender
detailing facts and circumstances of which the Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint and periodically inform
Lender of the status of the matter. Such information is to be provided to allow
the Lender to protect its security interest in the Collateral and is not
intended to create nor shall it create any obligation upon the Lender with
respect thereto.
(iii) Borrower shall defend and indemnify the Lender and hold the
Lender harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including reasonable attorney's fees,
suffered or incurred by the Lender under or on account of A. any environmental
laws, including, without limitation, the assertion of any lien thereunder, with
respect to any Hazardous Discharge, the presence of any hazardous substances
affecting Borrower's property, whether or not the same originates or emerges
from Borrower's property or any contiguous real estate, including any loss of
value of the Collateral as a result of the foregoing except to the extent such
loss, liability, damage and expense is attributable to any Hazardous Discharge
resulting from actions on the part of the Lender, and B. any Sanction/Embargo
Program. The Borrower's obligations under Section 12(e)(v) A. shall arise upon
the discovery of the presence of any Hazardous Substances on the Borrower's
property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any hazardous
substances, and under Section 12(e)(v) B on failure to comply with any
Sanction/Embargo Program. The Borrower's obligation and the indemnifications
hereunder shall survive the termination of this Agreement.
(iv) For purposes of Section 12(e) all references to Borrower's
property shall be deemed to include all of Borrower's right, title and interest
in and to all owned and/or leased premises;
(f) based upon the Employee Retirement Income Security Act of 1974
("ERISA"), as amended, and the regulations and published interpretations
thereunder: (i) Borrower has not engaged in any Prohibited Transactions as
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder; (ii)
Borrower has met all applicable minimum funding requirements under Section 302
of ERISA in respect of its plans; (iii) Borrower has no knowledge of any event
or occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) Borrower has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than participants
and beneficiaries in Borrower's qualified pension plan; and (v) Borrower has not
withdrawn, completely or partially, from any multiemployer pension plan so as to
incur liability under the Multiemployer Pension Plan Amendments Act of 1980;
(g) it is solvent, able to pay its debts as they mature, has capital
sufficient to carry on its business and all businesses in which it is about to
engage and the fair saleable value of its assets (calculated on a going concern
basis) is in excess of the amount of its liabilities;
(h) there is no pending or threatened litigation, actions or
proceedings which would reasonably be expected to materially and adversely
affect the Borrower's business, assets, operations, condition or prospects,
financial or otherwise, or a material portion of the Collateral or the ability
of Borrower to perform this Agreement;
(i) all balance sheets and income statements which have been delivered
to Lender fairly, accurately and properly state Borrower's financial condition
on a basis consistent with that of previous financial statements, and there has
been no material adverse change in Borrower's financial condition as reflected
in such statements since the date thereof, and such statements do not fail to
disclose any fact or facts which might materially and adversely affect
Borrower's financial condition;
(j) (x) it possesses all of the licenses, patents, copyrights,
trademarks, trade names and permits necessary to conduct its business, (y)
Borrower has received no assertion or claim of violation or infringement with
respect thereof, and (z) all such licenses, patents, copyrights, trademarks,
trade names and permits are listed on Schedule 12(j);
(k) it will pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon it;
(l) it will promptly inform Lender in writing of: (i) the commencement
of all proceedings and investigations by or before and/or the receipt of any
notices from, any governmental or nongovernmental body and all actions and
proceedings in any court or before any arbitrator against or in any way
concerning any of Borrower's properties, assets or business, which Borrower
reasonably expects would singly or in the aggregate, have a materially adverse
effect on Borrower; (ii) any amendment of Borrower's certificate of
incorporation or by-laws; (iii) any change in Borrower's business, assets,
liabilities, condition (financial or otherwise), results of operations or
business prospects which has had or which Borrower reasonably expects would have
a materially adverse effect on Borrower; (iv) any Event of Default or Incipient
Event of Default; (v) any default or any event which with the passage of time or
giving of notice or both would constitute a default under any agreement for the
payment of money to which Borrower is a party or by which Borrower or any of
Borrower's properties may be bound which would have a material adverse effect on
Borrower's business, operations, property or condition (financial or otherwise)
or the Collateral; (vi) any change in the location of Borrower's executive
offices; (vii) any change in the location of Borrower's Inventory or Equipment
from the locations listed on Schedule 12(l) attached hereto, (viii) any change
in Borrower's corporate name; (ix) any material delay in Borrower's performance
of any of its obligations to any Customer and of any assertion of any material
claims, offsets, counterclaims or Disputes by any Customer and of any
allowances, credits and/or other monies granted by it to any Customer; (x)
furnish to and inform Lender of all material adverse information of which
Borrower is aware relating to the financial condition of any account debtor; and
(xi) any material return of goods;
(m) it will not (i) create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt) whether secured or unsecured other than
Borrower's indebtedness to Lender and as set forth on Schedule 12(m) attached
hereto and made a part hereof; (ii) declare, pay or make any dividend or
distribution on any shares of the common stock or preferred stock of Borrower or
apply any of its funds, property or assets to the purchase, redemption or other
retirement of any common or preferred stock of Borrower; (iii) directly or
indirectly, prepay any indebtedness (other than to Lender), or repurchase,
redeem, retire or otherwise acquire any indebtedness of Borrower other than for
the purpose of realizing trade discounts; (iv) make advances, loans or
extensions of credit to any Person; (v) outside the ordinary course of business
become either directly or contingently liable upon the obligations of any Person
by assumption, endorsement or guaranty thereof or otherwise; (vi) enter into any
merger, consolidation or other reorganization with or into any other Person or
acquire all or a portion of the assets or stock of any Person or permit any
other Person to consolidate with or merge with it; (vii) form any Subsidiary or
enter into any partnership, joint venture or similar arrangement; (viii)
materially change the nature of the business in which it is presently engaged;
(ix) change its fiscal year or make any changes in accounting treatment and
reporting practices or in the tax reporting treatment without prior written
notice to Lender except as required by GAAP or in the tax reporting treatment or
except as required by law; (x) enter into any transaction with any Affiliate,
except in the ordinary course of its business on arms' length terms; or (xi)
bill Receivables under any name except the present name of the Borrower; (xii)
sell, transfer or lease or otherwise dispose of any of its properties or assets,
except in the ordinary course of its business;
(n) it shall not permit its Tangible Net Worth to be less than seven
hundred seventy-five thousand dollars ($775,000). Thereafter, the Borrower's
Tangible Net Worth will be tested on a quarterly basis and must be in the
following minimum amounts as of the end of each of the Borrower's following
Fiscal quarters:
Fiscal Quarter Minimum Amount
-------------- --------------
Third Quarter, 2001 $3,300,000
Fourth Quarter, 2001 $3,700,000
First Quarter, 2002 $3,700,000
Second Quarter, 2002 $4,300,000
Third Quarter, 2002 $5,300,000
Fourth Quarter, 2002 $5,300,000
First Quarter, 2003 $5,300,000
Second Quarter, 2003 $6,700,000
Third Quarter, 2003 $7,800,000
Fourth Quarter, 2003 $7,800,000
First Quarter, 2004 $7,800,000
Second Quarter, 2004 $8,100,000
(o) it shall maintain a ratio of Funded Debt to EBITDA of not less
than:
Fiscal Quarter Minimum Funded Debt/EBITDA Coverage
-------------- -----------------------------------
Third Quarter, 2001 15.50X
Fourth Quarter, 2001 3.85X
First Quarter, 2002 3.20X
Second Quarter, 2002 2.70X
Third Quarter, 2002 2.70X
Fourth Quarter, 2002 2.70X
First Quarter, 2003 2.70X
Second Quarter, 2003 2.50X
Third Quarter, 2003 2.40X
Fourth Quarter, 2003 2.30X
First Quarter, 2004 2.30X
Second Quarter, 2004 2.30X
(Lender shall test the Borrower's Maximum Funded Debt/EBITDA Cover quarterly
pursuant to the table above and which is based upon a rolling four-quarter
calculation.)
(p) all financial projections of Borrower's performance prepared by
Borrower or at Borrower's direction and delivered to Lender will represent, at
the time of delivery to Lender, Borrower's best estimate of Borrower's future
financial performance and will be based upon assumptions which are reasonable in
light of Borrower's past performance and then current business conditions;
(q) it will not make capital expenditures capital expenditures,
including capital leases, which shall exceed the following:
Fiscal Year Maximum Capital Expenditures
----------- ----------------------------
Fiscal Year 2001 $100,000
Fiscal Year 2002 $300,000
Fiscal Year 2003 $500,000
(r) it shall maintain a Fixed Charge Coverage Ratio of not less than
the following:
Fiscal Quarter Minimum Fixed Charge Coverage
-------------- -----------------------------
Third Quarter, 2001 2.50X
Fourth Quarter, 2001 2.70X
First Quarter, 2002 3.10X
Second Quarter, 2002 2.10X
Third Quarter, 2002 2.00X
Fourth Quarter, 2002 2.00X
First Quarter, 2003 2.00X
Second Quarter, 2003 2.00X
Third Quarter, 2003 2.00X
Fourth Quarter, 2003 2.00X
First Quarter, 2004 2.00X
Second Quarter, 2004 2.00X
(Lender shall test the Borrower's Minimum Fixed Charge Coverage quarterly
pursuant to the table above and which is based upon a rolling four-quarter
calculation.)
(s) Borrower will at all times maintain Minimum Excess Borrowing
Availability of not less than $500,000.
(t) Borrower shall have availability under the Formula Amount for
Revolving Credit Allowances on the Closing Date immediately following the
closing of this Agreement of not less than $1,000,000.
(u) none of the proceeds of the Loans hereunder will be used directly
or indirectly to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect;
(v) it will bear the full risk of loss from any loss of any nature
whatsoever with respect to the Collateral. At its own cost and expense in
amounts and with carriers reasonably acceptable to Lender, it shall (i) keep all
its insurable properties and properties in which it has an interest insured
against the hazards of fire, flood, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to Borrower's
including, without limitation, extra expense insurance; (ii) maintain a bond in
such amounts as is customary in the case of companies engaged in businesses
similar to Borrower's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Borrower
either directly or through authority to draw upon such funds or to direct
generally the disposition of such assets; (iii) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (iv) maintain all such workers' compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; (v) furnish Lender with (x) copies of all
policies and evidence of the maintenance of such policies at least thirty (30)
days before any expiration date, and (y) appropriate loss payable endorsements
in form and substance reasonably satisfactory to Lender, naming Lender as loss
payee and providing that as to Lender the insurance coverage shall not be
impaired or invalidated by any act or neglect of Borrower and the insurer will
provide Lender with at least thirty (30) days notice prior to cancellation.
Borrower shall instruct the insurance carriers that in the event of any loss
thereunder in excess of $100,000, the carriers shall make payment for such loss
to Lender and not to Borrower and Lender jointly. If any insurance losses in
excess of $100,000 are paid by check, draft or other instrument payable to
Borrower and Lender jointly, Lender may endorse Borrower's name thereon and do
such other things as Lender may deem advisable to reduce the same to cash.
Lender is hereby authorized to adjust and compromise claims upon the occurrence
of an Event of Default. All loss recoveries received by Lender upon any such
insurance may be applied to the Obligations, in such order as Lender in its sole
discretion shall determine upon the occurrence of an Event of Default. Any
surplus shall be paid by Lender to Borrower or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrower to Lender, on
demand; and
(w) it shall not purchase or acquire obligations or stock of, or any
other interest in, or make any investment in any entity, except (A) obligations
issued or guaranteed by the United States of America or any agency thereof, (B)
commercial paper with maturities of not more than 180 days and a published
rating of not less than A-1 or P-1 (or the equivalent rating), (C) certificates
of time deposit and bankers' acceptances having maturities of not more than 180
days and repurchase agreements backed by United States government securities of
a commercial bank if (x) such bank has a combined capital and surplus of at
least $500,000,000, or (y) its debt obligations, or those of a holding company
of which it is a subsidiary, are rated not less than A (or the equivalent
rating) by a nationally recognized investment rating agency, (D) U.S. money
market funds that invest solely in obligations issued or guaranteed by the
United States of America or an Agency thereof, and (E) Eurodollar time deposits
with financial institutions with a published rating of not less than A-1 or P-1
(or the equivalent rating).
13. Power of Attorney. Borrower hereby appoints Lender or any other
Person whom Lender may designate as Borrower's attorney, with power to: (i)
endorse Borrower's name on any checks, notes, acceptances, money orders, drafts
or other forms of payment or security that may come into Lender's possession;
(ii) sign Borrower's name on any invoice or bill of lading relating to any
Receivables, drafts against Customers, schedules and assignments of Receivables,
notices of assignment, financing statements and other public records,
verifications of account and notices to or from Customers; (iii) verify the
validity, amount or any other matter relating to any Receivable by mail,
telephone, telegraph or otherwise with Customers; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) do all things reasonably necessary to carry out this
Agreement, any Ancillary Agreement and all related documents; and (vi) on or
after the occurrence and continuation of an Event of Default, notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, and to receive, open and dispose of all mail
addressed to Borrower. Borrower hereby ratifies and approves all acts of the
attorney. Neither Lender nor the attorney will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law. This power,
being coupled with an interest, is irrevocable so long as any Receivable which
is assigned to Lender or in which Lender has a security interest remains unpaid
and until the Obligations have been fully satisfied.
14. Expenses. Borrower shall pay all of Lender's reasonable
out-of-pocket costs and expenses, including without limitation reasonable fees
and disbursements of counsel retained or employed by Lender and appraisers, in
connection with the preparation, execution and delivery of this Agreement and
the Ancillary Agreements, and in connection with the prosecution or defense of
any action, contest, dispute, suit or proceeding concerning any matter in any
way arising out of, related to or connected with this Agreement or any Ancillary
Agreement. Borrower shall also pay all of Lender's reasonable out-of-pocket
costs and expenses, including without limitation reasonable fees and
disbursements of counsel retained or employed by Lender, in connection with (a)
the preparation, execution and delivery of any waiver, any amendment thereto or
consent proposed or executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, (b) Lender's obtaining performance
of the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the enforcement or defense of Lender's security interests,
assignments of rights and liens hereunder as valid perfected security interests,
(c) any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of any Collateral, and (d) any consultations in connection
with any of the foregoing. Borrower shall also pay Lender's then standard price
for furnishing Borrower or its designees copies of any statements, records,
files or other data (collectively, "Reports") requested by Borrower or its
designees, other than reports of the kind furnished to Borrower and Lender's
other borrowers on a regular, periodic basis in the ordinary course of Lender's
business. Borrower shall also pay Lender's customary bank charges, including,
without limitation, all wire transfer fees incurred by Lender, for all bank
services performed or caused to be performed by Lender for Borrower at
Borrower's request. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by Borrower to Lender
shall be payable on demand and shall be secured by the Collateral. If any tax by
any governmental authority is or may be imposed on or as a result of any
transaction between Borrower and Lender which Lender is or may be required to
withhold or pay (other than Lender's income taxes), Borrower agrees to indemnify
and hold Lender harmless in respect of such taxes, and Borrower will repay to
Lender the amount of any such taxes which shall be charged to Borrower's
account; and until Borrower shall furnish Lender with indemnity therefor (or
supply Lender with evidence satisfactory to it that due provision for the
payment thereof has been made), Lender may hold without interest any balance
standing to Borrower's credit and Lender shall retain its security interests in
any and all Collateral. Borrower hereby acknowledges that Lender shall not be
liable in any manner whatsoever for any selling expenses, orders, purchases or
contracts of any kind resulting from any transaction between Borrower and any
other Person, and Borrower hereby indemnifies and holds Lender harmless with
respect thereto, which indemnity shall survive termination of this Agreement.
15. Assignment. Lender may assign any or all of the Obligations
together with any or all of the security therefor and any transferee shall
succeed to all of Lender's rights with respect thereto. Upon such transfer,
Lender shall be released from all responsibility for the Collateral to the
extent same is assigned to any transferee. Lender may from time to time sell or
otherwise grant participations in any of the Obligations and the holder of any
such participation shall, subject to the terms of any agreement between Lender
and such holder, be entitled to the same benefits as Lender with respect to any
security for the Obligations in which such holder is a participant. Borrower
agrees that each such holder may exercise any and all rights of banker's lien,
set-off and counterclaim with respect to its participation in the Obligations as
fully as though Borrower were directly indebted to such holder in the amount of
such participation. However, in any such participation Borrower shall only be
liable for the reasonable costs incurred by Lender or its assigns as lead bank
and shall not be liable for the costs and expenses of any other such
participants. Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Lender,
and no such assignment or transfer of any such obligation shall relieve Borrower
thereof unless Lender shall have consented to such release in a writing
specifically referring to the obligation from which Borrower is to be released.
16. Waivers. Borrower waives presentment and protest of any instrument
and notice thereof, notice of default and all other notices to which Borrower
might otherwise be entitled.
17. Term of Agreement. This Agreement shall continue in full force and
effect until the expiration of the Term. The Term shall be automatically
extended for successive periods of one (1) year each unless either party shall
have provided the other with a written notice of termination, at least sixty
(60) days prior to the expiration of any renewal Term. The Borrower may
terminate this Agreement at any time upon sixty (60) days' prior written notice
("Termination Date") upon payment in full of the Obligations; provided, that
Borrower pays an early termination fee in an amount equal to the Required
Percentage of the Maximum Revolving Advance Amount. For the purposes hereof,
Required Percentage shall mean (a) three percent (3%) from the Closing Date to
the first anniversary thereof, (b) three-quarters percent (3/4 %) from the first
anniversary of the Closing Date to the second anniversary thereof and (c)
one-half percent (1/2%) from the second anniversary of the Closing Date to the
third anniversary thereof or prior to any subsequent anniversary thereof.
18. Events of Default. The occurrence of any of the following shall
constitute an Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder;
(b) failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on Borrower's books;
(c) failure to perform under and/or committing any breach of this
Agreement or any Ancillary Agreement or any other agreement between Borrower and
Lender;
(d) occurrence of a default under any agreement to which Borrower is a
party with third parties which has a material adverse affect upon Borrower's
business, operations, property or condition (financial or otherwise) including
all leases for any premises where material amounts of Inventory or Equipment is
located;
(e) any representation, warranty or statement made by Borrower
hereunder, in any Ancillary Agreement, any certificate, statement or document
delivered pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should at any time be false or misleading, when
made, in any material respect;
(f) an attachment or levy is made upon any of Borrower's assets having
an aggregate value in excess of $50,000, or a judgment is rendered against
Borrower or any of Borrower's property involving a liability of more than
$50,000, which shall not have been vacated, discharged, stayed or bonded pending
appeal within thirty (30) days from the entry thereof;
(g) any change in Borrower's condition or affairs (financial or
otherwise) which in Lender's reasonable opinion materially impairs the
Collateral or the ability of Borrower to perform its Obligations;
(h) as to any material portion of the Collateral any lien created
hereunder or under any Ancillary Agreement for any reason ceases to be or is not
a valid and perfected lien having a first priority interest;
(i) Borrower shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within forty-five (45) days, any petition filed against it in
any involuntary case under such bankruptcy laws, or (vii) take any action for
the purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
(k) any Affiliate or any Subsidiary or any Guarantor shall (i) apply
for or consent to the appointment of, or the taking possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, within forty-five (45) days, any
petition filed against it in any involuntary case under such bankruptcy laws,
or(viii) take any action for the purpose of effecting any of the foregoing;
(l) Borrower directly or indirectly sells, assigns, transfers, conveys,
or suffers or permits to occur any sale, assignment, transfer or conveyance of
any assets of Borrower or any interest therein, except as permitted herein;
(m) Borrower fails to operate in the ordinary course of business;
(n) Lender shall in good faith deem itself insecure or unsafe or shall
fear diminution in value, removal or waste of the Collateral;
(o) a default by Borrower in the payment, when due, of any principal of
or interest on any indebtedness for money borrowed beyond any applicable grace
period contained in the documentation pertaining to such indebtedness;
(p) any Guarantor attempts to terminate, or challenges the validity of,
its liability under any Guaranty Agreement or Guarantor Security Agreement;
(q) any Guarantor defaults in its obligations under any Guaranty
Agreement or any Guarantor Security Agreement, or any proceeding shall be
brought to challenge the validity, binding effect or enforceability of any
Guaranty Agreement or any Guarantor Security Agreement, or any Guarantor
breaches any representation, warranty or covenant contained in any Guaranty
Agreement or any Guarantor Security Agreement, or any Guaranty Agreement or
Guarantor Security Agreement ceases to be a valid, binding and enforceable
obligation; or
(r) any Change of Ownership.
19. Remedies. (a) Upon the occurrence of an Event of Default pursuant
to Section 18 (i) herein, all Obligations shall be immediately due and payable
and this Agreement shall be deemed terminated; upon the occurrence and
continuation of any other of the Events of Default, Lender shall have the right
to demand repayment in full of all Obligations, whether or not otherwise due
and/or to terminate this Agreement without advance notice. Until all Obligations
have been fully satisfied, Lender shall retain its security interest in all
Collateral. Lender shall have, in addition to all other rights and remedies
provided herein, the rights and remedies of a secured party under the Uniform
Commercial Code, and under other applicable law, all other legal and equitable
rights to which Lender may be entitled, including without limitation, the right
to take immediate possession of the Collateral, to require Borrower to assemble
the Collateral, at Borrower's expense, and to make it available to Lender at a
place designated by Lender which is reasonably convenient to both parties and to
enter any of the premises of Borrower or wherever the Collateral shall be
located, with or without force or process of law, and to keep and store the same
on said premises until sold (and if said premises shall be the property of
Borrower, Borrower agrees not to charge Lender for storage thereof for a period
up to at least sixty (60) days after sale or disposition of said Collateral).
Further, Lender may, at any time or times after default by Borrower, sell and
deliver all Collateral held by or for Lender at public or private sale for cash,
upon credit or otherwise, at such prices and upon such terms as Lender, in
Lender's sole discretion, deems advisable, or Lender may otherwise recover upon
the Collateral in any commercially reasonable manner as Lender, in its sole
discretion, deems advisable. Except as to that part of the Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the requirement of reasonable notice shall be met
if such notice is mailed postage prepaid to Borrower at Borrower's address as
shown in Lender's records, at least ten (10) days before the time of the event
of which notice is being given. Lender may be the purchaser at any sale, if it
is public. In connection with the exercise of the foregoing remedies, Lender is
granted permission to use all of Borrower's trademarks, trade names, trade
styles, patents, patent applications, licenses, franchises and other proprietary
rights which are used in connection with (a) Inventory for the purpose of
disposing of such Inventory and (b) Equipment for the purpose of completing the
manufacture of unfinished goods. The proceeds of sale shall be applied first to
all costs and expenses of sale, including but not limited to attorneys' fees,
and second to the payment (in whatever order Lender elects) of all Obligations.
Lender will return any excess to Borrower and Borrower shall remain liable to
Lender for any deficiency.
20. Waiver; Cumulative Remedies. Failure by Lender to exercise any
right, remedy or option under this Agreement or any supplement hereto or any
other agreement between Borrower and Lender or delay by Lender in exercising the
same, will not operate as a waiver; no waiver by Lender will be effective unless
it is in writing and then only to the extent specifically stated. Lender's
rights and remedies under this Agreement will be cumulative and not exclusive of
any other right or remedy which Lender may have.
21. Application of Payments. Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times hereafter
received by Lender from or on Borrower's behalf, and Borrower hereby irrevocably
agrees that Lender shall have the continuing exclusive right to apply and
reapply any and all payments received at any time or times hereafter against
Borrower's Obligations hereunder in such manner as Lender may deem advisable
notwithstanding any entry by Lender upon any of Lender's books and records.
22. Depository Accounts. Any payment received by Borrower on account of
any Collateral shall be held by Borrower in trust for Lender, and Borrower shall
promptly deliver same in kind to Lender or deposit all such payments into a cash
collateral account at such bank as Lender may designate for application to
payment of the Obligations. Borrower shall also execute such further documents
as Lender may reasonably deem necessary or which depository may require to
establish such an account and all funds deposited in such account shall
immediately be deemed Lender's property.
23. Lock Box Accounts. Borrower shall, at Lender's request, instruct
all of its Customers to make such payments on account of Receivables to an
account under Lender's dominion and control at such bank as Lender may
designate. Borrower shall also execute such further documents as Lender may deem
necessary to establish such an account, and all funds deposited in such account
shall immediately be deemed Lender's property.
24. Revival. Borrower further agrees that to the extent Borrower makes
a payment or payments to Lender, which payment or payments or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.
25. Notices. Any notice or request hereunder may be given to Borrower
or Lender at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this paragraph.
Any notice or request hereunder shall be given by registered or certified mail,
return receipt requested, or by overnight mail or by telecopy (confirmed by
mail). Notices and requests shall be, in the case of those by mail or overnight
mail, deemed to have been given when deposited in the mail or with the overnight
mail carrier, and, in the case of a telecopy, when confirmed.
Notices shall be provided as follows:
If to the Lender:
GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Frank Imperato, Senior Vice President
Telephone: (212) 884-7026
Telecopy: (212) 884-7162
If to the Borrower:
Morgan Drive Away, Inc.
2746 Old U.S. 20 West
Elkhart, Indiana 46514
Attention: Gary Klusman
Telephone: (219) 295-2200
Telecopy: (800) 285-0828
With a copy to:
Baker & Daniels
205 West Jefferson Blvd., Suite 250
South Bend, Indiana 46601
Attention: Peter G. Trybula, Esq.
Telephone: (219) 234-4149
Telecopy: (219) 239-1900
26. Governing Law and Waiver of Jury Trial. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. LENDER SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER
APPLICABLE LAW INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE OF NEW
YORK. BORROWER AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS
SHALL BE LITIGATED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK OR, AT LENDER'S OPTION, IN ANY OTHER COURTS LOCATED IN NEW YORK
STATE OR ELSEWHERE AS LENDER MAY SELECT AND THAT SUCH COURTS ARE CONVENIENT
FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS.
BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS
UPON BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO BORROWER AT BORROWER'S ADDRESS APPEARING ON LENDER'S
RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED THE DAY FOLLOWING
DELIVERY TO FEDERAL EXPRESS OR EXPRESS MAIL FOR OVERNIGHT DELIVERY OR THE DATE
RECEVIED IF MAILED BY REGULAR OR REGISTED OR CERTIFIED MAIL. BOTH PARTIES HERETO
WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN BORROWER
AND LENDER, AND BORROWER WAIVES THE RIGHT TO ASSERT IN ANY ACTION OR PROCEEDING
INSTITUTED BY LENDER WITH REGARD TO THIS AGREEMENT OR ANY OF THE OBLIGATIONS ANY
OFFSETS OR COUNTERCLAIMS WHICH IT MAY HAVE.
27. Limitation of Liability. Borrower acknowledges and understands that
in order to assure repayment of the Obligations hereunder Lender may be required
to exercise any and all of Lender's rights and remedies hereunder and agrees
that neither Lender nor any of Lender's agents shall be liable for acts taken or
omissions made in connection herewith or therewith except for actual bad faith,
gross negligence or willful misconduct.
28. Entire Understanding. This Agreement and the Ancillary Agreements
contain the entire understanding between Borrower and Lender and constitute the
complete agreement between the parties with respect to the subject matter hereof
and thereof, and any promises, representations, warranties, understandings, or
guarantees not contained in this Agreement or the Ancillary Agreements shall
have no force and effect.
29. Modification. Neither this Agreement, the Ancillary Agreements, nor
any portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
parties hereto and thereto.
30. Severability. Wherever possible each provision of this Agreement or
the Ancillary Agreements shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement or the
Ancillary Agreements shall be prohibited by or invalid under applicable law such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
thereof.
31. Captions. All captions are and shall be without substantive meaning
or content of any kind whatsoever.
32. Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
33. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
ATTEST: MORGAN DRIVE AWAY, INC.
/s/ Michael J. Archual By: /s/ Gary J. Klusman
- ------------------------------------ ----------------------------------------
President Name: Gary J. Klusman
Title: Executive VP Finance and
Administration
ATTEST: TDI, INC.
/s/ Michael J. Archual By: /s/ Gary J. Klusman
- ------------------------------------ ----------------------------------------
Chief Executive Officer Name: Gary J. Klusman
Title: Executive VP Finance and
Administration
GMAC COMMERCIAL CREDIT LLC
By: /s/ Joe Grimaldi
----------------------------------------
Name: Joe Grimaldi
Title: President
SCHEDULES
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Schedule 1(A) - Permitted Liens
Schedule 12(j) - Licenses, Patents, Trademarks and Copyrights
Schedule 12(l) - Inventory Locations
Schedule 12(m) - Permitted Indebtedness