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EXHIBIT 10.23
LOAN AND SECURITY AGREEMENT
DATED AS OF DECEMBER 31, 2001
AMONG
POSSIBLE DREAMS, LTD.,
AS BORROWER
AND
LASALLE BUSINESS CREDIT, INC.,
AS A LENDER AND AS AGENT
AND
THE INSTITUTIONS FROM TIME TO TIME
A PARTY HERETO
AS LENDERS
$16,000,000
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made as of this 31st day
of December, 2001, by and among LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("LaSalle"), with its principal office at 135 South LaSalle Street,
Chicago, Illinois 60603, the financial institutions which from time to time
become a party hereto (collectively, the "Lenders" and individually, a
"Lender"), LaSalle as agent for Lenders (in such capacity, "Agent") and POSSIBLE
DREAMS, LTD., a Delaware corporation, with its principal office at 6 Perry
Drive, Foxboro, Massachusetts 02035 ("Borrower").
WITNESSETH:
WHEREAS, from time to time Borrower may request Agent and Lenders to
make loans and advances to and extend certain credit accommodations to Borrower,
and the parties wish to provide for the terms and conditions upon which such
loans, advances and credit accommodations shall be made;
NOW, THEREFORE, in consideration of any loans, advances and credit
accommodations (including any loans by renewal or extension) hereafter made to
Borrower by Agent and the Lenders, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
Borrower, the parties agree as follows:
1. DEFINITIONS.
(a) GENERAL DEFINITIONS
"ACCOUNT DEBTOR" shall mean the Person who is obligated on or under an
Account.
"ACCOUNTS" shall have the meaning given to the term "accounts" in the
UCC and shall in any event include, without limitation, all of Borrower's
presently existing and hereafter arising accounts, accounts receivable, contract
rights, instruments, documents, chattel paper, and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods or the
rendition of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guarantees, letters of credit and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower, and
all products and proceeds of the foregoing.
"ACCOUNTS ADVANCE RATE" shall have the meaning set forth in paragraph
2(b)(A) hereof.
"ACCOUNTS TRIAL BALANCE" shall have the meaning set forth in paragraph
12(c) hereof.
"ADVANCE RATES" shall mean collectively, the Accounts Advance Rate and
the Inventory Advance Rate.
"AFFILIATE" means any Person: (a) directly or indirectly controlling,
controlled by, or under common control with, Borrower; (b) directly or
indirectly owning or holding five percent (5%) or more of any equity interest in
Borrower; or (c) five percent (5%) or more of whose voting stock or other equity
interest having ordinary voting power for the election of directors or the power
to direct or cause the direction of management, is directly or indirectly owned
or held by Borrower; or (d) which has a senior executive officer who is also a
senior executive officer of Borrower. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") means the possession directly or indirectly of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or other equity
interest, or by contract or otherwise.
"AGENT" shall have the meaning set forth in the introductory paragraph
hereof.
"APPLICABLE MARGIN" shall mean the percentage set forth below for the
applicable Type and Kind of Loan set forth below:
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<Table>
<Caption>
APPLICABLE MARGIN
Revolving Loans Term Loan A Term Loan B
--------------- ----------- -----------
Prime Libor Prime Libor Prime Libor
----- ----- ----- ----- ----- -----
0.00% 2.50% 0.50% 3.00% 0.50% 3.00%
</Table>
"AUTHORITY" shall have the meaning set forth in paragraph 15(s)(iv)
hereof.
"BANC OF AMERICA" shall mean Banc of America Commercial Finance
Corporation (formerly known as NationsCredit Commercial Corporation).
"BANC OF AMERICA SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement dated as of the Closing Date among Agent and Banc of
America which agreement shall be substantially in form and substance attached
hereto as EXHIBIT J.
"BANC OF AMERICA WARRANT AGREEMENT" shall mean that certain
Warrantholders Rights Agreement dated as of May 17, 1996 among Borrower,
Holdings, SCC, Banc of America, Warren Stanley and Arnold Lee, as in effect on
the Closing Date.
"BANC OF AMERICA WARRANTS" shall mean those certain Warrants issued by
Borrower in favor of Banc of America that are exercisable for shares of the
Class B Common Stock of Borrower and shall include any rights of Banc of America
under the Banc of America Warrant Agreement.
"BANK" shall mean LaSalle Bank National Association.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as
amended, including amendments made by The Bankruptcy Reform Act of 1994, as
codified in Title 11 of the United States Code.
"BENEFIT PLAN" shall mean an employee pension benefit plan sponsored;
maintained or contributed to by Borrower or an ERISA Affiliate, as defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA.
"BORROWER" shall have the meaning set forth in the introductory
paragraph hereof.
"BORROWING BASE" shall have the meaning specified in paragraph 2(b)(A)
hereof.
"BORROWING BASE CERTIFICATE" shall mean a certificate duly executed by
an officer of Borrower appropriately completed and in substantially the form of
EXHIBIT C hereto.
"BREAKAGE COSTS" shall have the meaning specified in paragraph
7(c)(iv) hereof.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or
such other day as banks in Illinois and/or New York are authorized or required
to be closed for business; PROVIDED, HOWEVER, that with respect to LIBOR Rate
Loans, the term "Business Day" shall also exclude any day that banks in London,
England are authorized or required to be closed for business.
"BUSINESS INTERRUPTION TRIGGER EVENT" shall have the meaning specified
in paragraph 17(n) hereof.
"CANADIAN ACCOUNT RESERVE" shall mean a reserve against borrowing base
availability equal to the Specified Percentage of the amount of Eligible
Accounts due and owing to any Borrower from an Account Debtor which is a
resident or citizen of, and is located within, Canada (a "Canadian Eligible
Account"). For purposes hereof, the term "Specified Percentage" means seven
percent (7%) or such other percentage, if any, of a
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Canadian Eligible Account which constitutes a federal and/or provincial tax due
and payable by Borrower with respect to such Account under applicable Canadian
law.
"CAPITAL ADEQUACY CHARGE" shall have the meaning specified in
paragraph 6(i) hereof.
"CAPITAL ADEQUACY DEMAND" shall have the meaning specified in
paragraph 6(i) hereof.
"CAPITAL EXPENDITURES" shall mean, with respect to any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including expenditures for capitalized lease obligations) by Borrower during
such period that are required by GAAP to be included in or reflected by the
property, plant or equipment or similar fixed asset accounts (or in intangible
accounts subject to amortization) in the balance sheet of Borrower.
"CASH EQUIVALENTS" shall mean (a) securities with maturities of one
year or less from the date of acquisition which are issued or fully guaranteed
or insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities of one year
or less from the date of acquisition and overnight bank deposits of Agent or of
any commercial bank having capital and surplus in excess of $500,000,000, or (c)
repurchase obligations of Agent or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days with respect to securities issued or fully guaranteed or insured by the
United States Government.
"CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 ET
SEQ.
"CHANGE OF CONTROL" shall mean (a) the occurrence of any event
(whether in one or more transactions) which results in an acquisition of (i)
control of Borrower or (ii) control of Holdings, in any such case, by a Person
who is not an Original Owner or directly controlled by an Original Owner, (b)
any merger or consolidation of or with Borrower or sale of all or substantially
all of the property or assets of Borrower or (c) the occurrence of any other
Trigger Event. For purposes of this definition, (a) "control of Borrower" shall
mean the power, direct or indirect to direct or cause the direction of the
management and policies of Borrower by contract or otherwise and (b) "control of
Holdings" shall mean the power, direct or indirect to direct or cause the
direction of the management and policies of Holdings by contract or otherwise.
"CNC" shall mean Columbia National Corporation, a Delaware
corporation.
"CNC SUBORDINATED NOTE" shall mean that certain subordinated
promissory note dated May 17, 1996 executed by Borrower in favor of QTIP Trust
(as assignee of CNC) in the original aggregate principal amount of $332,000, as
in effect on the Closing Date.
"CHATTEL PAPER" shall have the meaning given to the term "chattel
paper" in the UCC and in any event shall include, without limitation, a writing
or writings which evidence both a monetary obligation and a security interest in
or a lease of specific goods.
"CLOSING DATE" shall mean the date upon which the initial Loan is
made.
"CLOSING DOCUMENT LIST" shall have the meaning specified in paragraph
16(a)(i) hereof.
"COLLATERAL" shall mean all of the personal property of Borrower as
described in paragraph 8 hereof and all other real or personal property of any
Obligor or any other Person now or hereafter pledged to Agent for its benefit
and for the ratable benefit of Lenders to secure, either directly or indirectly,
repayment of any of the Liabilities.
"COMMERCIAL TORT CLAIM" shall have the meaning given to the term
"commercial tort claim" in the UCC and in any event shall include, without
limitation, a claim arising in tort with respect to which: (A) the claimant is
an organization; or (B) the claimant is an individual and the claim: (i) arose
in the course of the
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claimant's business or profession; and (ii) does not include damages arising out
of personal injury to or the death of an individual.
"COMMITMENT PERCENTAGE" of any Lender shall mean the percentage set
forth below such Lender's name on the signature page hereof as same may be
adjusted upon any assignment by a Lender pursuant to paragraph 25 hereof.
"COMMITMENT TRANSFER SUPPLEMENT" shall mean a document in the form of
EXHIBIT 25(b) attached hereto and made part hereof, properly completed and
otherwise in form and substance satisfactory to Agent by which a Purchasing
Lender purchases and assumes a portion of the obligation of Lenders to make
Loans under this Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
paragraph 28(e) hereof.
"CONSOLIDATED INCOME TAX SHARING AGREEMENT" shall mean the
Consolidated Income Tax Sharing Agreement dated as of May 17, 1996 by and among
SCC, Holdings and Borrower, as the same may be amended, supplemented or
otherwise modified, renewed or replaced from time to time, in each case to the
extent expressly permitted under the terms of this Agreement.
"CONTINUATION" shall have the meaning specified in paragraph 7(c)(i)
hereof.
"CONTRACT YEAR" shall mean each period of twelve (12) consecutive
months commencing on the Closing Date and on each anniversary thereafter.
"CONTROLLED GROUP" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the IRC.
"CONVERSION" shall have the meaning specified in paragraph 7(c)(ii)
hereof.
"CURRENT ASSETS" shall mean the sum of (a) cash PLUS (b) cash
equivalents PLUS (c) accounts receivable PLUS (d) inventories, all as reflected
on the Borrower's annual financial statements delivered to Agent in accordance
with the provisions of paragraph 12(d) hereof.
"CURRENT LIABILITIES" shall mean the sum of (a) the principal amount
of Revolving Loans PLUS (b) accounts payable PLUS (c) accrued expenses PLUS (d)
state income taxes payable PLUS (e) the amount owed to any related party for
income taxes, all as reflected on the Borrower's annual financial statements
delivered to Agent in accordance with the provisions of paragraph 12(d) hereof.
"CUSTOMER LISTS" shall mean the customer lists of Borrower attached
hereto as EXHIBIT B and made a part hereof, as same shall be updated pursuant to
paragraph 12(h) hereof.
"CUSTOMS" shall have the meaning set forth in paragraph 4(f) hereof.
"DEFAULT" shall mean any event, condition or default which with the
giving of notice, the lapse of time or both would be an Event of Default.
"DEFAULTING LENDER" shall have the meaning set forth in paragraph 7(h)
hereof.
"DEFAULTING LENDER CURE PERIOD" shall have the meaning specified in
paragraph 7(m) hereof.
"DEPOSIT ACCOUNT" shall have the meaning given to the term "deposit
account" in the UCC and in any event shall include, without limitation, a
demand, time, savings, passbook or similar account maintained with a bank.
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"DESIGNATED LENDER" shall have the meaning set forth in paragraph 7(m)
hereof.
"DILUTION RESERVE" shall mean a reserve against borrowing base
availability, established by Agent in its reasonable discretion, in an amount
equal to (a) the percentage above which the dilution rate with respect to the
Accounts exceeds five (5%) percent multiplied by (b) all Eligible Accounts.
"DOCUMENTS" shall mean the term "documents" as such term is defined
under Article 9 of the UCC.
"DOLLAR" and the sign "$" shall mean lawful money of the United
States.
"EBITDA" shall mean, with respect to any applicable fiscal period, the
following for Borrower each calculated for such period: net income before taxes
for such period (excluding pre-tax gains or losses on the sale of assets (other
than the sales of Inventory in the ordinary course of business) and excluding
other pre-tax extraordinary gains) PLUS interest expense, depreciation,
amortization and other non-cash charges deducted in determining net income for
such period, MINUS interest income calculated in determining net income for such
period.
"ELIGIBLE ACCOUNT" shall mean an Account owing to Borrower which is
acceptable to Agent in its reasonable discretion for lending purposes. Agent
shall, in general, consider an Account to be an Eligible Account if it meets,
and so long as it continues to meet, the following requirements:
(i) it is genuine and in all respects is what it purports to
be;
(ii) it is owned by Borrower and Borrower has the right to
subject it to a security interest in favor of Agent;
(iii) it arises from (A) the performance of services by Borrower
and such services have been fully performed and acknowledged and
accepted by the Account Debtor thereunder or (B) the sale or
lease of Goods by Borrower, and such Goods have been completed in
accordance with the Account Debtor's specifications (if any) and
delivered to and accepted by the Account Debtor, and such Account
Debtor has not returned, offered to return or given notice of its
intention to return any of the Goods which are the subject of
such Account, and Borrower has possession of, or has delivered to
Agent at Agent's request, shipping and delivery receipts
evidencing delivery of such Goods;
(iv) if the Account Debtor thereunder is not an Extended Term
Customer or a Preferred Customer, it is evidenced by an invoice
rendered to such Account Debtor and does not remain unpaid more
than the earlier of (a) sixty (60) days past the stated due date
thereof and (b) ninety (90) days past the stated invoice date
thereof; PROVIDED, HOWEVER, if more than fifty percent (50%) of
the aggregate dollar amount of invoices owing by such Account
Debtor remain unpaid for more than (A) sixty (60) days past the
respective stated due dates thereof or (B) ninety (90) days past
the respective invoice dates thereof, then all Accounts owing to
Borrower by such Account Debtor shall be deemed ineligible.
(v) if the Account Debtor thereunder is a Preferred Customer,
it is evidenced by an invoice rendered to such Account Debtor and
does not remain unpaid more than the earlier of (a) sixty (60)
days past the stated due date thereof and (b) one hundred and
twenty (120) days past the stated invoice date thereof; PROVIDED,
HOWEVER, if more than fifty percent (50%) of the aggregate dollar
amount of invoices owing by such Account Debtor remain unpaid for
more than (A) sixty (60) days past the respective stated due
dates thereof or (B) one hundred and twenty (120) days past the
respective invoice dates thereof, then all Accounts owing to
Borrower by such Account Debtor shall be deemed ineligible.
(vi) if the Account Debtor thereunder is an Extended Term
Customer, it is evidenced by an invoice rendered to such Account
Debtor thereunder and does not remain unpaid more than the
earlier of (a) thirty (30) days past the stated due date thereof
and (b) two hundred and seventy (270) days past the stated
invoice dated thereof (all such Accounts, collectively, "Extended
Term Accounts"); PROVIDED, HOWEVER, that if more than fifty
percent (50%) of the aggregate dollar amount of invoices owing by
such Account Debtor
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remain unpaid for more than (A) thirty (30) days past the
respective stated due dates thereof or (B) two hundred and
seventy (270) days past the respective invoice dates thereof,
then all Extended Term Accounts owing to Borrower by such Account
Debtor shall be deemed ineligible;
(vii) it is not subject to any prior assignment, offset, claim,
lien, security interest or encumbrance whatsoever, other than
Liens in favor of Agent;
(viii) it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and is not subject
to setoff, counterclaim, credit, allowance or adjustment by such
Account Debtor, or to any claim asserted by such Account Debtor
denying liability thereunder in whole or in part;
(ix) it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of
applicable law;
(x) the Account Debtor thereunder is not a director, officer,
employee or agent of Borrower, or a Subsidiary, Parent or
Affiliate of Borrower;
(xi) it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local
government, or any department, agency or instrumentality thereof
(each, a "Government Account" and collectively, the "Government
Accounts"), unless Borrower assigns its right to payment of such
Government Account to Agent pursuant to, and in full compliance
with, the Assignment of Claims Act of 1940, as amended or any
comparable state or local law, provided that no such compliance
with the Assignment of Claims Act shall be required with respect
to Government Accounts due and owing to Borrower from a post
exchange of any branch of the United States Department of Defense
in an aggregate amount of up to $400,000 per calendar year;
(xii) it is not an Account with respect to which the Account
Debtor is located in a state which requires Borrower, as a
precondition to commencing or maintaining an action in the courts
of that state, either to (A) receive a certificate of authority
to do business and be in good standing in such state, or (B) file
a notice of business activities report or similar report with
such state's taxing authority, unless (x) Borrower has taken one
of the actions described in clauses (A) or (B), (y) the failure
to take one of the actions described in either clause (A) or (B)
may be cured retroactively by Borrower at its election, or (z)
Borrower has proven, to Agent's satisfaction, that it is exempt
from any such requirements under any such state's laws;
(xiii) it is an Account which arises out of a sale made in the
ordinary course of Borrower's business;
(xiv) the Account Debtor is a resident or citizen of, and is
located within, the United States of America, provided that
Accounts as to which the Account Debtor is a resident or citizen
of, and is located in, Canada may be included up to a maximum of
$300,000 in the aggregate outstanding from time to time;
(xv) it is not an Account with respect to which the Account
Debtor's obligation to pay is conditional upon the Account
Debtor's approval of the Goods or services or is otherwise
subject to any repurchase obligation or return right, as with
sales made on a bill-and-hold, guaranteed sale, sale on approval,
sale or return or consignment basis;
(xvi) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue
or (B) which violates any of the covenants of Borrower contained
in this Agreement;
(xvii) it is not an Account which, when added to a particular
Account Debtor's other indebtedness to Borrower, exceeds the
lesser of (A) ten percent (10%) of the aggregate of Borrower's
Accounts or (B) a credit limit determined by Agent in its
reasonable credit judgment for that Account Debtor as set forth
on EXHIBIT E attached hereto; PROVIDED, HOWEVER, that Accounts
excluded from Eligible Accounts solely by reason of this
subparagraph (xv) shall be Eligible Accounts to the extent of
such credit limit; PROVIDED, FURTHER, that EXHIBIT E may be
amended by Agent from time to time in the exercise of its
reasonable discretion to change limits for existing Account
Debtors and reflect credit limits for new Account Debtors;
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(xviii) it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be
impaired, as determined by Agent in its reasonable discretion;
(xix) it is not an Account arising from progress billings,
invoices for deposits, samples or tooling;
(xx) it is not an Account with respect to which the sale is on an
installment basis, cash on delivery basis, lease or, except for
Extended Term Customers, other extended payment basis; and
(xxi) it is not that portion of an Account representing late
fees, service charges or interest.
"ELIGIBLE INVENTORY" shall mean Inventory held for sale by Borrower,
normally and currently saleable in the ordinary course of Borrower's business,
and which at all times pertinent hereto is of good and merchantable quality,
free from defects, as to which Inventory Agent has a perfected first priority
security interest and which Inventory is subject to no other Lien other than
Liens in favor of Agent, and which is located at the locations set forth in
EXHIBIT A of this Agreement and is not in transit, provided, however, Inventory
(i) in transit to any Borrower at a location set forth on EXHIBIT A of this
Agreement; (ii) having an aggregate value of less than $2,000,000 for all such
in transit Inventory; (iii) paid for in full in cash or by causing the issuance
of a Letter of Credit by such Borrower; and (iv) for which bills of lading have
been issued in the name of such Borrower and, if requested by Agent, such bills
of lading shall have been delivered and endorsed to Agent in a manner reasonably
satisfactory to Agent, shall not be excluded from Eligible Inventory solely by
reason of such Inventory's being in transit, as that Exhibit may, from time to
time, be amended or supplemented in accordance with the terms of this Agreement,
and as to which Borrower has satisfied all terms, conditions, warranties and
representations of this Agreement and the Other Agreements; but Eligible
Inventory shall not include any of the following: (a) catalogs, packages,
shipping materials, supplies consumed in Borrower's business, shrink wrap and
warranty reserves and other promotional materials of any kind; (b) returned
items (other than items which satisfy each of the following: (1) the return of
which was authorized in advance by Borrower, (2) which have been restocked in
Borrower's inventory, (3) which are free from material defects and (4) which are
able to be sold in the ordinary course of Borrower's business); (c)
work-in-process or raw materials; (d) damaged, defective or recalled items; (e)
obsolete items; (f) items used as demonstrators, prototypes or salesmen's
samples; (g) items of Inventory which have been consigned to Borrower or as to
which a Person claims a security interest, prior assignment claim or encumbrance
whatsoever other than Liens in favor of Agent; (h) items of Inventory which have
been consigned by Borrower to a consignee; (i) Inventory located on premises
leased by Borrower from a landlord with whom Agent has not entered into a
landlord's waiver on terms satisfactory to Agent; (j) Inventory located at a
warehouse premises with respect to which Agent has not received (1) a bailee
letter, acceptable in all respects to Agent, executed by the bailee of such
warehouse or (2) evidence satisfactory in all respects to Agent of such bailee's
receipt of a bailee letter acceptable in all respects to Agent; (k) Inventory
which in the reasonable judgment of Agent is considered to be slow moving or
otherwise not merchantable; (l) Inventory located outside the United States of
America; and (m) Inventory which is subject to a Material License Agreement
unless Agent shall have entered into a licensor consent letter with the licensor
in form and substance satisfactory to Agent; and (n) any Inventory that Agent,
after good faith consultation with Borrower, has reasonably determined is not
acceptable due to age, type, category or quantity.
"ENVIRONMENTAL COMPLAINT" shall have the meaning set forth in
paragraph 15(s)(iv) hereof.
"ENVIRONMENTAL LAWS" shall mean all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, binding policies, guidelines,
interpretations, decisions, binding orders and binding directives of federal,
state and local governmental agencies and authorities with respect thereto.
"EQUIPMENT" shall have the meaning given to the term "equipment" in
the UCC and shall in any event include, without limitation, the machinery and
equipment of Borrower, including without limitation processing equipment, data
processing and computer equipment with software and peripheral equipment, and
all engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, molds, dies, attachments,
accessories, automotive equipment, trailers, trucks, motor vehicles, tanks,
cylinders and other equipment of every kind and nature, and fixtures, all
whether now owned or hereafter acquired, and
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wheresoever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, and all manuals, drawings,
instructions, warranties, and rights with respect thereto, and all products and
proceeds of the foregoing, and condemnation awards and insurance proceeds with
respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and all references to sections thereof shall include such
sections and any predecessor and successor provisions thereto.
"ERISA AFFILIATE" shall mean each Person which together with the
Borrower would be deemed to be a single employer as determined under Section
414(b), (c), (m), or (o) of the IRC.
"EVENT OF DEFAULT" shall have the meaning specified in paragraph 17
hereof.
"EXCESS AVAILABILITY" shall mean, as of any date of determination by
Agent, the excess, if any, of (i) the lesser of (a) the Revolving Loan
Commitment and (b) the Borrowing Base over (ii) the outstanding Revolving Loans,
in each case as of the close of business on such date. For purposes of
calculating Excess Availability of Borrower and the amount of the Borrowing Base
relating thereto, Agent may, in the exercise of its sole discretion, establish a
reserve in an aggregate amount based on the sum of (a) Borrower's outstanding
trade payables which are not current or which are past due beyond Borrower's
normal trade terms in any material respect, PLUS (b) any taxes due and unpaid to
any taxing authority, PLUS (c) transaction fees incurred by Borrower in
connection with the consummation of the transactions contemplated by this
Agreement which are due and remain unpaid, in each case as of such date of
determination, to the extent thereof.
"EXCESS CASH FLOW" for any Fiscal Year shall mean an amount equal to
(a) the net income of Borrower for such Fiscal Year MINUS (b) non-cash
extraordinary gains and extraordinary losses PLUS (c) depreciation and
amortization which were deducted in determining net income for such Fiscal Year
PLUS (d) long term debt incurred for Capital Expenditures made during such
period MINUS (e) Capital Expenditures made during such Fiscal Year MINUS (f)
scheduled payments of principal and prepayments on indebtedness for such Fiscal
Year (excluding principal payments made with respect to the Term Loan), to the
extent such payments are permitted under this Agreement MINUS (g) the change in
Net Working Accounts during such Fiscal Year.
"EXHIBIT A" shall mean the exhibit entitled EXHIBIT A - Business and
Collateral Locations which is attached hereto and made a part hereof.
"EXHIBIT D" shall mean the exhibit entitled EXHIBIT D-Officer's
Certificate which is attached hereto and made a part hereof.
"EXISTING LOCK BOX" shall have the meaning set forth in paragraph 11
hereof.
"EXTENDED TERM CUSTOMER" shall mean any Account Debtor to which
Borrower has granted extended dating terms acceptable to Agent and which Agent
has agreed in writing to treat as an Extended Term Customer hereunder. The
Extended Term Customers and extended dating terms approved by Agent are listed
on EXHIBIT F attached hereto; PROVIDED, that EXHIBIT F may be amended by Agent
from time to time in its commercially reasonable discretion exercised in good
faith to reflect new Extended Term Customers and the approved payment terms
therefor, the deletion of existing Extended Term Customers or a change in
payment terms for an existing Extended Term Customer. In the event of any such
amendment to EXHIBIT F, Agent shall provide Borrower prior notice thereof,
except to the extent Agent believes in its commercially reasonable discretion
exercised in good faith that such prior notice is not practicable in light of
the circumstances, in which event Agent shall provide Borrower subsequent notice
of any such amendment.
"FASB" shall mean Financial Accounting Standards Board which is an
independent board formed in 1973 to succeed and continue the activities of the
Accounting Principles Board and is responsible for establishing and interpreting
generally accepted accounting principles.
"FISCAL YEAR" shall mean with respect to Borrower, the twelve (12)
month accounting period of Borrower commencing January 1st of each calendar year
and ending December 31st of such calendar year.
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"FIXED CHARGE COVERAGE RATIO" shall mean and include, with respect to
any applicable fiscal period, the ratio of (a) EBITDA, MINUS non-financed
Capital Expenditures made during such period MINUS cash taxes actually paid
during such period to (b) the sum of (i) scheduled principal payments of
long-term debt paid or scheduled to be paid during such period PLUS (ii)
capitalized leases paid or scheduled to be paid during such period PLUS (iii)
interest expense of Borrower for such period.
"FUNDED DEBT" shall mean, at the date of determination thereof,
liabilities, as reflected on Borrower's latest internally prepared, GAAP
compliant, balance sheet.
"GAAP" shall mean generally accepted accounting principles and
policies in the United States as in effect from time to time.
"GBNF TRUST" shall mean the GBNF Trust, a trust organized under the
laws of the Commonwealth of Massachusetts, together with its successors and
assigns.
"GENERAL INTANGIBLES" shall have the meaning given to the term
"general intangibles" in the UCC and in any event shall include, without
limitation, all of Borrower's present and future general intangibles and other
personal property, any and all rights of Borrower to all choses or things in
action, tax refund claims, credits, claims, claims against carriers and
shippers, guarantee claims, contract rights, security interests, security rights
and any rights to indemnification, demands, goodwill, licenses, franchise
agreements, subscription costs, patents, patent applications, design rights,
trade names, trademarks, trademark applications, copyrights, registrations,
rights to royalties, blueprints, drawings, customer lists, purchase orders,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, methods, sales literature, video tapes, confidential information and
trade secrets, consulting agreements, employment agreements, leasehold interests
in real and personal property, insurance policies, deposits with insurers
relating to worker's compensation liabilities, Deposit Accounts and tax refunds,
other than Equipment, Inventory, Investment Property and Accounts, as well as
Borrower's books and records relating to any of the foregoing, and all products
and proceeds of the foregoing.
"GOODS" shall have the meaning given to the term "goods" in the UCC
and in any event shall include, without limitation, all of Borrower's tangible
assets and tangible properties which are moveable at the time the security
interest attaches or which are fixtures.
"GUARANTORS" shall mean any Person which executes and becomes
obligated under a Guaranty.
"GUARANTY" shall mean individually and collectively each Guaranty
executed by a Guarantor in favor of Agent and Lenders.
"HAZARDOUS DISCHARGE" shall have the meaning set forth in paragraph
15(s)(iv) hereof.
"HAZARDOUS SUBSTANCE" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, 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.
"HAZARDOUS WASTES" shall mean all waste materials subject to
regulation under CERCLA, RCRA or applicable state law, and any other applicable
Federal and state laws now in force or hereafter enacted relating to hazardous
waste disposal.
"HEALTH-CARE-INSURANCE RECEIVABLE" shall have the meaning given to the
term "health-care-insurance-receivable" in the UCC and in any event shall
include, without limitation, an interest in or claim under a policy of insurance
which is a right to payment of a monetary obligation for health-care goods or
services provided.
"HOLDINGS" shall mean PD Holdings, Inc., a Delaware corporation.
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"INDEMNIFIED PARTY" shall have the meaning specified in paragraph 19
hereof.
"INSTRUMENTS" shall have the meaning given to the term "instruments"
in the UCC and shall include, without limitation, a negotiable instrument or a
certificated security or any other writing which evidences a right to the
payment of money.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor Agreement dated
as of the Closing Date among Agent, Softech and Borrower.
"INTEREST PERIOD" shall mean for any LIBOR Rate Loan the period
commencing on the date of the borrowing thereof and ending one, three or six
months thereafter, provided, however, that Borrower may not select any Interest
Period that ends after the Term. Whenever the last day of an Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day;
provided, that if such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day.
"INVENTORY" shall have the meaning given to the term "inventory" in
the UCC and in any event shall include, without limitation, all present and
future inventory in which Borrower has any interest, including, but not limited
to, goods held by Borrower for sale or lease or to be furnished under a contract
of service and all of Borrower's present and future raw materials, work in
process, finished goods, supplies and packing and shipping materials, wherever
located, any and all merchandise returned to or reclaimed by Borrower, and any
documents of title representing any of the above.
"INVENTORY ADVANCE RATE" shall mean (i) sixty-five percent (65%)
during a period of four consecutive months (not otherwise within or part of a
Fifty Percent Period (as hereafter defined)) during each Contract Year (each
such period, a "Sixty-Five Percent Period"), each such Sixty-Five Percent Period
to be designated in advance by Borrower to Agent in writing and approved by
Agent in its sole discretion PROVIDED, that (A) if Borrower fails to designate a
Sixty-Five Percent Period on or before the 180th day of any Contract Year, there
shall be no Sixty-Five Percent Period during such Contract Year (it being
understood that a Sixty-Five Percent Period may occur after the 180th day of a
Contract Year PROVIDED that any such Sixty-Five Percent Period is designated
prior to such 180th day) and (B) no Sixty-Five Percent Period may occur during
more than one (1) of the following months: November, December, January or
February, (ii) fifty percent (50%) during a period of three consecutive months
(not otherwise within or part of a Sixty-Five Percent Period) during each
Contract Year (each such period, a "Fifty Percent Period"), each such Fifty
Percent Period to be designated in advance by Borrower to Agent in writing and
approved by Agent in its sole discretion PROVIDED, that, notwithstanding
anything to the contrary contained herein, if Borrower fails to designate a
Fifty Percent Period on or before the 271st day of any Contract Year, the Fifty
Percent Period for such Contract Year shall automatically commence on the 270th
day of such Contract Year and end on the last day of such Contract Year and
(iii) sixty percent (60%) at all other times.
"INVESTMENT PROPERTY" shall have the meaning given to the term
"investment property" in the UCC, and in any event shall include, without
limitation, all of Borrower's now owned or hereafter acquired securities,
whether certificated or uncertificated, securities entitlements, securities
accounts, commodity and futures contracts and commodity and futures accounts.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"ISP 98" shall mean the International Standby Practices which applies
to standby letters of credit, prepared by the Institute of International Banking
Law and Practice, as amended from time to time.
"KIND" shall mean, with respect to any Loan, whether such Loan is a
Revolving Loan or a Term Loan.
"L/C ISSUER" shall mean the Bank or such other bank as may be selected
by Agent in its sole discretion.
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"LENDER DEFAULT" shall have the meaning set forth in paragraph 7(h)
hereof.
"LENDER(S)" shall have the meaning set forth in the introductory
paragraph hereof.
"LETTER OF CREDIT FEE" shall have the meaning set forth in paragraph
6(d) hereof.
"LETTER OF CREDIT OBLIGATIONS" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn amount of all Letters of
Credit and (ii) the aggregate unreimbursed amount of all drawn Letters of
Credit.
"LETTER-OF-CREDIT RIGHT" shall have the meaning given to the term
"letter-of-credit-right" in the UCC and in any event shall include, without
limitation, 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.
"LETTERS OF CREDIT" shall mean those documentary letters of credit and
stand-by letters of credit issued for Borrower's account in accordance with the
terms of paragraph 4 hereof.
"LEVERAGE RATIO" shall mean and include, with respect to any
applicable fiscal period of Borrower, the ratio of (a) Funded Debt to (b) EBITDA
MINUS non-financed Capital Expenditures made during such period.
"LIABILITIES" shall mean all Loans and any and all other obligations,
liabilities and indebtedness of Borrower to Agent and/or Lenders or to any
parent, affiliate or subsidiary of Agent and/or Lenders of any and every kind
and nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, and any and all other Loans, obligations, liabilities and indebtedness
of Borrower to Agent and/or Lenders of any kind and nature, howsoever created,
arising or evidenced under this Agreement and/or the Other Agreements, in each
case whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.
"LICENSE AGREEMENT" shall mean each license agreement now or hereafter
entered into by Borrower as licensee, with respect to any trademarks, patents or
other intellectual property.
"LICENSE AGREEMENTS" shall mean all License Agreements which any
Borrower enters into with a Person pursuant to which such Borrower licenses any
intellectual property.
"LIBOR RATE" shall mean, with respect to the Interest Period
applicable to the borrowing of a LIBOR Rate Loan, the rate obtained (rounded
upwards to the nearest 1/100 of 1%) by dividing (i) the rate of interest per
annum offered to Bank in the London interbank foreign currency deposits market
as of approximately 9:00 A.M. (Chicago time) two (2) Business Days prior to the
commencement of such Interest Period for U.S. dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan for which the LIBOR Rate is being determined with maturities comparable to
the Interest Period for which such LIBOR Rate will apply, by (ii) a percentage
equal to 1 minus the stated reserve (expressed as a decimal), if any, required
to be maintained against "Eurocurrency liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System as from time to time
shall be in effect (or against any other category of liabilities, which includes
deposits, by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extensions of credit on other assets, which
includes loans by a non-U.S. office of Bank to U.S. Residents). In the absence
of manifest error, each determination by Bank of the applicable LIBOR Rate shall
be deemed conclusive.
"LIBOR RATE LOAN" shall mean a Revolving Loan or portion of a Term
Loan that bears interest based on the LIBOR Rate.
"LIBOR RATE REVOLVING LOAN" shall mean a Revolving Loan that bears
interest based on the LIBOR Rate.
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"LIBOR RATE TERM LOAN" shall mean that portion of a Term Loan that
bears interest based on the LIBOR Rate.
"LOAN" OR "LOANS" shall mean any and all Revolving Loans and each Term
Loan made by Agent and Lenders to Borrower pursuant to paragraphs 2 and 3 hereof
and all other loans, advances and financial accommodations made by Agent and
Lenders to or on behalf of Borrower hereunder.
"LOCK BOX" and "BLOCKED ACCOUNT" shall have the meanings specified in
paragraph 11 hereof.
"MANAGEMENT AGREEMENT" shall mean the Management Advisory Services
Agreement dated as of May 17, 1996, between the Borrower and SCC as amended by
that certain Amendment to Management Advisory Services Agreement dated as of the
Closing Date, as the same may be further amended, restated, or otherwise
modified, renewed or replaced from time to time, in each case to the extent
expressly permitted under the terms of this Agreement.
"MANAGEMENT PAYMENT DATE" shall have the meaning specified in
paragraph 15(j) hereof.
"MANAGEMENT SUBORDINATION AGREEMENT" shall mean the Management
Subordination Agreement dated as of the Closing Date among Borrower, SCC and
Agent which agreement shall be substantially in form and substance attached
hereto as Exhibit I.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse change in, or
a material adverse effect upon, the business, property, assets, operations,
condition (financial or otherwise) or prospects of Borrower taken as a whole,
related to any event, act, condition or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related.
"MATERIAL LICENSE AGREEMENT" shall mean a License Agreement which
relates to Inventory having a value (calculated on the basis of the lower of
cost or market value on a first in, first out basis) of more than $150,000 in
the aggregate.
"MAXIMUM TERM LOAN A AMOUNT" shall mean an amount equal to $1,500,000.
"MAXIMUM TERM LOAN B AMOUNT" shall mean an amount equal to $1,800,000.
"MORTGAGE" shall mean each mortgage or deed of trust executed by
Borrower in favor of Agent for its benefit and for the ratable benefit of
Lenders.
"MULTIEMPLOYER PLAN" shall mean a plan described in Section 4001(a)(3)
of ERISA which covers employees of Borrower or any ERISA Affiliate.
"NET WORKING ACCOUNTS" at a particular date, shall mean the difference
between Current Assets MINUS Current Liabilities at such date.
"NET WORTH" shall mean with respect to any applicable fiscal period,
the following for Borrower, each calculated for such period: shareholders'
equity (including retained earnings), less prepaid expenses, reasonably
determined by Agent on a consistent basis, plus the amount of any debt
subordinated to Agent on terms and conditions reasonably acceptable to Agent in
its sole judgment, all as determined in accordance with GAAP, consistently
applied.
"NON-DEFAULTING LENDER" shall have the meaning specified in paragraph
7(i) hereof.
"NOTE" shall mean individually and collectively, the Revolving Note
and each Term Note.
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"OBLIGOR" shall mean Borrower and each Person who is or shall become
pursuant to a document, instrument or agreement executed by such Person in favor
of the Agent and/or any Lender primarily or secondarily liable for any of the
Liabilities (including, without limitation any Person who provides security to
Agent for any Liability), PROVIDED, HOWEVER, that such term shall not include
any Account Debtor.
"ORGANIZATIONAL DOCUMENTS" shall mean, collectively, as the case may
be, articles of incorporation, certificate of incorporation, certificate of
partnership, certificate of limited partnership, certificate of formation,
by-laws, operating agreement, partnership agreement, limited partnership
agreement and/or any other agreement, certificate, document and/or instrument
associated with the organization and/or governance of the applicable entity or
the conduct of its business.
"ORIGINAL OWNER" shall mean (a) with respect to Borrower, Holdings and
(b) with respect to Holdings, SCC.
"OTHER AGREEMENTS" shall mean all agreements, instruments and
documents including, without limitation, guaranties, mortgages, trust deeds,
pledges, powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other writings heretofore, now
or from time to time hereafter executed by or on behalf of Borrower or any other
Person and delivered to Agent or any Lender or to any parent, affiliate or
subsidiary of Agent or any Lender in connection with the Liabilities or the
transactions contemplated hereby.
"PARENT" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority of
the issued and outstanding stock of Borrower or any Subsidiary.
"PARTICIPANT" shall mean each Person who shall be granted the right by
any Lender to participate in any of the Loans.
"PAYMENT INTANGIBLE" shall have the meaning given to the term "payment
intangible" in the UCC and in any event shall include, without limitation, a
General Intangible under which the Account Debtor's principle obligation is a
monetary obligation.
"PAYMENT OFFICE" shall mean initially 135 South LaSalle Street,
Chicago, Illinois 60603, thereafter, such other office of Agent, if any, which
Agent may designate by notice to Borrower to be the Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor agency.
"PDL MASSACHUSETTS" shall mean Possible Dreams, Ltd., a Massachusetts
corporation.
"PDL SUBORDINATED NOTE" shall mean that certain subordinated
promissory note executed by Borrower in favor of the GBNF Trust (as assignee of
PDL Massachusetts) in the aggregate original principal amount of $2,128,000, as
in effect on the Closing Date.
"PERMITTED LIENS" shall mean (i) statutory liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers incurred
in the ordinary course of business and securing amounts not yet due or declared
to be due by the claimant thereunder, (ii) liens or security interests in favor
of Agent, (iii) zoning restrictions and easements, rights of way, licenses,
covenants and other restrictions affecting the use of real property that do not
individually or in the aggregate have a Material Adverse Effect on Borrower's
ability to use such real property for its intended purpose in connection with
Borrower's business, (iv) liens securing the payment of taxes or other
governmental charges not yet delinquent or being contested in good faith and by
appropriate proceedings, (v) liens incurred or deposits made in the ordinary
course of Borrower's business in connection with capitalized leases or purchase
money security interests for purchase of, and applying only to, Equipment
included in the permitted borrowings under paragraph 14(q)(ii) or permitted as
Capital Expenditures under paragraph 15(p)(iv), the documents relating to such
liens to be in form and substance acceptable to Agent, (vi) liens securing
indebtedness
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owing by any Subsidiary to Borrower to the extent such indebtedness
is permitted under paragraph 14(q), or to any other Subsidiary of Borrower,
(vii) deposits to secure performance of bids, trade contracts, leases and
statutory obligations (to the extent not excepted elsewhere herein); (viii)
liens specifically permitted by Agent in writing as set forth on SCHEDULE 1(a)
attached hereto; (ix) any lien arising out of the refinancing, extension,
renewal or refunding of any indebtedness secured by any lien permitted by any of
the foregoing sections (v), (vi) and (viii) PROVIDED THAT (a) such indebtedness
is not secured by any additional assets, and (b) the amount of such indebtedness
is not increased; (x) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation; (xi)
grants of security and rights of setoff in Deposit Accounts, securities and
other properties held at banks or financial institutions to secure the payment
or reimbursement under overdraft, acceptance and other facilities, and (xii)
rights of setoff, banker's lien and other similar rights arising solely by
operation of law.
"PERSON" shall mean any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"PREFERRED CUSTOMER" shall mean any Account Debtor to which Borrower
has granted extended dating terms acceptable to Agent in its sole discretion and
which Agent has agreed in its sole discretion in writing to treat as a Preferred
Customer hereunder. The Preferred Customers and extended dating terms approved
by Agent are listed on EXHIBIT G attached hereto; PROVIDED, that EXHIBIT G may
be amended by Agent from time to time to reflect new Preferred Customers and the
approved payment terms therefor, the deletion of existing Preferred Customers or
a change in payment terms for an existing Preferred Customer.
"PRIME RATE" shall mean the publicly announced prime rate of the Bank,
in effect from time to time. The Prime Rate is not intended to be the lowest or
most favorable rate of the Bank in effect at any time.
"PRIME RATE LOAN" shall mean a Revolving Loan or portion of a Term
Loan that bears interest based on the Prime Rate.
"PRIME RATE REVOLVING LOAN" shall mean a Revolving Loan that bears
interest based on the Prime Rate.
"PRIME RATE TERM LOAN" shall mean that portion of a Term Loan that
bears interest based on the Prime Rate.
"PRO FORMA BALANCE SHEET" shall have the meaning specified paragraph
14(a)(i).
"PROHIBITED TRANSACTION" shall mean a prohibited transaction described
in Section 406 of ERISA or Section 4975 of the IRC.
"PURCHASING LENDER" shall have the meaning specified in paragraph
25(b) hereof.
"QTIP TRUST" shall mean the Leonard I. Miller QTIP Trust A, a trust
organized under the by laws of the Commonwealth of Massachusetts, together with
its successors and assigns.
"RCRA" shall mean the Resource Conservation and Recovery Act 42 U.S.C.
Sections 6901 ET SEQ., as same may be amended from time to time.
"REAL PROPERTY" shall mean all of Borrower's right, title and interest
in and to the owned and leased premises identified on SCHEDULE 1(b) hereto.
"RELEASE" shall have the meaning set forth in paragraph 14(bb) hereof.
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"REPORTABLE EVENT" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder for which the 30-day
notice of such event has not been waived pursuant to such regulations.
"REQUIRED LENDERS" shall mean Lenders holding at least fifty one
percent (51%) of the Loans, or if no Loans are outstanding, Lenders holding at
least fifty one percent (51%) of the Commitment Percentages.
"REVOLVING LOANS" shall have the meaning specified in paragraph 2
hereof.
"REVOLVING LOAN COMMITMENT" shall mean the sum of $12,700,000.
"REVOLVING NOTE" shall mean the promissory note(s) in the aggregate
original principal amount of the Revolving Loan Commitment, executed by Borrower
to the order of Agent for its benefit and for the benefit of Lenders, or to each
Lender, as applicable, dated as of the Closing Date, together with all
replacements and substitutions thereof.
"ROYALTY RESERVE" shall mean a reserve against borrowing base
availability in an amount equal to $13,317, which such amount may be adjusted by
Agent in the exercise of its reasonable discretion upon the occurrence of any
one or more of the following events: (a) at any time following the occurrence
and during the continuance of an Event of Default and/or (b) upon the completion
of any Collateral examination performed or caused to be performed by Agent in
accordance with the terms of this Agreement, each such adjustment to be based on
the aggregate amount of contracted and estimated payments required to be then
paid by Borrower under each License Agreement, based on the value of the
Inventory subject to each such License Agreement (calculated on the basis of the
lower of cost or market value on a first in, first out basis).
"SCC" shall mean Security Capital Corporation, a Delaware corporation.
"SCC MANAGEMENT FEE" shall have the meaning specified in paragraph
15(j) hereof.
"SCC PAYMENT CONDITIONS" shall mean (A) no Event of Default has
occurred or would occur as a result of the payment of the then applicable SCC
Management Fee and (B) the applicable SCC Management Fee would be permitted to
be made pursuant to the terms and conditions of the Subordinated Notes and the
Management Subordination Agreement.
"SELLER SUBORDINATION AGREEMENT" shall mean that certain Seller
Subordination Agreement dated as of the Closing Date among Agent, the GBNF Trust
and QTIP Trust pursuant to which the indebtedness evidenced by the Subordinated
Notes is subordinated to the Liabilities, which agreement shall be substantially
in form and substance attached hereto as EXHIBIT H.
"SETTLEMENT DATE" shall mean the Closing Date and thereafter every
Wednesday of each Week unless such day is not a Business Day in which case it
shall be the next succeeding Business Day.
"SOFTECH" shall mean Softech Financial, a division of EAB Leasing
Corp.
"SPECIFIED EXTENDED TERM ACCOUNTS" shall mean those Eligible Accounts
due from an Extended Term Customer which remain unpaid more than one hundred and
eighty days (180) past the stated invoice date thereof.
"SUBORDINATED DEBT DOCUMENTS" shall mean the Subordinated Notes, the
Banc of America Warrants and all other documents, agreements and instruments
executed in connection therewith.
"SUBORDINATED NOTES" shall mean, collectively, the PDL Massachusetts
Note and the CNC Note.
"SUBSIDIARY" shall mean (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such
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corporation (irrespective of whether at the time stock of any other class of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned by
Borrower, (ii) any partnership, limited liability company, entity or joint
venture of which more than fifty percent (50%) of the outstanding equity
interests is at the time, directly or indirectly, owned by Borrower or (iii) any
partnership of which Borrower is general partner.
"SUPPORTING OBLIGATION" shall have the meaning given to the term
"supporting obligation" in the UCC and in any event shall include, without
limitation, 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.
"TAX PAYMENT CONDITIONS" shall mean (a) the date of such payment shall
be on or after January 1, 2003, (b) no Event of Default shall have occurred and
be continuing, after giving effect to such tax payment, (c) Agent shall have
received statements of income and statements of cash flow of Borrower and
balance sheets of Borrower (the "Internal Annual Financial Statements") prepared
by Borrower's controller, in each case for the Fiscal Year for which such tax
payment is being made, (d) based on the Internal Annual Financial Statements for
such Fiscal Year, after giving effect to such tax payment, Borrower would be in
compliance with paragraph 15(p)(ii) hereof as of the fiscal quarter ended
December 31 of such Fiscal Year (each such compliance, a "Financial Covenant
Compliance") and (e) Agent shall have received a certificate executed by
Borrower's controller certifying such Financial Covenant Compliance.
"TERM" shall have the meaning specified in paragraph 13 hereof.
"TERM LOAN" shall mean, individually and collectively, Term Loan A and
Term Loan B.
"TERM LOAN A" shall have the meaning specified in paragraph 3(a)
hereof.
"TERM LOAN B" shall have the meaning specified in paragraph 3(b)
hereof.
"TERM NOTE A" shall mean the promissory note(s) in the aggregate
original principal amount equal to the Maximum Term Loan A Amount, executed by
Borrower to the order of Agent for its benefit and for the ratable benefit of
Lenders or to each Lender, as applicable, and dated as of the Closing Date,
together with all replacements and substitutions therefor.
"TERM NOTE B" shall mean the promissory note(s) in the aggregate
original principal amount equal to the Maximum Term Loan B Amount, executed by
Borrower to the order of Agent for its benefit and for the ratable benefit of
Lenders or to each Lender, as applicable, and dated as of the Closing Date,
together with all replacements and substitutions therefor.
"TERM NOTES" shall mean, collectively, Term Note A and Term Note B.
"TERMINATION EVENT" shall mean (i) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan; (ii) the withdrawal of Borrower or any
member of the Controlled Group from a Benefit Plan or Multiemployer Plan during
a plan year in which such entity was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Benefit Plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit
Plan or Multiemployer Plan; (v) any event or condition (a) which might
reasonably constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Benefit Plan or
Multiemployer Plan, or (b) that may reasonably result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Section 4203 or 4205 of ERISA,
respectively, of Borrower or an ERISA Affiliate from a Multiemployer Plan.
"TOTAL CREDIT FACILITY" shall mean the sum of $16,000,000.
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"TOXIC SUBSTANCE" shall mean and include any material present on the
Real Property which has been shown to have significant adverse effect on human
health and which is subject to regulation under the Toxic Substances Control Act
(TSCA), 15 U.S.C. Sections 2601 ET SEQ., applicable state law, or any other
applicable Federal or state laws relating to toxic substances. "Toxic Substance"
includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and
lead-based paints.
"TRANSACTIONS" shall mean the transactions contemplated under this
Agreement.
"TRANSFEREE" shall have the meaning set forth in paragraph 25(a)
hereof.
"TRIGGER EVENT" shall have the meaning given to such term in the CNC
Subordinated Note.
"TYPE" shall mean, with respect to (i) any Revolving Loan, whether
such Revolving Loan is a LIBOR Rate Revolving Loan or a Prime Rate Revolving
Loan and (ii) a Term Loan, whether any portion thereof is a LIBOR Rate Term Loan
or a Prime Rate Term Loan.
"UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in the State of New York, as amended from time to time, and any successor
statute; provided, that, in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of Agent's security
interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other that the State of New York, the term "Code" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions of this Agreement relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
"UNPAID MANAGEMENT FEE" shall have the meaning specified in paragraph
15(j) hereof.
"WEEK" shall mean the time period commencing with a Wednesday and
ending on the following Tuesday.
(b) ACCOUNTING TERMS AND DEFINITIONS. Unless otherwise defined or specified
herein, all accounting terms used in this Agreement shall be construed in
accordance with GAAP, applied on a basis consistent in all material respects
with the financial statements delivered by Borrower to Agent on or before the
Closing Date or as otherwise agreed to by Agent. The definitions of "Current
Assets" and "Current Liabilities" set forth in paragraph 1(a) are solely for use
in the definition of "Net Working Accounts". All other references to the terms
"current assets" or "current liabilities" used in this Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the financial statements delivered by Borrower to Agent on or
before the Closing Date or as otherwise agreed to by Agent. All accounting
determinations for purposes of determining compliance with the financial
covenants contained in paragraph 15(p) shall be made in accordance with GAAP as
in effect on the Closing Date and applied on a basis consistent in all material
respects with the audited financial statements of Borrower delivered to Agent by
Borrower on or before the Closing Date (provided, however, that such
determinations may be affected by any write downs of goodwill taken in response
to FASB releases existing on the Closing Date or issued at any date thereafter).
The financial statements required to be delivered hereunder from and after the
Closing Date, and all financial records, shall be maintained in accordance with
GAAP. If GAAP shall change from the basis used in preparing the audited
financial statements delivered to Agent by Borrower on or before the Closing
Date, the certificates required to be delivered pursuant to paragraph 12
demonstrating compliance with the covenants contained herein shall include, at
the election of Borrower or upon the request of Agent, calculations setting
forth the adjustments necessary to demonstrate how Borrower is in compliance
with the financial covenants based upon GAAP as in effect on the Closing Date.
2. REVOLVING LOANS. Subject to the terms and conditions of this Agreement
and the Other Agreements, during the Term, absent the existence of a Default or
Event of Default:
(a) REVOLVING LOAN COMMITMENT. Each Lender, severally and not jointly,
shall make such revolving loans and advances (the "Revolving Loans") to Borrower
in aggregate amounts outstanding at any time equal to such Lender's Commitment
Percentage as Borrower shall from time to time request, in accordance with the
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terms of paragraph 2(b) hereof. The aggregate unpaid principal amount of all
Revolving Loans outstanding at any one time made to Borrower shall not exceed
the lesser of (A) the Borrowing Base and (B) the Revolving Loan Commitment, in
each case minus the outstanding Letter of Credit Obligations. All Revolving
Loans shall be repaid in full upon the earlier to occur of (i) the end of the
Term and (ii) the acceleration of the Liabilities pursuant to paragraph 18 of
this Agreement. If at any time the outstanding principal balance of the
Revolving Loans made to Borrower exceeds (A) the Borrowing Base or (B) the
Revolving Loan Commitment, in each case minus the outstanding Letter of Credit
Obligations, Borrower shall immediately, and without the necessity of a demand
by Agent, pay to Agent such amount as may be necessary to eliminate such excess,
and Agent shall apply such payment pro rata according to the Commitment
Percentage of each Lender against the outstanding principal balance of the
Revolving Loans. In addition, if at any time the sum of (i) the outstanding
principal balance of the Loans and (ii) the outstanding Letter of Credit
Obligations exceeds the Total Credit Facility, Borrower shall immediately and
without the necessity of a demand by Agent pay to Agent such amount as may be
necessary to eliminate such excess, and Agent shall apply such payment against
the outstanding principal balance of the Loans in such order as Agent shall
determine in its sole discretion. Borrower hereby authorizes Agent to charge any
of Borrower's accounts to make any payments of principal or interest required by
this Agreement. All Revolving Loans shall, in Agent's sole discretion, be
evidenced by one or more Revolving Notes in substantially the form attached
hereto as EXHIBIT 2(a). However, if such Revolving Loans are not so evidenced,
such Revolving Loans may be evidenced solely by entries upon the books and
records maintained by Agent.
(b) BORROWING LIMITS. Each Lender, severally and not jointly, shall
make Revolving Loans to Borrower up to its Commitment Percentage of the lesser
of clause (A) or (B) below, the amount calculated pursuant to clause (A) below
being the "Borrowing Base":
A. an amount equal to the sum of (i) eighty-five percent (85%)
(the "Standard Accounts Advance Rate") multiplied by the face amount
of Eligible Accounts (other than Specified Extended Term Accounts),
PLUS (ii) the lesser of (x) $1,250,000 or (y) fifty percent (50%) (the
"Extended Accounts Advance Rate", and together with the Standard
Accounts Advance Rate, collectively the "Accounts Advance Rate")
multiplied by the face amount of Specified Extended Term Accounts,
PLUS (iii) the lesser of (x) $3,500,000; (y) the Inventory Advance
Rate multiplied by the value of Eligible Inventory calculated on the
basis of the lower of cost or market value on a first in, first out
basis or (z) the sum of (I) sixty percent (60%) of the value
multiplied by Eligible Inventory calculated on the basis of the lower
of cost or market value on a first in, first out basis plus (II)
$250,000 MINUS (iv) the Dilution Reserve MINUS (v) the Royalty Reserve
MINUS (vi) the Canadian Account Reserve MINUS (vii) such other
reserves as Agent may establish from time to time in the exercise of
its commercially reasonable discretion MINUS (viii) the outstanding
amount of all Letter of Credit Obligations; or
B. the Revolving Loan Commitment, minus the outstanding amount of
all Letter of Credit Obligations.
C. Borrower acknowledges that the Agent's imposition of the
reserves described in (A) may limit or restrict Loans requested by
Borrower.
3. ADDITIONAL LOANS.
(a) TERM LOAN A. On the Closing Date, each Lender, severally and
not jointly, shall make a term loan ("Term Loan A") to Borrower in an amount
equal to its Commitment Percentage of the Maximum Term Loan A Amount. Principal
payable on account of Term Loan A shall be payable in successive monthly
installments payable, (i) on the first day of each month, the first of which
installments shall be due and payable on the first day of the month immediately
following the 30th day after the Closing Date and (ii) in equal and level
payments of $12,500 each month during the Term, PROVIDED, HOWEVER, that the
entire unpaid principal balance of Term Loan A shall be due and payable in full
upon the expiration of the Term. Notwithstanding anything hereinabove to the
contrary, the entire unpaid principal balance of Term Loan A, and any accrued
and unpaid interest thereon, shall be immediately due and payable upon the
earlier to occur of (i) the last day of the Term and (ii) the acceleration of
the Liabilities pursuant to paragraph 18 of this Agreement. Term Loan A shall be
evidenced by one or more Term Notes in substantially the form attached hereto as
EXHIBIT 3(a).
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(b) TERM LOAN B. On the Closing Date, each Lender, severally and
not jointly, shall make a term loan ("Term Loan B") to Borrower in an amount
equal to its Commitment Percentage of the Maximum Term Loan B Amount. Principal
payable on account of Term Loan B shall be payable in successive monthly
installments payable, (i) on the first day of each month, the first of which
installments shall be due and payable on the first day of the month immediately
following the 30th day after the Closing Date and (ii) in twenty-four (24) equal
and level payments of $75,000 each month until the principal balance of Term
Loan B is paid in full, PROVIDED, HOWEVER, that the entire unpaid principal
balance of Term Loan B shall be due and payable in full upon the expiration of
the Term. Notwithstanding anything hereinabove to the contrary, the entire
unpaid principal balance of Term Loan B, and any accrued and unpaid interest
thereon, shall be immediately due and payable upon the earlier to occur of (i)
the last day of the Term and (ii) the acceleration of the Liabilities pursuant
to paragraph 18 of this Agreement. Term Loan B shall be evidenced by one or more
Term Notes in substantially the form attached hereto as EXHIBIT 3(a).
4. LETTER OF CREDIT. (a) Subject to the terms and conditions hereof, Agent
shall (a) from time to time issue or cause the L/C Issuer to issue Letters of
Credit for the account of Borrower; PROVIDED, HOWEVER, that Agent will not be
required to issue or cause to be issued any Letters of Credit to the extent that
the issuance of such Letters of Credit would then cause the sum of (i) the
outstanding Revolving Loans PLUS (ii) the Letter of Credit Obligations (with the
requested Letter of Credit being deemed to be outstanding for purposes of this
calculation) to exceed the lesser of (x) the Revolving Loan Commitment or (y)
the Borrowing Base in effect prior to the issuance of the requested Letter of
Credit. The maximum amount of outstanding Letters of Credit shall not exceed One
Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate at any time.
Each disbursement or payment by the L/C Issuer or Agent related to Letters of
Credit shall be deemed to be a Revolving Loan and shall bear interest as a Prime
Rate Revolving Loan. Letters of Credit that have not been drawn upon shall not
bear interest.
(b) Borrower may from time to time upon notice not later than
12:00 Noon, Chicago time, at least three (3) Business Days in advance, request
Agent to assist Borrower in establishing or opening a Letter of Credit by
delivering to Agent at the Payment Office, the L/C Issuer's standard form of
letter of credit application (the "Letter of Credit Application") completed to
the satisfaction of the L/C Issuer; and, such other certificates, documents and
other papers and information as Agent may reasonably request.
(c) Each Letter of Credit shall, among other things, (i) provide
for the payment of sight drafts when presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than twelve (12) months
after such Letter of Credit's date of issuance and in no event later than the
last day of the Term. Each Letter of Credit Application and each Letter of
Credit shall be subject to (x) the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
and any amendments or revision thereof in connection with any documentary letter
of Credit and (y) ISP 98 in connection with any standby Letter of Credit, or
with respect to any Letter of Credit Application or Letter of Credit, any other
rules, regulations and customs prevailing at the place where any such Letter of
Credit Application is made or where any such Letter of Credit is available or
the drafts are drawn or negotiated and, to the extent not inconsistent
therewith, the laws of the State of New York.
(d) In connection with the issuance of any Letter of Credit,
Borrower shall indemnify, save and hold Agent, each Lender and each L/C Issuer
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any L/C Issuer, and expenses
and reasonable attorneys' fees incurred by Agent, any Lender or any L/C Issuer
arising out of, or in connection with, any Letter of Credit to be issued for the
account of Borrower. Borrower shall be bound by the L/C Issuer's regulations and
good faith interpretations of any Letter of Credit issued or created for
Borrower's account, although this interpretation may be different from
Borrower's own; and, neither Agent nor any Lender, any L/C Issuer, nor any of
its correspondents shall be liable for any error, negligence, or mistakes,
whether of omission or commission, in following Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for
Agent's or any Lender's or such correspondents' gross (not mere) negligence or
willful misconduct.
(e) Borrower shall authorize and direct the L/C Issuer to name
Borrower as the "Account Party" therein and to deliver to Agent all instruments,
documents, and other writings and property received by the L/C Issuer pursuant
to the Letter of Credit and to accept and rely upon Agent's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit and the application therefor.
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(f) In connection with all Letters of Credit issued or caused to
be issued by Agent under this Agreement, Borrower hereby appoints Agent, or its
designee, as its attorney, with full power and authority, exercisable after the
occurrence and continuance of an Event of Default (i) to sign and/or endorse
Borrower's name upon any warehouse or other receipts, letter of credit
applications and acceptances; (ii) to sign Borrower's name on bills of lading;
(iii) to clear Inventory through the United States of America Customs Department
("Customs") in the name of Borrower or Agent or Agent's designee, and to sign
and deliver to Customs officials powers of attorney in the name of Borrower for
such purpose; (iv) to complete in the name of Agent, or Agent's designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof; (v) to clear and resolve any
questions of non-compliance of documents; (vi) to give any instructions as to
acceptance or rejection of any documents or goods; (vii) to execute any and all
applications for steamship or airways guarantees, indemnities or delivery
orders; (viii) to grant any extensions of the maturity of, time of payment for,
or time of presentation of, any drafts, acceptances, or documents; and (ix) to
agree to any amendments, renewals, extensions, modifications, changes or
cancellation of any of the terms or conditions of any of the applications,
Letters of Credit, drafts or acceptances; all in Agent's sole name, and the L/C
Issuer shall be entitled to comply with and honor any and all such documents or
instruments executed by or received solely from Agent; all without notice to or
consent from Borrower. Neither Agent nor its attorneys will be liable for any
acts or omissions nor for any error of judgment or mistakes of fact or law,
except for Agent's or its attorney's gross (not mere) negligence or willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit remain outstanding.
(g) Neither Agent nor any Lender shall be responsible for: the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any differences or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent, or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipment, or failure or omission to ship
any or all of the goods referred to in the Letters of Credit or documents; any
deviation from instructions, delay, default, or fraud by the shipper and/or any
one else in connection with the Collateral or the shipping thereof; or any
breach of contract between the shipper or vendors and Borrower.
(h) Any necessary import, export or other licenses or
certificates for the import or handling of the Collateral will have been
promptly procured; all foreign and domestic governmental laws and regulations in
regard to the shipment and importation of the Collateral or the financing
thereof will have been promptly and fully complied with; any certificates in
that regard that Agent may at any time request will be promptly furnished. In
this connection, Borrower warrants and represents that all shipments made under
any such Letters of Credit are in accordance with the governmental laws and
regulations of the countries in which the shipments originate and terminate, and
are not prohibited by any such law and regulations. Borrower assumes all risk,
liability and responsibility for, and agrees to pay and discharge all present
and future local, state, federal or foreign taxes, duties, or levies. Any
embargo, restriction, laws, customs or regulations of any country, state, city
or other political subdivision where the Collateral is or may be located or
wherein payments are to be made or wherein drafts may be drawn, negotiated,
accepted, or paid shall be solely at Borrower's risk, liability and
responsibility.
(i) Each Lender shall to the extent of the percentage amount
equal to the product of such Lender's Commitment Percentage times the aggregate
amount of all disbursements made with respect to the Letters of Credit be deemed
to have irrevocably purchased an undivided participation in each Revolving Loan
made as a consequence of such disbursement. In the event that at the time a
disbursement is made the unpaid balance of Revolving Loans exceeds or would
exceed, with the making of such disbursement, the lesser of the Revolving Loan
Commitment or the Borrowing Base, and such disbursement is not reimbursed by
Borrower within two (2) Business Days, Agent shall promptly notify each Lender
and upon Agent's demand each Lender shall pay to Agent such Lender's
proportionate share of such unreimbursed disbursement together with such
Lender's proportionate share of Agent's unreimbursed costs and expenses relating
to such unreimbursed disbursement. Upon receipt by Agent of a repayment from
Borrower of any amount disbursed by Agent for which Agent had already been
reimbursed by the Lenders, Agent shall deliver to each of the Lenders that
Lender's pro rata share of such repayment. Each Lender's participation
commitment shall continue until the last to occur of any of the following
events: (A) Agent ceases to be obligated to issue or cause the issuance of
Letters of Credit hereunder; (B) no Letter of Credit issued hereunder
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remains outstanding and uncancelled or (C) all Persons (other than Borrower)
have been fully reimbursed for all payments made under or relating to Letters of
Credit.
(j) The obligations of a Lender to make payments to the Agent for the
account of the Agent or the L/C Issuer with respect to a Letter of Credit shall
be irrevocable, without any qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the Other Agreements;
(ii) the existence of any claim, setoff, defense or other right
which Borrower may have at any time against a beneficiary named in such Letter
of Credit or any transferee of such Letter of Credit (or any Person for which
any such transferee may be acting), the Agent, L/C Issuer, any Lender, or any
other person, whether in connection with this Agreement, such Letter of Credit,
the transactions contemplated herein or any related transactions (including any
underlying transactions between Borrower or any other party and the beneficiary
named in such Letter of Credit);
(iii) any draft, certificate or any other document presented
under such Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or any of the
Other Agreements;
(v) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to such Letter of Credit;
(vi) any payment by the L/C Issuer under any of the Letters of
Credit against presentation of a draft or certificate which does not comply with
the terms of such Letter of Credit (if, in the good faith opinion of the L/C
Issuer, such prepayment is deemed to be appropriate); or
(vii) the occurrence of any Default or Event of Default,
PROVIDED, HOWEVER, that after paying in full its reimbursement obligation
hereunder, nothing herein shall adversely affect the right of Borrower or any
Lender, as the case may be, to commence any proceeding against such L/C Issuer
for any wrongful disbursement made by such L/C Issuer under a Letter of Credit
as a result of acts or omissions constituting gross (not mere) negligence or
willful misconduct on the part of such L/C issuer.
5. MANDATORY PREPAYMENTS.
(a) SALE, DAMAGE, DESTRUCTION, ETC. If Borrower sells any Equipment,
or if Borrower sells any Real Property subject to a Mortgage, or if any of the
Collateral is damaged, destroyed or taken by condemnation, Borrower shall pay to
Agent for its benefit and for the ratable benefit of Lenders, unless otherwise
specifically provided herein or otherwise agreed to by Agent, as and when
received by Borrower and as a mandatory prepayment of the Loans, to be applied
first against the last maturing installments of principal of Term Loan B in the
inverse order thereof, second against the last maturing installments of
principal of Term Loan A in the inverse order thereof and then to the Revolving
Loans, subject to Borrower's ability to reborrow Revolving Loans in accordance
with the terms hereof (or, at Agent's option, such of the other Liabilities of
Borrower as Agent may elect), a sum equal to the proceeds received by Borrower
from (i) such sale or (ii) such damage, destruction or condemnation, PROVIDED,
HOWEVER, that without Agent's consent, unless and until an Event of Default has
occurred and is continuing:
(i) obsolete or worn out Equipment may be sold or otherwise
disposed of by Borrower and the proceeds thereof may be retained
by Borrower, so long as the fair
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market value of any such Equipment sold or otherwise disposed of
in any single transaction is less than $100,000, and the fair
market value, in the aggregate, of all such Equipment sold or
otherwise disposed of by Borrower during any twelve-month period
is less than $250,000; and
(ii) proceeds of Collateral arising from the damage, destruction
or condemnation thereof may be retained by Borrower and used by
Borrower to repair, restore or replace such Collateral, as the
case may be, so long as the fair market value of any such
Collateral damaged, destroyed or condemned in any single incident
is less than $100,000 and the fair market value, in the
aggregate, of all such Collateral owned by Borrower and damaged,
destroyed or condemned during any twelve-month period is less
than $250,000.
(b) EXCESS CASH FLOW RECAPTURE. (i) Borrower shall, each Fiscal Year,
pay to Agent for its benefit and for the ratable benefit of Lenders a prepayment
of the outstanding amount of the Loans in an amount equal to twenty-five percent
(25%) of Excess Cash Flow for the immediately preceding Fiscal Year commencing
with the Fiscal Year ending December 31, 2002 payable upon delivery of the
annual financial statements to Agent referred to in and required by paragraph
12(d) for the applicable Fiscal Year but in no event later than ninety (90) days
after the end of such Fiscal Year. Such payments shall be applied first against
the last maturing installments of principal of Term Loan B in the inverse order
thereof until Term Loan B is paid in full, second against the last maturing
installments of principal of Term Loan A in the inverse order thereof until Term
Loan A is paid in full and then to the Revolving Loans, subject to Borrower's
ability to reborrow Revolving Loans in accordance with the terms hereof. In the
event that the annual financial statements referred to and required by paragraph
12(d) are not timely delivered, then a calculation based upon estimated amounts
shall be made by Agent upon which calculation Borrower shall make the prepayment
required by this paragraph 5(b), subject to adjustment, as applicable, when the
annual financial statements are delivered to Agent as required hereby. The
calculation made by Agent shall not be deemed a waiver of any rights Agent or
any Lender may have as a result of the failure of Borrower to deliver such
financial statements.
(ii) After the annual computation of Excess Cash Flow for the
immediately preceding Fiscal Year and payments to Agent in
accordance with clause (i) above, Borrower may (subject to the
last sentence of this clause (ii)) distribute in any Fiscal Year
up to fifty (50%) percent of Excess Cash Flow for the immediately
preceding Fiscal Year in such manner and to such Persons as
Borrower may reasonably determine, including, without limitation,
notwithstanding any restriction set forth in paragraph 15(j)
hereof, payments to be made by Borrower pursuant to the
Consolidated Income Tax Sharing Agreement, the Management
Agreement, the Subordinated Debt Documents (other than the Banc
of America Warrants), other shareholder distributions or any
other distribution; PROVIDED, HOWEVER, that no such payment or
distribution shall be (x) permitted after the occurrence and
continuance of an Event of Default hereunder or if after giving
effect to the payment of any such distribution an Event of
Default would occur hereunder and (y) used to make a payment or
distribution with respect to the Banc of America Warrants.
Borrower shall retain during each Fiscal Year as working capital
an amount equal to or greater than twenty-five (25%) percent of
Excess Cash Flow for the immediately preceding Fiscal Year.
(c) LIFE INSURANCE PROCEEDS. If Agent or Borrower receives any
proceeds of life insurance on the life of Dawn McCormack, as and when received
by Agent or Borrower, as applicable, Agent shall apply such proceeds as a
mandatory prepayment of the Loans, to be applied first against the last maturing
installments of principal of Term Loan B until Term Loan B is paid in full,
second to the last maturing installments of principal of Term Loan A until Term
Loan A is paid in full and then to the outstanding Revolving Loans as a
permanent reduction in the Revolving Loan Commitment.
6. INTEREST, FEES AND CHARGES.
(a) RATES OF INTEREST. Interest accrued on the Loans shall be due on
the earliest of (i) in the case of a LIBOR Rate Loan, the first day of each
month (for the immediately preceding month), computed through the last calendar
day of the preceding month and at the end of the Interest Period applicable
thereto and in the case of a Prime Rate Loan, the first day of each month (for
the immediately preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which Agent
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elects to accelerate the maturity and payment of the Liabilities, or (iii)
termination of this Agreement pursuant to paragraph 13 hereof. Interest shall
accrue on (1) the principal amount of the Revolving Loans made to Borrower
outstanding at the end of each day at (A) with respect to Prime Rate Revolving
Loans, a fluctuating rate per annum equal to the Applicable Margin above the
Prime Rate or (B) with respect to LIBOR Rate Revolving Loans, a fixed rate per
annum equal to the Applicable Margin above the LIBOR Rate, (2) the unpaid
principal balance of Term Loan A at (A) with respect to Prime Rate Term Loans, a
fluctuating rate per annum equal to the Applicable Margin above the Prime Rate
or (B) with respect to LIBOR Rate Term Loans, a fixed rate per annum equal to
the Applicable Margin above the LIBOR Rate and (3) the unpaid principal amount
of Term Loan B made to Borrower outstanding at the end of each day at (A) with
respect to Prime Rate Term Loans, a fixed rate per annum equal to the Applicable
Margin above the Prime Rate or (B) with respect to LIBOR Rate Term Loans, a
fixed rate per annum equal to the Applicable Margin above the LIBOR Rate. The
rate of interest payable on Prime Rate Loans shall increase or decrease by an
amount equal to any increase or decrease in the Prime Rate, effective as of the
opening of business on the day that any such change in the Prime Rate occurs.
Upon and after the occurrence of an Event of Default, and during the
continuation thereof, the principal amount of all Loans shall bear interest on
demand at a rate per annum equal to the rate of interest then in effect under
this paragraph 6(a) plus two percent (2%).
(b) COMPUTATION OF INTEREST AND FEES. Interest and collection charges
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year consisting of three hundred and sixty (360) days.
For the purpose of computing interest hereunder, all items of payment received
by Agent shall be deemed applied by Agent on account of the Liabilities (subject
to final payment of such items) on the second Business Day after receipt by
Agent of good funds in Agent's account located in Chicago, Illinois.
(c) MAXIMUM INTEREST. It is the intent of the parties that the rate
of interest and the other charges to Borrower under this Agreement shall be
lawful; therefore, if for any reason the interest or other charges payable under
this Agreement are found by a court of competent jurisdiction, in a final
determination, to exceed the limit which Agent may lawfully charge Borrower,
then the obligation to pay interest and other charges shall automatically be
reduced to such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrower.
(d) LETTER OF CREDIT FEES. Borrower shall remit to Agent for its own
account a letter of credit fee equal to two and one-half percent (2.50%) per
annum (the "Letter of Credit Fee") on the aggregate undrawn face amount of all
outstanding Letters of Credit issued for the account of Borrower, which fee
shall be payable monthly in arrears on each day that interest is payable
hereunder. Borrower shall also pay on demand the normal and customary
administrative charges for issuance, amendment, negotiation, renewal or
extension of any Letter of Credit imposed by the L/C Issuer. Upon the occurrence
and during the continuance of an Event of Default, all Letter of Credit Fees
shall be payable on demand at a rate equal to the Letter of Credit Fees under
this paragraph 6(d) then in effect plus two percent (2%) on the aggregate
undrawn face amount thereof.
(e) CLOSING FEE. Borrower shall pay to Agent for its own account a
closing fee of eighty thousand dollars($80,000), which fee shall be deemed fully
earned, non refundable and due on the Closing Date.
(f) UNUSED LINE FEE. Borrower shall pay to Agent for the ratable
benefit of Lenders at the end of each month, in arrears, and on the last day of
the Term an Unused Line Fee equal to one-half of one percent (0.5%) per annum on
the daily average amount by which the Revolving Loan Commitment exceeds the sum
of (i) the outstanding principal balance of the Revolving Loans, and (ii) the
outstanding Letter of Credit Obligations. The Unused Line Fee shall accrue from
the Closing Date until the last day of the Term.
(g) COLLATERAL MANAGEMENT FEE. Borrower shall pay to Agent for its
own account an annual collateral management fee (the "Annual Collateral
Management Fee") of $15,000 per annum, which fee shall be deemed earned in full
on the Closing Date and on each anniversary thereafter and shall not be subject
to rebate or proration for any reason. Each Annual Collateral Management Fee
shall be paid and due on the earlier of (i) in equal quarterly installments of
$3,750 each, on the Closing Date (and each anniversary thereafter) and each
January 1, April 1 and July 1 during the Term, (ii) in full upon the occurrence
of an Event of Default in consequence of which Agent elects to accelerate the
maturity and payment of the Liabilities, or (iii) in full upon the termination
of this Agreement pursuant to paragraph 13 hereof.
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(h) EXAMINATION AND APPRAISAL FEES. In addition to the costs and
expenses described in paragraph 6(g) hereof, Borrower shall pay to Agent for its
own account an examination fee of $750 per Person per day charged by Agent for
each examination performed by or at Agent's direction of Borrower's books and
records and Collateral and such other matters as Agent shall deem appropriate in
its commercially reasonable judgment together with each such Person's out of
pocket expenses incurred in connection with each such examination, each such fee
and out of pocket expenses to be paid upon the completion of each such
examination.
(i) CAPITAL ADEQUACY CHARGE. If Agent or any Lender shall have
determined that the adoption of any law, rule or regulation regarding capital
adequacy, or any change therein or in the interpretation or application thereof,
or compliance by Agent or any Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or governmental authority enacted after the Closing Date, does or shall have the
effect of reducing the rate of return on Agent's or any Lender's capital as a
consequence of its obligations hereunder to a level below that which Agent could
have achieved but for such adoption, change or compliance (taking into
consideration Agent's or such Lender's policies with respect to capital
adequacy) by a material amount, then from time to time, after submission by
Agent to Borrower of a written demand therefor ("Capital Adequacy Demand")
together with the certificate described below, Borrower shall pay to Agent or
such Lender such additional amount or amounts ("Capital Adequacy Charge") as
will compensate Agent or such Lender for such reduction, such Capital Adequacy
Demand to be made with reasonable promptness following such determination. A
certificate of Agent claiming entitlement to payment as set forth above shall be
conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such reduction, the amount of the
Capital Adequacy Charge to be paid to Agent or such Lender, and the method by
which such amount was determined. In determining such amount, Agent or such
Lender may use any reasonable averaging and attribution method, applied on a
non-discriminatory basis.
7. LOAN ADMINISTRATION.
(a) LOAN REQUESTS. A request for a Revolving Loan shall be made or
shall be deemed to be made, each in the following manner: (i) Borrower shall
give Agent same day notice, no later than 10:30 A.M. (Chicago time) of such day,
of its intention to borrow, a Prime Rate Revolving Loan, and at least three (3)
Business Days prior notice of its intention to borrow a LIBOR Rate Revolving
Loan, in which notice Borrower shall specify the amount of the proposed
borrowing and the proposed borrowing date, PROVIDED, however, that no such
request may be made at a time when there exists a Default or an Event of
Default; and (ii) the coming due of any amount required to be paid under this
Agreement or any Note, whether on account of interest or for any other
Liability, shall be deemed irrevocably to be a request for a Prime Rate
Revolving Loan on the due date thereof in the amount required to pay such
interest or other Liability. As an accommodation to Borrower, Agent may permit
telephone requests for Revolving Loans and electronic transmittal of
instructions, authorizations, agreements or reports to Agent by Borrower. Unless
Borrower specifically directs Agent in writing not to accept or act upon
telephonic or electronic communications from Borrower, neither Agent nor any
Lender shall have any liability to Borrower for any loss or damage suffered by
Borrower as a result of Agent's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Agent by Borrower and Agent shall have no duty to verify the origin of
any such communication or the authority of the Person sending it. Each notice of
borrowing shall be irrevocable by and binding on Borrower, and if such notice
requests the borrowing of a LIBOR Rate Revolving Loan, such notice shall state
the Interest Period with respect thereto. Borrower, at its option, may choose
Prime Rate Revolving Loans or LIBOR Rate Revolving Loans, provided that any
LIBOR Rate Revolving Loan shall be in a minimum amount of $1,000,000 or an
integral multiple of $100,000 in excess thereof, and provided further that the
right of Borrower to choose any LIBOR Rate Loan is subject to the provisions of
paragraph 7(c) hereof.
(b) DISBURSEMENT. Borrower hereby irrevocably authorizes Agent to
disburse the proceeds of each Revolving Loan requested by Borrower, or deemed to
be requested by Borrower, as follows: (i) the proceeds of each Revolving Loan
requested under paragraph 7(a)(i) shall be disbursed by Agent in lawful money of
the United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement
letter from Borrower, and in the case of each subsequent borrowing, by wire
transfer to such bank account as may be agreed upon by Borrower and Agent from
time to time, or elsewhere if pursuant to a written direction from Borrower; and
(ii) the proceeds of each Revolving Loan requested under paragraph 7(a)(ii)
shall be disbursed by Agent by way of direct payment of the relevant interest or
other Liability. Each borrowing of
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Revolving Loans shall be advanced according to the Commitment Percentages of the
Lenders. The Term Loan shall be advanced according to the Commitment Percentages
of the Lenders.
(c) NOTICE OF CONTINUATION AND NOTICE OF CONVERSION.
(i) Subject to the provisions of clause (iii) hereof, Borrower may
elect to maintain any borrowing by it consisting of the same Kind of LIBOR
Rate Loans, or any portion thereof, as a LIBOR Rate Loan by selecting a new
Interest Period for such borrowing, which new Interest Period shall
commence on the last day of the then existing Interest Period. Each
selection of a new Interest Period (a "Continuation") shall be made on
three (3) Business Days prior notice, given by Borrower to Agent not later
than 9:30 A.M. (Chicago time) on the third Business Day preceding the date
of any proposed Continuation. If Borrower elects to maintain more than one
borrowing consisting of LIBOR Rate Loans of the same Kind by combining such
borrowings into one borrowing and selecting a new Interest Period pursuant
to this clause, each of the borrowings so combined shall consist of Loans
of the same Kind having Interest Periods ending on the same date. If
Borrower shall fail to select a new Interest Period for any borrowing by it
consisting of LIBOR Rate Loans of the same Kind in accordance with this
clause, such LIBOR Rate Loans will automatically convert into Prime Rate
Loans.
(ii) Subject to the provisions of clause (iii) hereof, Borrower may on
three (3) Business Days prior notice given to Agent convert the entire
amount of or a portion of all Loans of the same Kind and Type into Loans of
the same Kind and another Type (a "Conversion"); PROVIDED that no Default
or Event of Default shall have occurred and be continuing, and PROVIDED
FURTHER that any Conversion of any LIBOR Rate Loans into Prime Rate Loans
may only be made on the last day of the Interest Period for such LIBOR Rate
Loans, and upon Conversion of any Prime Rate Loans into LIBOR Rate Loans,
Borrower shall pay accrued interest to the date of Conversion on the
principal amount converted on the first day of the following month. Each
such notice shall be given not later than 9:30 A.M. (Chicago time) on the
third Business Day preceding the date of any proposed Conversion. Each
Conversion shall be in an aggregate amount of not less than $1,000,000 or
an integral multiple of $100,000 in excess thereof. Borrower may elect to
convert the entire amount of or a portion of all Loans made to Borrower of
the same Kind and Type comprising more than one borrowing into Loans of the
same Kind and another Type by combining such borrowings into one borrowing
consisting of Loans of the same Kind and another Type; PROVIDED, HOWEVER,
that if the borrowings so combined consist of LIBOR Rate Loans, such LIBOR
Rate Loans shall have Interest Periods ending on the same date.
(iii) Notwithstanding anything contained in clauses (i) and (ii) above
to the contrary:
A. if Agent is unable to determine the LIBOR Rate for LIBOR
Rate Loans comprising any requested borrowing, Continuation or
Conversion, the right of Borrower to select or maintain LIBOR Rate
Loans for such borrowing or any subsequent borrowing shall be
suspended until Agent shall notify Borrower that the circumstances
causing such suspension no longer exist, and each Loan comprising such
borrowing shall be automatically converted into a Prime Rate Loan;
B. if at any time Agent shall notify Borrower that the LIBOR
Rate for Loans comprising such borrowing by Borrower will not
adequately reflect the cost to Agent of making such Loans, the right
of Borrower to select, maintain, continue or convert to LIBOR Rate
Loans for such borrowing shall be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no longer
exist, and each Loan comprising such borrowing shall be automatically
converted into a Prime Rate Loan;
C. there shall not be outstanding at any one time more than an
aggregate of four (4) LIBOR Rate Loans;
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D. any LIBOR Rate Loan shall be in a minimum amount of
$1,000,000 or an integral multiple of $100,000 in excess thereof; and
E. interest shall be calculated and paid by Borrower on the
full amount of each LIBOR Rate Loan borrowed by Borrower at the
commencement of the applicable Interest Period, regardless of any
reductions in the principal amount of such LIBOR Rate Loan which occur
during such Interest Period, and Borrower shall not be credited for
any part of such interest until such interest is actually paid by
Borrower. To the extent the aggregate repayments of principal on
Revolving Loans received by Agent during the pendency of an Interest
Period applicable to a then outstanding LIBOR Rate Revolving Loan
exceed the aggregate unpaid principal amount of all Prime Rate
Revolving Loans outstanding during such Interest Period, Agent shall,
to the extent of such excess, credit to a special suspense account the
amount of such repayments received during such Interest Period, and at
the expiration of such Interest Period, Agent shall apply all such
amounts credited to such account against the unpaid principal balance
of the LIBOR Rate Revolving Loans then outstanding. Borrower shall not
earn interest on any credit balance which may be deemed to exist in
favor of Borrower by virtue of this clause (E).
F. there shall not be outstanding at any time LIBOR Rate Loans
with an outstanding principal amount exceeding eighty percent (80%) of
the outstanding principal amount of all Loans.
(iv) Each notice of Continuation or Conversion shall be irrevocable
and binding on Borrower. In the case of (w) any borrowing of a Loan,
Continuation, or Conversion that the related notice of borrowing, notice of
Continuation or notice of Conversion specifies is to be comprised of LIBOR
Rate Loans, or (x) any payment of principal of, or Conversion or
Continuation of, any LIBOR Rate Loan made other than on the last day of the
Interest Period for such Loan as a result of a payment, prepayment,
Conversion or Continuation of such Loan or acceleration of the maturity of
any of the Liabilities pursuant to paragraph 18 hereof, or for any other
reason, then in any such case, upon Agent's demand, Borrower shall pay to
Lenders and indemnify Lenders from and against the following (collectively
"Breakage Costs"): (y) any loss, cost or expense incurred by Lenders as a
result of any failure to fulfill, on or before the date for such borrowing,
Continuation or Conversion, the applicable conditions set forth in
paragraph 16(b) hereof, and (z) any additional losses, costs or expenses
which Agent or any Lender may reasonably incur as a result of such payment,
including, without limitation in each such case, any loss (excluding loss
of anticipated profits), cost or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by Agent or
any Lender to fund the Loan to be made as part of such borrowing,
Continuation or Conversion.
(d) Each payment (including each prepayment) by Borrower on account of the
principal of and interest on the Revolving Note or any Term Note shall be
applied to the Revolving Loans and Term Loans or, as applicable, pro rata
according to the Commitment Percentages of the Lenders. Except as expressly
provided herein, all payments (including prepayments) to be made by Borrower on
account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to Agent on behalf of the Lenders to the Payment
Office, in each case on or prior to 1:00 P.M. (Chicago time), in Dollars and in
immediately available funds. Notwithstanding anything to the contrary contained
herein, each payment (including each prepayment) by Borrower on account of the
principal of the Revolving Note shall be applied to the Revolving Loans in the
inverse order of the date on which such Revolving Loans were advanced.
(e) (i) Notwithstanding anything to the contrary contained in Sections
(b), (c) and (d) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Loans shall be advanced by Agent and
each payment by Borrower on account of Revolving Loans shall be applied first to
those Revolving Loans made by Agent. On or before 1:00 P.M. (Chicago time) on
each Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (I) if
the aggregate amount of new Revolving Loans made by Agent during the preceding
Week exceeds the aggregate amount of repayments applied to outstanding Revolving
Loans during such preceding Week, then each Lender shall provide Agent with
funds in an amount equal to its Commitment Percentage of the
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difference between (w) such Revolving Loans and (x) such repayments and (II) if
the aggregate amount of repayments applied to outstanding Revolving Loans during
such Week exceeds the aggregate amount of new Revolving Loans made during such
Week, then Agent shall provide each Lender with its Commitment Percentage of the
difference between (y) such repayments and (z) such Revolving Loans.
(ii) Each Lender shall be entitled to earn interest at the
interest rate provided in paragraph 6(a) on outstanding Loans which it has
funded.
(iii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and Loans made
during the Week immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.
(f) If any Lender or Participant (a "benefited Lender") shall at any
time receive any payment of all or part of its Loans, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's Loans,
or interest thereon, and such greater proportionate payment or receipt of
Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lender with the benefits of any such
Collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Each
Lender so purchasing a portion of another Lender's Loans may exercise all rights
of payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(g) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its Commitment Percentage of the Loans available to Agent, Agent may
(but shall not be obligated to) assume that such Lender shall make such amount
available to Agent and, in reliance upon such assumption, make available to
Borrower a corresponding amount. Agent will promptly notify Borrower of its
receipt of any such notice from a Lender. If such amount is made available to
Agent on a date after a Settlement Date, such Lender shall pay to Agent on
demand an amount equal to the product of (i) the daily average federal funds
rate (computed on the basis of a year of 360 days) during such period as quoted
by Agent, times (ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount becomes
immediately available to Agent. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this paragraph 7(g) shall be conclusive,
in the absence of manifest error. If such amount is not in fact made available
to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon
at the rate per annum then applicable to Revolving Loans hereunder, on demand
from Borrower; PROVIDED, HOWEVER, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrower's rights (if any) against such
Lender.
(h) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its Commitment
Percentage of any Loan or (y) notifies either Agent or Borrower that it does not
intend to make available its Commitment Percentage of any Loan (if the actual
refusal would constitute a breach by such Lender of its obligations under this
Agreement) (each, a "Lender Default"), all rights and obligations hereunder of
such Lender (a "Defaulting Lender") as to which a Lender Default is in effect
and of the other parties hereto shall be modified to the extent of the express
provisions of this paragraph 7(h) while such Lender Default remains in effect.
(i) Revolving Loans shall be allocated PRO RATA among Lenders (the
"Non-Defaulting Lenders") which are not Defaulting Lenders in accordance with
their respective Commitment Percentages, and no Commitment Percentage of any
Lender or any PRO RATA share of any Revolving Loans required to be advanced by
any Lender shall be increased as a result of such Lender Default. Amounts
received in respect of principal of Loans shall be applied to reduce Loans of
each Lender PRO RATA based on the aggregate of the outstanding Loans of all
Lenders at the time of such application; PROVIDED, that, such amount shall not
be applied to any Loans of a
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Defaulting Lender at any time when, and to the extent that, the aggregate amount
of Loans of any Lender that is not a Defaulting Lender exceeds such Lender's
Commitment Percentage of all Loans then outstanding.
(j) A Defaulting Lender shall not be entitled to (i) give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement or the Other Agreements or (ii) receive or
earn unused line fees which are due and payable during the continuation of a
Lender Default. All amendments, waivers and other modifications of this
Agreement and the Other Agreement may be made without regard to a Defaulting
Lender and, solely for purposes of the definition of "Required Lenders", a
Defaulting Lender shall be deemed not to be a Lender and not to have Loans
outstanding.
(k) Other than as expressly set forth in this paragraph 7(k), the
rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this paragraph 7(k) shall be deemed to release any Defaulting Lender from its
obligations under this Agreement or the Other Agreements, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender may
have against any Defaulting Lender as a result of any default by such Defaulting
Lender hereunder.
(l) In the event a Defaulting Lender retroactively cures, to the
satisfaction of Agent, the breach which caused such Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender
and shall be treated as a Lender under this Agreement.
(m) In the event a Defaulting Lender fails to retroactively cure, to
the satisfaction of Agent and Borrower, the breach which caused a Lender to
become a Defaulting Lender within five (5) Business Days of the occurrence of
such default (the "Defaulting Lender Cure Period"), then Agent may, but shall
not be obligated to, require such Defaulting Lender to assign its interest in
the Loans to Agent or to another financial institution designated by Agent (the
"Designated Lender") for a purchase price equal to the outstanding principal
amount of all Loans made by such Defaulting Lender plus accrued and unpaid
interest and fees (other than any unused line fees due during the continuance of
such Lender Default) due to such Defaulting Lender, which interest and fees
shall be paid to the Defaulting Lender when collected from Borrower. In the
event Agent so elects to require any Defaulting Lender to assign its interest to
Agent or to the Designated Lender, as applicable, Agent will notify such
Defaulting Lender at any time after the expiration of the Defaulting Lender Cure
Period, and such Defaulting Lender shall assign its interest to Agent or the
Designated Lender, as applicable, no later than five (5) days following receipt
of such notice pursuant to a Commitment Transfer Supplement executed by such
Defaulting Lender, Agent or the Designated Lender, as applicable, and Agent.
Upon (i) the execution of the Commitment Transfer Supplement, (ii) payment of
the purchase price set forth above, (iii) recordation of the assignment in the
Register by Agent pursuant to paragraph 25(c) hereof, and (iv) if so requested
by Agent or the Designated Lender (as applicable), receipt by such Person of
replacement Notes, Agent or the Designated Lender (as applicable) shall increase
its Commitment Percentage hereunder or shall become a Lender hereunder, as
applicable, and the Defaulting Lender shall cease to be a Lender hereunder
except with respect to indemnification provisions set forth herein.
8. GRANT OF SECURITY INTEREST TO AGENT. As security for the payment of
all Loans now or in the future made by Agent and Lenders to Borrower hereunder
and for the payment or other satisfaction of all other Liabilities, Borrower
hereby assigns and grants to Agent for its benefit and for the ratable benefit
of Lenders a continuing security interest in all assets of Borrower, whether now
or hereafter owned, existing, acquired or arising and wherever now or hereafter
located including without limitation: (a) all Accounts (whether or not Eligible
Accounts including, without limitation, Health Care Insurance Receivables)) and
all Goods whose sale, lease or other disposition by Borrower has given rise to
Accounts and have been returned to or repossessed or stopped in transit by
Borrower; (b) all Chattel Paper, Instruments (including without limitation,
Promissory Notes), Documents and General Intangibles (including, without
limitation, Payment Intangibles); (c) all Inventory (whether or not Eligible
Inventory); (d) all Goods (other than Inventory) including, without limitation,
Equipment, vehicles and fixtures; (e) all deposits and cash and any other
property of Borrower now or hereafter in the possession, custody or control of
Agent, any Lender or any agent or any parent, affiliate or subsidiary of Agent
or such Lender or any participant with Agent or such Lender in the Loans for any
purpose (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise); (f) all Investment Property; (g) all Customer Lists;
(h) all Real Property; (i) all Deposit Accounts; (j) all Supporting Obligations;
(k) all Letter of Credit Rights; and (l) all additions and accessions to,
substitutions for, and replacements, products and proceeds of the foregoing
property,
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including, without limitation, proceeds of all insurance policies insuring the
foregoing property, and all of Borrower's books and records relating to any of
the foregoing and to Borrower's business.
8A. CONCERNING REVISED ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. (a) The
Borrower hereby acknowledges that none of its assets constituting Collateral
are, as of the Closing Date, located in the states of Florida, Mississippi or
Alabama.
(b) ATTACHMENT. If Borrower shall at any time, acquire a Commercial Tort
Claim, Borrower shall immediately notify Agent in a writing signed by Borrower
of the brief details thereof and grant to Agent in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to Agent.
(c) PERFECTION BY FILING. Agent may at any time and from time to time,
pursuant to the provisions of paragraph 9 hereof, file financing statements,
continuation statements and amendments thereto that describe the Collateral as
all assets of Borrower or words of similar effect and which contain any other
information required by the UCC for the sufficiency or filing office acceptance
of any financing statement, continuation statement or amendment, including
whether Borrower is an organization, the type of organization and any
organization identification number issued to Borrower. Borrower agrees to
furnish any such information to Agent promptly upon Agent's request therefor.
Any such financing statements, continuation statements and/or amendments may be
signed by Agent on behalf of Borrower, as provided in this Agreement, and may be
filed at any time in any jurisdiction.
(d) OTHER PERFECTION, ETC. Borrower shall at any time and from time to
time take such steps as Agent may request in its reasonable discretion (a) for
Agent to obtain an acknowledgement, in form and substance satisfactory to Agent,
of each bailee having possession of any Collateral that such bailee holds such
Collateral for the benefit of Agent, (b) for Agent to obtain "control" of any
investment property, deposit accounts, letter-of-credit rights or electronic
chattel paper (as such terms are defined in Article 9 of the UCC relating to
what constitutes "control" for such items of Collateral), with any agreements
establishing control to be in form and substance satisfactory to Agent, and (c)
to insure the continued perfection and priority of Agent's security interest in
any of the Collateral and the preservation of its rights therein.
(e) SAVINGS CLAUSE. Nothing contained in this paragraph 8A shall be
construed to narrow the scope of Agent's security interest in any of the
Collateral or the perfection or priority thereof or to impair or otherwise limit
any of the rights, powers, privileges or remedies of Agent or any Lender
hereunder except mandated by the applicable provisions of the UCC.
9. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
THEREIN. Borrower shall, at Agent's request, at any time and from time to time,
execute and deliver to Agent such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed reasonably necessary or desirable by Agent) and do
such other acts and things as Agent may deem necessary or desirable in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Agent for its benefit and for the ratable benefit of
Lenders (free and clear of all other liens, claims and rights of third parties
whatsoever, whether voluntarily or involuntarily created, except Permitted
Liens) to secure payment of the Liabilities, and in order to facilitate the
collection of the Collateral. Borrower irrevocably hereby makes, constitutes and
appoints Agent (and all Persons designated by Agent for that purpose) as
Borrower's true and lawful attorney and agent-in-fact to execute and/or file
such financing statements, documents and other agreements and instruments and do
such other acts and things as may be necessary to preserve and perfect Agent's
security interest in the Collateral. Borrower further agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement shall be sufficient as a financing statement.
10. POSSESSION OF COLLATERAL AND RELATED MATTERS. Unless an Event of
Default has occurred and be continuing, Borrower shall have the right, except as
otherwise provided for in this Agreement, in the ordinary course of Borrower's
business, to (a) sell, lease or furnish under contracts of service any of
Borrower's Inventory normally held by Borrower for any such purpose, and (b) use
and consume any raw materials,
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work in process or other materials normally held by Borrower for such purpose,
PROVIDED, HOWEVER, that a sale in the ordinary course of business shall not
include any transfer or sale in satisfaction, partial or complete, of a debt
owed by Borrower.
11. COLLECTIONS.
(a) ESTABLISHMENT OF LOCKBOX AND BLOCKED ACCOUNT. Borrower shall
direct all of its Account Debtors to make all payments on the Accounts directly
to a post office box ("Lock Box") with a financial institution acceptable to,
and in the name and under exclusive control of Agent PROVIDED, that Borrower (i)
may continue to utilize the lockbox account maintained at Fleet National Bank in
Boston, Massachusetts (the "Existing Lock Box") for a period not to exceed sixty
(60) days following the Closing Date and (ii) shall not be obligated to
re-direct any Account Debtor to make any payments on Accounts (A) which arose
and were invoiced prior to the Closing Date and (B) pursuant to which Borrower
prior to the Closing Date directed such Account Debtor to make payments directly
to the Existing Lock Box. Borrower shall establish an account ("Blocked
Account") in Agent's name for the benefit of Borrower with a financial
institution acceptable to Agent, into which all payments received in the Lock
Box shall be deposited, and into which Borrower will immediately deposit all
payments received by Borrower for Inventory or services sold, leased or rendered
by Borrower and received by Borrower in the identical form in which such
payments were received, whether by cash or check. If Borrower, any Affiliate or
Subsidiary of Borrower, or any shareholder, officer, director, employee or agent
of Borrower or any Affiliate or Subsidiary, or any other Person acting for or in
concert with Borrower shall receive any monies, checks, notes, drafts or other
payments relating to or as proceeds of Accounts or other Collateral, Borrower
and each such Person shall receive all such items in trust for, and as the sole
and exclusive property of, Agent for its benefit and for the ratable benefit of
Lenders and, immediately upon receipt thereof, shall remit the same (or cause
the same to be remitted) in kind to the Blocked Account. Each financial
institution with which a Lock Box or Blocked Account is established shall
acknowledge and agree, in a manner satisfactory to Agent for its benefit and for
the ratable benefit of Lenders, that the amounts on deposit in such Lock Box and
such Blocked Account are the sole and exclusive property of Agent, that such
financial institution has no right to setoff against such Lock Box or Blocked
Account or against any other account maintained by such financial institution
into which the contents of such Blocked Account are transferred, and that such
financial institution shall wire, or otherwise transfer in immediately available
funds in a manner satisfactory to Agent, funds deposited in the Blocked Account
on a daily basis as such funds are collected. Borrower agrees that all payments
made to the Blocked Account established by Borrower or otherwise received by
Agent, whether in respect of the Accounts of Borrower or as proceeds of other
Collateral of Borrower or otherwise, will be applied on account of the Revolving
Loans and also on account of such other due and payable Liabilities of Borrower
as Agent shall determine in accordance with the terms of this Agreement.
Borrower agrees to pay all fees, costs and expenses which Borrower incurs in
connection with opening and maintaining a Lock Box and Blocked Account. All of
such fees, costs and expenses which remain unpaid by Borrower pursuant to any
Lock Box or Blocked Account Agreement with Borrower, to the extent same shall
have been paid by Agent hereunder, shall constitute Revolving Loans hereunder,
shall be payable to Agent for its benefit and for the ratable benefit of Lenders
by Borrower upon demand, and, until paid, shall bear interest at the highest
rate then applicable to Revolving Loans hereunder. All checks, drafts,
instruments and other items of payment or proceeds of Collateral delivered to
Agent in kind shall be endorsed by Borrower to Agent, and, if that endorsement
of any such item shall not be made for any reason, Agent is hereby irrevocably
authorized to endorse the same on Borrower's behalf. For the purpose of this
paragraph, Borrower irrevocably hereby makes, constitutes and appoints Agent
(and all Persons designated by Agent for that purpose) as Borrower's true and
lawful attorney and agent-in-fact (i) to endorse Borrower's name upon said items
of payment and/or proceeds of Collateral of Borrower and upon any Chattel Paper,
document, instrument, invoice or similar document or agreement relating to any
Account of Borrower or goods pertaining thereto; (ii) to take control in any
manner of any item of payment or proceeds thereof; (iii) to have access to any
lock box or postal box into which any of Borrower's mail is deposited; and (iv)
open and process all mail addressed to Borrower and deposited therein, PROVIDED,
HOWEVER, that Agent shall not exercise any such powers described in clauses (ii)
and (iv) unless and until an Event of Default has occurred.
(b) COLLECTION OF ACCOUNTS. Agent may, at any time and from time to
time after the occurrence and during the continuation of an Event of Default,
whether before or after notification to any Account Debtor and whether before or
after the maturity of any of the Liabilities, (i) enforce collection of any of
Borrower's Accounts, other amounts owed to Borrower or contract rights by suit
or otherwise; (ii) exercise all of Borrower's rights and remedies with respect
to proceedings brought to collect any Accounts or other amounts owed to
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Borrower; (iii) surrender, release or exchange all or any part of any Accounts
of Borrower or other amounts owed to Borrower, or compromise or extend or renew
for any period (whether or not longer than the original period) any indebtedness
thereunder; (iv) sell or assign any Account of Borrower or other amounts owed to
Borrower upon such terms, for such amount and at such time or times as Agent
deems advisable; (v) prepare, file and sign Borrower's name on any proof of
claim in bankruptcy or other similar document against any Account Debtor
indebted on an Account of Borrower or other Person obligated to Borrower; and
(vi) do all other acts and things which are necessary, in Agent's sole
discretion, to fulfill Borrower's obligations under this Agreement and to allow
Agent to collect the Accounts or other amounts owed to Borrower. In addition to
any other provision hereof, Agent may at any time on or after the occurrence and
during the continuation of an Event of Default, at Borrower's expense, notify
any parties obligated on any of the Accounts of Borrower to make payment
directly to Agent of any amounts due or to become due thereunder.
(c) APPLICATION OF PROCEEDS. Agent shall, within two (2) Business
Days after receipt by Agent at its office in Chicago, Illinois of cash or other
immediately available funds from collections of items of payment and proceeds of
any Collateral, apply the whole or any part of such collections or proceeds
against the Liabilities in such order as Agent shall determine in its sole
discretion. With respect to the application of such collections and proceeds to
the outstanding Revolving Loans, Agent shall apply such collections and proceeds
to the Revolving Loans in the inverse order of the date on which such Revolving
Loans were advanced.
(d) ACCEPTANCE OF ASSIGNMENT. In its sole credit judgment, without
waiving or releasing any obligation, liability or duty of Borrower under this
Agreement or the Other Agreements or any Event of Default, at any time or times
hereafter, Agent may (but shall not be obligated to) pay, acquire or accept an
assignment of any security interest, lien, encumbrance or claim asserted by any
Person in, upon or against the Collateral. All sums paid by Agent in respect
thereof and all costs, fees and expenses (including without limitation
reasonable attorney fees, all court costs and all other charges relating
thereto) incurred by Agent shall constitute Revolving Loans, payable by Borrower
to Agent on demand and, until paid, shall bear interest at the highest rate then
applicable to Revolving Loans hereunder.
(e) DELIVERY OF DOCUMENTS AND INSTRUMENTS. Immediately upon
Borrower's receipt of any portion of the Collateral evidenced by an agreement,
instrument or document including, without limitation, any Chattel Paper,
Borrower shall deliver the original thereof to Agent together with an
appropriate endorsement or other specific evidence of assignment thereof to
Agent (in form and substance acceptable to Agent). If an endorsement or
assignment of any such items shall not be made for any reason, Agent is hereby
irrevocably authorized, as Borrower's attorney and agent-in-fact, to endorse or
assign the same on Borrower's behalf.
12. SCHEDULES AND REPORTS.
Borrower shall furnish or cause to be furnished to Agent the following:
(a) Borrower shall provide Agent with a written report on Tuesday of
each week hereafter, reflecting the activity of Borrower with respect to sales,
collections of Accounts and credits issued by Borrower for the immediately
preceding week. Such report shall be in a form and with such specificity as is
satisfactory to Agent and shall contain such additional information as Agent may
reasonably require concerning Accounts and Inventory included, described or
referred to in such weekly report and any other documents in connection
therewith requested by Agent, including without limitation but only if
specifically requested by Agent, copies of all invoices prepared in connection
with such Accounts.
(b) As soon as practicable and in any event within thirty (30) days
following the end of each calendar month, (i) statements of income and
statements of cash flow of Borrower for each such month and for the period from
the beginning of the then current Fiscal Year to the end of such month, (ii)
balance sheets of Borrower as of the end of such month, and (iii) with respect
to such statements of income and balance sheets, in comparative form, figures
for the corresponding periods in the preceding Fiscal Year, all in reasonable
detail and certified by the chief financial officer of Borrower that such
statements fairly present the financial condition of Borrower in accordance with
GAAP, subject to changes resulting from normal and recurring year-end
adjustments that individually and in the aggregate are not material to the
business of Borrower and the absence of footnotes, together with detailed
computations of Borrower's compliance with the covenants set forth in this
Agreement.
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(c) As soon as practicable and in any event (1) on Tuesday of each
week, a Borrowing Base Certificate (which shall be calculated as of the last day
of the immediately preceding week and which shall not be binding upon Agent or
restrictive of Agent's rights under this Agreement), and (2) within fifteen (15)
days following the end of each calendar month and at such other times as may be
requested by Agent from time to time, (i) when requested by Agent, a schedule
identifying by age each Account of Borrower together with copies of the invoices
(with evidence of shipment attached) pertaining to each such Account and a
schedule identifying by age each account payable of Borrower, (ii) a detailed
aged trial balance of Borrower's Accounts ("Accounts Trial Balance") in form and
substance satisfactory to Agent in its reasonable discretion, including, without
limitation, the names and addresses of all Account Debtors of Borrower, (iii) a
summary and detail of accounts payable (such Accounts and accounts payable
divided into such time intervals as Agent may require in its reasonable
discretion), including a listing of any held checks, (iv) such additional
schedules, certificates, reports and information with respect to the Collateral
as Agent may from time to time require; (v) a copy of any statement received by
Borrower in connection with the Lockbox and/or the Blocked Account; (vi) an
assignment of any or all items of Collateral to Agent and (vii) the general
ledger inventory account balance, a perpetual inventory report and Agent's
standard form of Inventory report then in effect, for Borrower by each category
of Inventory, together with a description of the change in each category of
Inventory, in each case, for such immediately preceding month (or other
applicable period). Agent, through its officers, employees or agents, shall have
the right, at any time and from time to time in Agent's name, in the name of a
nominee of Agent or in Borrower's name, to verify the validity, amount or any
other matter relating to any of Borrower's Accounts, by mail, telephone,
telegraph or otherwise. Borrower shall reimburse Agent, on demand, for all
reasonable costs, fees and expenses incurred by Agent in this regard. Borrower
shall immediately notify Agent of any event causing loss or depreciation in
value of Borrower's Inventory (other than normal depreciation occurring in the
ordinary course of business).
(d) As soon as practicable and in any event within ninety (90) days
after the end of each Fiscal Year commencing with the Fiscal Year ending
December 31, 2001 (i) statements of income of Borrower for such Fiscal Year, and
a balance sheet of Borrower as of the end of such Fiscal Year, and (ii)
statements of cash flow of Borrower for such Fiscal Year, all setting forth in
comparative form, corresponding figures for the period covered by the preceding
annual audit and as of the end of the preceding Fiscal Year, such statements to
be presented in accordance with Borrower's normal method of accounting for
Inventory and (if Borrower uses the LIFO method) on a pre-tax FIFO basis, all in
reasonable detail and in accordance with GAAP and examined and reported on by
independent certified public accountants of recognized national standing
selected by Borrower and satisfactory to Agent, whose opinion shall be
unqualified and shall be in accordance GAAP, in form and substance satisfactory
to Agent.
(e) As soon as practicable and in any event not later than thirty
(30) days prior to the beginning of each Fiscal Year commencing with the Fiscal
Year ending December 31, 2002 projected balance sheets, statements of income and
cash flow for Borrower, for each of the twelve (12) months during such Fiscal
Year, which shall include the assumptions used therein, together with
appropriate supporting details as requested by Agent (hereinafter referred to as
"Projections").
(f) As soon as practicable and in any event within ten (10) days of
delivery to Borrower, a copy of any letter issued by Borrower's independent
public accountants or other management consultants with respect to Borrower's
financial or accounting systems or controls, including all so-called "management
letters".
(g) In conjunction with the delivery of the annual presentation of
projections or budgets referred to in subparagraph (e) above, a letter signed by
the president or a vice president of Borrower and by the treasurer, controller
or chief financial officer of Borrower, describing, comparing and analyzing, in
detail, all changes and developments between the anticipated financial results
included in such projections or budgets and the historical financial statements
of Borrower.
(h) As soon as practicable and in any event at the end of each Fiscal
Year or as Agent may otherwise reasonably request (but, prior to the occurrence
of an Event of Default, not more frequently than quarterly), a complete and
accurate update of the Customer Lists.
(i) With reasonable promptness, such other business or financial
data, reports, appraisals and projections as Agent may reasonably request.
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All financial statements delivered to Agent pursuant to the
requirements of this paragraph 12 (except where otherwise expressly indicated)
shall be prepared in accordance with GAAP as provided in this Agreement.
Together with each delivery of financial statements required by SUBPARAGRAPHS
(b) AND (d) above, Borrower shall deliver to Agent an officer's certificate in
the form attached hereto as EXHIBIT D, which shall include a calculation of
financial covenants in the schedule attached to such Officer's Certificate in
form satisfactory to Agent. Together with each delivery of annual financial
statements required by SUBPARAGRAPH (d) above, Borrower shall deliver to Agent a
certificate of the accountants who performed the audit in connection with such
statements stating that in making the audit necessary to the issuance of a
report on such financial statements, they have obtained no knowledge of any
Event of Default, or, if such accountants have obtained knowledge of an Event of
Default, specifying the nature and period of existence thereof and such
certificates shall contain or have appended thereto calculations which set forth
Borrower's compliance with the financial covenants set forth herein.
(j) All schedules, certificates, reports and assignments and other
items delivered by Borrower to Agent hereunder shall be executed by an
authorized representative of Borrower and shall be in such form and contain such
information as Agent shall reasonably request. Borrower shall deliver from time
to time such other schedules and reports pertaining to the Collateral of
Borrower as Agent may reasonably request.
13. TERM.
(a) This Agreement shall be in effect from the date hereof until
December 31, 2004 (the "TERM") (provided, that, the last day of the Term shall
be automatically accelerated to March 17, 2003 following the occurrence of an
Event of Default under paragraph 17(b) as a result of Borrower's failure to
comply with paragraph 15(u) hereof) unless the due date of the Liabilities is
accelerated pursuant to paragraph 18 hereof, in which case this Agreement shall
terminate on the date thereafter that the Liabilities are paid in full,
PROVIDED, HOWEVER, that the security interests and liens created under this
Agreement and the Other Agreements shall survive such termination until the date
upon which payment and satisfaction in full of the Liabilities shall have
occurred. At such time as Borrower has repaid all of the Liabilities and this
Agreement has terminated, Borrower shall deliver to Agent a release, in form and
substance reasonably satisfactory to Agent, of all obligations and liabilities
of Agent, Lenders and their officers, directors, employees, agents, parents,
subsidiaries and affiliates to Borrower, and if Borrower is obtaining new
financing from another lender, Borrower shall deliver such lender's
indemnification of Agent and each Lender, in form and substance reasonably
satisfactory to Agent, for checks which Agent has credited to Borrower's
account, but which subsequently are dishonored for any reason.
(b) If, for any reason, this Agreement is terminated prior to the end
of the Term and Borrower prepays all or any portion of the Liabilities (which
prepayment by Borrower must be upon forty-five (45) days' prior written notice
to Agent), Borrower agrees to pay to Agent for its benefit and for the ratable
benefit of Lenders, as a prepayment fee, in addition to the payment of all other
Liabilities owing by Borrower, an amount equal to (x) one percent (1%) of the
Total Credit Facility if this Agreement is terminated during the first Contract
Year; and (y) one-half of one percent (0.5%) of the Total Credit Facility if
this Agreement is terminated during the second Contract Year. In light of the
extreme difficulty of accurately calculating actual damages arising out of any
early termination and prepayment, Agent, Lenders and Borrower have agreed that
the prepayment fee provided for above is a reasonable estimate of actual damages
that would be incurred by Agent and Lenders.
14. REPRESENTATIONS AND WARRANTIES. Borrower hereby makes the following
representations, warranties and covenants:
(a) (i) Borrower has furnished to Agent a balance sheet of Borrower
as of the Closing Date ("Pro Forma Balance Sheet") as set forth on EXHIBIT
14(a)(i) attached hereto and made a part hereof. The Pro Forma Balance Sheet is
accurate, complete and correct and fairly reflects the financial condition of
Borrower as of the Closing Date after giving effect to the Transactions, and has
been prepared in accordance with GAAP, consistently applied. The Pro Forma
Balance Sheet has been certified by the President and controller of Borrower as
accurate, complete and correct and fairly reflecting of the financial condition
of the Borrower on the Closing Date after giving effect to the Transactions and
as prepared in accordance with GAAP, consistently applied.
(ii) Borrower has furnished to Agent (1) balance sheets, income
statements and cash flow projections of Borrower reflected monthly for the
period beginning December 1, 2001 and ending November
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30, 2002 as set forth on EXHIBIT 14(a)(ii)(1) attached hereto and made a part
hereof, (2) balance sheets, income statements and cash flow projections of
Borrower reflected annually for the second and third Contract Years as set forth
on EXHIBIT 14(a)(ii)(2) attached hereto and made a part hereof, and (3) an
availability schedule for the period ending November 30, 2001 in the form
attached hereto as SCHEDULE 14(a)(ii)(3). The financial statements described in
clauses (1) and (2) of the first sentence of this paragraph were prepared by or
under the directions of the Controller of Borrower and reflect, as of the
Closing Date, the reasonable estimates of Borrower of the information projected
therein, based on the assumptions accompanying such projections.
(b) the office where Borrower keeps its books, records and
accounts (or copies thereof) concerning the Collateral, Borrower's principal
place of business and all of Borrower's other places of business, locations of
Collateral and post office boxes are as set forth in EXHIBIT A; Borrower shall
promptly (but in no event less than thirty (30) days prior thereto) advise Agent
in writing of the proposed opening of any new place of business, the closing of
any existing place of business, any change in the location of Borrower's books,
records and accounts (or copies thereof) or the opening or closing of any post
office box of Borrower;
(c) the Collateral, including without limitation the Equipment
(except any part thereof which prior to the date of this Agreement Borrower
shall have advised Agent in writing consists of Collateral normally used in more
than one state) is and shall be kept, or, in the case of vehicles, based, only
at the addresses set forth on the first page of this Agreement or on EXHIBIT A,
and at other locations within the continental United States of which Agent has
been advised by Borrower pursuant to thirty (30) days prior written notice;
(d) Borrower shall immediately give written notice to Agent of
any use of any such Goods in any state or county other than a state or county in
which Borrower has previously advised Agent such Goods shall be used (as of the
Closing Date, such states or counties being set forth on EXHIBIT 14(d) hereto,
and such Goods shall not, unless Agent shall otherwise consent in writing, be
used outside of the continental United States (other than Inventory which is in
transit from Borrower to an Account Debtor in Canada);
(e) no security agreement, financing statement or analogous
instrument exists or shall exist with respect to any of the Collateral other
than any security agreement, financing statement or analogous instrument
evidencing Permitted Liens;
(f) each Account or item of Inventory which Borrower shall,
expressly or by implication, request Agent to classify as an Eligible Account or
as Eligible Inventory, respectively, shall, as of the time when such request is
made, conform in all respects to the requirements of such classification as set
forth in the respective definitions of Eligible Account and Eligible Inventory
and as otherwise established by Agent from time to time, and Borrower shall
promptly notify Agent in writing if any such Eligible Account or Eligible
Inventory shall subsequently become ineligible;
(g) Borrower is and shall at all times during the Term be the
lawful owner of all Collateral now purportedly owned or hereafter purportedly
acquired by Borrower, free from all liens, claims, security interests and
encumbrances whatsoever, whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens;
(h) Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder; Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not and shall not conflict with the provisions of any statute, regulation,
ordinance or rule of law, or any agreement, contract or other document which may
now or hereafter be binding on Borrower, or Borrower's Organizational Documents,
and Borrower's execution, delivery and performance of this Agreement and the
Other Agreements shall not result in the imposition of any lien or other
encumbrance upon any of Borrower's property under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other agreement or
instrument by which Borrower or any of its property may be bound or affected,
other than in favor of Agent;
(i) there are no actions or proceedings which are pending or,
to the best of Borrower's knowledge, threatened against Borrower which are
reasonably likely to have a Material Adverse Effect and
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Borrower shall, promptly upon becoming aware of any such pending or threatened
action or proceeding, give written notice thereof to Agent;
(j) Borrower has obtained and shall maintain all consents,
franchises, certificates, licenses, authorizations, approvals and permits, the
lack of which would have a Material Adverse Effect, and Borrower is and shall
remain in compliance in all material respects with all applicable federal,
state, local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, statutes, orders, regulations, rules and
ordinances relating to taxes, employer and employee contributions and similar
items, securities, employee retirement and welfare benefits, employee health and
safety or environmental matters), the failure to comply with which would be
reasonably likely to have a Material Adverse Effect;
(k) all written information now, heretofore or hereafter
furnished by Borrower to Agent is and shall be true and correct in all material
respects as of the date with respect to which such information was or is
furnished (except for financial projections, which have been prepared in good
faith based upon reasonable assumptions);
(l) Borrower is not conducting, permitting or suffering to be
conducted, nor shall it conduct, permit or suffer to be conducted, any
activities pursuant to or in connection with which any of the Collateral is now,
or will (while any Liabilities remain outstanding) be owned by any Affiliate;
(m) Borrower's name has always been as set forth on the first
page of this Agreement and Borrower uses no tradenames, assumed names,
fictitious names or division names in the operation of its business, except as
otherwise set forth on Schedule 14(m); Borrower shall notify Agent in writing at
least thirty (30) days prior to the change of its name or the use of any
tradenames, assumed names, fictitious names or division names not previously set
forth in Schedule 14(m);
(n) with respect to Borrower's Equipment: (i) Borrower has good
and indefeasible and marketable title to and ownership of all Equipment;
delivered to Agent prior to the date of this Agreement; (ii) Borrower shall keep
and maintain the Equipment in good operating condition and repair and shall make
all necessary replacements thereof and renewals thereto so that the value and
operating efficiency thereof shall at all times be preserved and maintained,
ordinary wear and tear excepted; (iii) Borrower shall not permit any such items
to become a fixture to real estate or an accession to other personal property;
(iv) from time to time Borrower may sell, exchange or otherwise dispose of
obsolete, unused or worn out Equipment, but only to the extent provided in
paragraph 5(a)(i) hereof; and (v) Borrower, immediately on demand by Agent,
shall deliver to Agent any and all evidence of ownership of, including, without
limitation, certificates of title and applications of title to, any of the
Equipment;
(o) this Agreement and the Other Agreements to which Borrower
is a party are the legal, valid and binding obligations of Borrower and are
enforceable against Borrower in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights of
creditors generally;
(p) Borrower is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business, now owns
property having a value both at fair valuation and at present fair saleable
value greater than the amount required to pay its debts, and will not be
rendered insolvent by the execution and delivery of this Agreement or any of the
Other Agreements or by completion of the transactions contemplated hereunder or
thereunder;
(q) Borrower is not now obligated, whether directly or
indirectly, for any loans or other indebtedness for borrowed money other than
(i) the Liabilities; (ii) indebtedness disclosed to Agent on SCHEDULE 14(q);
(iii) unsecured indebtedness to trade creditors arising in the ordinary course
of Borrower's business; (iv) indebtedness due to the GBNF Trust or the QTIP
Trust under the Subordinated Debt Documents as in effect on the Closing Date (or
as amended to the extent expressly permitted under the terms hereof) so long as
such indebtedness is subject to the terms of the Seller Subordination Agreement
and (v) unsecured indebtedness arising from the endorsement of drafts and other
instruments for collection, in the ordinary course of Borrower's business;
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(r) Borrower does not own any margin securities, and none of
the proceeds of the Loans hereunder shall be used for the purpose of purchasing
or carrying any margin securities or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase any margin securities or
for any other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time;
(s) except as otherwise disclosed on SCHEDULE 14(s), Borrower
has no Parents, Subsidiaries or divisions, nor is Borrower engaged in any joint
venture or partnership with any other Person;
(t) Borrower is duly organized, validly existing and in good
standing in its state of organization and Borrower is duly qualified and in good
standing in all states where the nature and extent of the business transacted by
it or the ownership of its assets makes such qualification necessary, except for
such other states in which the failure to so qualify would not have a Material
Adverse Effect, and Borrower has delivered to Agent true and complete copies of
its Organizational Documents as in effect on the Closing Date;
(u) Borrower is not in default under any material contract,
lease or commitment to which it is a party or by which it is bound, nor does
Borrower know of any dispute regarding any contract, lease or commitment which
is material to the continued financial success and well-being of Borrower;
(v) there are no controversies pending or threatened between
Borrower and any of its employees, other than employee grievances arising in the
ordinary course of business which are not, in the aggregate, material to the
continued financial success and well-being of Borrower, and Borrower is in
compliance in all material respects with all federal and state laws respecting
employment and employment terms, conditions and practices, except where the
failure to so comply would not have a Material Adverse Effect;
(w) Borrower possesses, and shall continue to possess, adequate
licenses, patents, patent applications, copyrights, service marks, trademarks,
trademark applications, tradestyles and tradenames to continue to conduct its
business as heretofore conducted by it;
(x) Borrower has delivered to Agent complete copies of the
Subordinated Debt Documents (including all schedules, exhibits and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such agreements and documents
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or agreement which has heretofore
been delivered to Agent;
(y) The proceeds of the Loans shall be used (i) to pay
indebtedness of Borrower due to Banc of America in a maximum aggregate amount of
$13,300,000, and (ii) for Borrower's general working capital purposes.
(z) Except as set forth on SCHEDULE 14(z), no Benefit Plan was
in violation in any material respect of any of the provisions of ERISA or any of
the qualification requirements of Section 401(a) of the IRC within the
immediately preceding five year period, no non-exempt Prohibited Transaction or
Reportable Event has occurred with respect to any Benefit Plan, no Benefit Plan
has been the subject of a waiver of the minimum funding standard under Section
412 of the IRC, no Benefit Plan has experienced an accumulated funding
deficiency under Section 412 of the IRC, no Lien has been imposed upon the
Borrower or any ERISA Affiliate under Section 412(n) of the IRC, no Benefit Plan
has been amended in such a way that the security requirements of Section
401(a)(29) of the IRC apply, no notice of intent to terminate a Benefit Plan has
been distributed to affected parties or filed with the PBGC under Section 4041
of ERISA, and no Benefit Plan has been terminated under Section 4041(e) of
ERISA, the PBGC has not instituted proceedings to terminate, or appoint a
trustee to administer, a Benefit Plan and no event has occurred or condition
exists which might reasonably constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Benefit
Plan, neither Borrower nor any ERISA Affiliate would be liable for any amount in
the aggregate pursuant to Sections 4062, 4063 or 4064 of ERISA if all Benefit
Plans terminated as of the most recent valuation dates of such Benefit Plans
which would be reasonably likely to result in a Material Adverse Effect; neither
Borrower nor any ERISA Affiliate of Borrower maintains any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, which provides any benefits
to an employee or the employee's dependents with respect to claims incurred
after the employee separates from service other than is
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required by applicable law; and neither Borrower nor any ERISA Affiliate of
Borrower has incurred or expects to incur any withdrawal liability to any
Multiemployer Plan and after the Closing Date, none of the above-described
events shall occur which are reasonably likely to result in Material Adverse
Effect;
(aa) On the Closing Date, Borrower has no material liabilities
(accrued, absolute, contingent, unliquidated or otherwise, including, without
limitation, any tax, warranty or product liabilities) which are, or indebtedness
which is, not fully reflected or provided for in accordance with GAAP on the Pro
Forma Balance Sheet as of the Closing Date and the Borrower does not know of any
basis for the assertion against Borrower of any material liabilities of Borrower
which are not adequately reflected or reserved against on the Pro Forma Balance
Sheet;
(bb) Except as set forth on SCHEDULE 14(bb) attached hereto,
(i) Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or orders of
non-compliance issued to Borrower or relating to its business, assets, property,
leaseholds or Equipment under any such laws, rules or regulations;
(ii) Borrower has been issued all required federal, state
and local licenses, certificates or permits required under applicable
Environmental Laws to operate its business;
(iii) (1) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as "Releases") of
Hazardous Substances at, upon, under or within any Real Property; (2) there are
no underground storage tanks or polychlorinated biphenyls on the Real Property;
(3) the Real Property has never been used as a treatment, storage or disposal
facility of Hazardous Waste; and (4) no Hazardous Substances are present on the
Real Property or any premises leased by Borrower, excepting such quantities as
are handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of Borrower or of its tenants;
(cc) Borrower is not involved in any labor dispute, there are no
strikes or walkouts or union organization of Borrower's employees threatened or
in existence and no labor contract is scheduled to expire during the Term other
than as set forth on SCHEDULE 14(cc) attached hereto; and
(dd) Upon and after the Closing Date, Borrower does not propose
to engage in any business other than designing, importing, finishing and
distributing fine quality collectibles and other specialty giftware and
activities necessary to conduct such business. On the Closing Date, Borrower
will own and possess all of the rights and consents necessary for the conduct of
the business of Borrower.
Borrower represents, warrants and covenants to Agent and each
Lender that all representations, warranties and covenants of Borrower contained
in this Agreement (whether appearing in paragraphs 14 or 15 hereof or elsewhere)
shall be true at the time of Borrower's execution of this Agreement, shall
survive the execution, delivery and acceptance hereof by the parties hereto and
the closing of the transactions described herein or related hereto, shall remain
true until the repayment in full of all of the Liabilities and termination of
this Agreement, and shall (other than the representation set forth in clause
(aa) above) be remade by Borrower at the time each Revolving Loan is made and
each Letter of Credit is issued pursuant to this Agreement.
15. COVENANTS. Until payment or satisfaction in full of all Liabilities
and termination of this Agreement, unless Borrower obtains Agent's prior written
consent waiving or modifying any of Borrower's covenants hereunder in any
specific instance, Borrower agrees as follows:
(a) Borrower shall at all times keep accurate and complete books,
records and accounts with respect to all of Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied, and shall keep such books, records and
accounts, and any copies thereof, only at the addresses indicated for such
purpose on EXHIBIT A;
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(b) Agent, or any Persons designated by it, shall have the right, at
any time upon not less than three (3) Business Days notice (provided that no
such prior notice shall be required if an Event of Default shall have occurred
or in the event Agent believes in the exercise of its reasonable discretion such
access is required to preserve or protect the Collateral), in the exercise of
its commercially reasonable credit judgment, to call at Borrower's places of
business at any reasonable times during Borrower's normal business hours, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to Borrower's business,
the Collateral or any transactions between the parties hereto, and shall have
the right to make such verification concerning Borrower's business as Agent may
consider reasonable under the circumstances. Borrower shall furnish to Agent
such information relevant to Agent's rights under this Agreement as Agent shall
at any time and from time to time reasonably request. Borrower authorizes Agent
to discuss the affairs, finances and business of Borrower with any officers or
directors of Borrower, any Guarantor, any shareholder of a Borrower or any
Affiliate of a Borrower and/or any Subsidiary of a Borrower or with those
employees of any of the foregoing with whom Agent has determined in its
commercially reasonable judgment to be necessary or desirable to converse, and
to discuss the financial condition of Borrower with Borrower's independent
public accountants. Any such discussions shall be without liability to Agent or
to such accountants. Borrower shall pay to or reimburse Agent for all reasonable
fees, costs, and out-of-pocket expenses incurred by Agent in the exercise of its
rights hereunder (in addition to the fees payable by Borrower pursuant to
paragraphs 6(g) and 6(h) in connection with Agent's examination of Borrower's
books and records and Collateral) and all of such costs, fees and expenses shall
constitute Revolving Loans hereunder, shall be payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Revolving Loans
hereunder;
(c) (i) Borrower shall: keep the Collateral properly housed and shall
keep the Collateral insured against such risks and in such amounts as are
customarily insured against by Persons engaged in businesses similar to that of
Borrower with such companies, in such amounts and under policies in such form as
shall be reasonably satisfactory to Agent. Originals or certified copies of such
policies of insurance have been or shall be delivered to Agent on the Closing
Date, together with evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance acceptable to Agent, showing loss
under such insurance policies payable to Agent. Such endorsement, or an
independent instrument furnished to Agent, shall provide that the insurance
company shall give Agent at least thirty (30) days prior written notice before
any such policy of insurance is altered or cancelled and that no act, whether
willful or negligent, or default of Borrower or any other Person shall affect
the right of Agent to recover under such policy of insurance in case of loss or
damage. Borrower hereby directs all insurers under such policies of insurance to
pay all proceeds payable thereunder directly to Agent for its benefit and for
the ratable benefit of Lenders as their respective interests may appear.
Borrower irrevocably, makes, constitutes and appoints Agent (and all officers,
employees or agents designated by Agent) as Borrower's true and lawful attorney
(and agent-in-fact) for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the name of Borrower on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance, PROVIDED, HOWEVER, that Agent shall exercise such rights
only upon the occurrence and continuance of an Event of Default;
(ii) Borrower shall maintain, at its expense, such public
liability and third party property damage insurance as is
customary for Persons engaged in businesses similar to that of
Borrower with such companies and in such amounts, with such
deductibles and under policies in such form as shall be
reasonably satisfactory to Agent and originals or certified
copies of such policies have been or shall be delivered to Agent
on the Closing Date, together with evidence of payment of all
premiums therefor; each such policy shall contain an endorsement
showing Agent as additional insured thereunder and providing that
the insurance company shall give Agent at least thirty (30) days
prior written notice before any such policy shall be altered or
cancelled;
(iii) Borrower shall maintain at its expense, key person life
insurance on the life of Dawn McCormack in the amount of at least
$1,000,000; such policy shall be assigned to Agent for its
benefit and for the ratable benefit of Lenders as collateral
security for the payment of the Liabilities pursuant to a
collateral assignment of life insurance policy in form and
substance acceptable to Agent, and such assignment shall be duly
recorded with the applicable life insurance company; and
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(iv) If Borrower at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto,
then Agent, without waiving or releasing any obligation or
default by Borrower hereunder, may (but shall be under no
obligation to) obtain and maintain such policies of insurance and
pay such premiums and take such other actions with respect
thereto as Agent reasonably deems advisable. All sums disbursed
by Agent in connection with any such actions, including, without
limitation, court costs, expenses, other charges relating thereto
and reasonable attorneys' fees, shall constitute Revolving Loans
hereunder and, until paid, shall bear interest at the highest
rate then applicable to Revolving Loans hereunder;
(d) Borrower shall not use the Collateral, or any part thereof, in
any unlawful business or for any unlawful purpose or use or maintain any of the
Collateral in any manner that does or could reasonably be expected to result in
material damage to the environment or a violation of any applicable
Environmental Laws; Borrower shall keep the Collateral in commercially
reasonable condition, repair and order, ordinary wear and tear excepted;
Borrower shall not permit the Collateral, or any part thereof, to be levied upon
under execution, attachment, distraint or other legal process; Borrower shall
not sell, lease, grant a security interest in or otherwise dispose of any of the
Collateral except as expressly permitted by this Agreement; and Borrower shall
not secrete or abandon any of the Collateral, or remove or permit removal of any
of the Collateral from any of the locations listed on EXHIBIT A or in any
written notice to Agent pursuant to paragraph 14 hereof, except for the removal
of Inventory sold in the ordinary course of Borrower's business as permitted
herein and sales or other dispositions of Collateral contemplated by paragraph
5(a);
(e) all monies and other property obtained by Borrower from Agent
pursuant to this Agreement will be used solely for the purposes set forth
herein;
(f) Borrower shall, at the request of Agent, indicate on its records
concerning the Collateral a notation, in form satisfactory to Agent, of the
security interest of Agent hereunder, and Borrower shall not maintain duplicates
or copies of such records at any address other than Borrower's principal place
of business set forth on the first page of this Agreement; PROVIDED, HOWEVER,
that Borrower, in the ordinary course of its business, may furnish copies of
such records to its accountants, attorneys and other agents or advisors as it
may determine to be necessary or desirable, in the exercise of its commercially
reasonable judgment;
(g) Borrower shall file all required tax returns and pay all of its
taxes when due, including, without limitation, taxes imposed by federal, state
or municipal agencies, and shall cause any liens for taxes to be promptly
released; provided, that Borrower shall have the right to contest the payment of
such taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on Borrower's financial statements, (ii) the contesting of
any such payment does not give rise to a lien for taxes, (iii) upon the
occurrence of an Event of Default, Borrower keeps on deposit with Agent (such
deposit to be held without interest) an amount of money which, in the sole
judgment of Agent, is sufficient to pay such taxes and any interest or penalties
that may accrue thereon, and (iv) if Borrower fails to prosecute such contest
with reasonable diligence, Agent may apply the money so deposited in payment of
such taxes. If Borrower fails to pay any such taxes and in the absence of any
such contest by Borrower, Agent may (but shall be under no obligation to)
advance and pay any sums required to pay any such taxes and/or to secure the
release of any lien therefor, and any sums so advanced by Agent shall constitute
Revolving Loans hereunder, shall be payable by Borrower to Agent on demand, and,
until paid, shall bear interest at the highest rate then applicable to Revolving
Loans hereunder;
(h) Borrower shall not (i) incur, create, assume or suffer to exist
any indebtedness other than (A) indebtedness arising under this Agreement, (B)
unsecured indebtedness owing in the ordinary course of business to trade
suppliers arising on or after the Closing Date, and (C) any other indebtedness
described in paragraphs 14(q)(ii), (iii), (iv) and (v) hereof; or (ii) assume,
guarantee or endorse, or otherwise become liable in connection with, the
obligations of any Person, except by endorsement of instruments for deposit or
collection or similar transactions in the ordinary course of business;
(i) Borrower shall not enter into any merger or consolidation, or
sell, lease or otherwise dispose of all or substantially all of its assets;
Borrower shall not create or acquire any new Subsidiary or Affiliate or
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issue any shares of, or warrants or other rights to receive or purchase any
shares of, any class of its stock; Borrower shall not enter into any transaction
outside the ordinary course of Borrower's business;
(j) Except as expressly permitted by paragraph 5(b)(ii) above,
Borrower shall not (i) except as expressly permitted below declare or pay any
dividend or other distribution (whether in cash or in kind) on, purchase, redeem
or retire any shares of any class of its stock including, without limitation, in
connection with the Banc of America Warrants, or make any payment on account of,
or set apart assets for the repurchase, redemption, defeasance or retirement of,
any class of its stock equity or other interest including, without limitation,
in connection with the Banc of America Warrants; (ii) make any optional payment
or prepayment on or redemption (including without limitation by making payments
to a sinking fund or analogous fund) or repurchase of any indebtedness for
borrowed money other than indebtedness pursuant to this Agreement; (iii) make
any payments whatsoever on the indebtedness owing to the GBNF Trust or the QTIP
Trust, except as permitted under the Seller Subordination Agreement; (iv) pay
any management or similar fees to any Person; provided Borrower may pay to SCC a
management fee plus applicable expenses incurred by SCC, in accordance with the
terms and conditions of the Management Agreement as in effect on the Closing
Date (such fees and expenses, collectively, the "SCC Management Fee"), on the
26th day of each January, April, July and October of each calendar year (each
such date, a "Management Payment Date") as and for the three (3) month period
immediately preceding each such Management Payment Date, in an amount not to
exceed, in each case, $43,750 with respect to fees and $15,000 with respect to
expenses (exclusive of those expenses incurred by SCC on Borrower's behalf
relating to tax and auditing services and insurance coverage, in each case
attributable to Borrower) (provided further, that payment of such expenses by
the Borrower pursuant to the Management Agreement shall not exceed $30,000 in
the aggregate during any calendar year) so long as the SCC Payment Conditions
shall have been satisfied after giving effect to each such payment and to the
payment of any Unpaid Management Fees (as defined herein) paid to SCC on such
Management Payment Date; provided further, if any SCC Management Fee or portion
thereof is not paid to SCC solely due to Borrower's failure to satisfy the SCC
Payment Conditions (such unpaid SCC Management Fee, an "Unpaid Management Fee"),
then Borrower shall be permitted to pay to SCC such Unpaid Management Fees on
any subsequent Management Payment Date so long as (A) such Unpaid Management
Fees are paid to SCC on such Management Payment Date and (B) at the time of such
payment the SCC Payment Conditions shall have been satisfied after giving effect
to the payment of such Unpaid Management Fees and all SCC Management Fees, if
any, paid on such Management Payment Date; or (v) make any loan in excess of
$1,000.00 to any Person except travel, entertainment and relocation advances to
Borrower's employees in the ordinary course of business consistent with past
practices. Notwithstanding the foregoing, Borrower shall be permitted to make
payments to SCC with respect to its federal income tax obligations pursuant to
the provisions of the Consolidated Income Tax Sharing Agreement with respect to
any Fiscal Year so long as (A) the federal income tax returns and obligations of
Borrower, for such Fiscal Year have been consolidated with the federal tax
returns and obligations of SCC for such Fiscal Year and (B) the Tax Payment
Conditions shall have been satisfied prior to and immediately after giving
effect to any such payment. If the failure to satisfy all of the Tax Payment
Conditions restricts Borrower from making any payment pursuant to the
Consolidated Income Tax Sharing Agreement, Borrower shall be permitted to make a
payment pursuant to the Consolidated Income Tax Sharing Agreement for the
applicable Fiscal Year so long as the aggregate amount of cash payments made,
directly or indirectly, by Borrower to SCC, with respect to such Fiscal Year
shall not exceed the lesser of (x) the aggregate amount of federal income taxes
("Income Taxes") which would have been payable by Borrower with respect to such
Fiscal Year but for the fact that federal income tax returns of Borrower for
such Fiscal Year have been consolidated with corresponding returns of SCC with
respect to such Fiscal Year and (y) the aggregate amount of Income Taxes
actually payable by Borrower, Holdings, SCC and any other Person party to the
Consolidated Income Tax Sharing Agreement during such Fiscal Year; provided,
further that the foregoing shall not limit the distributions permitted to be
made pursuant to paragraph 5(b)(ii) above;
(k) Borrower shall not make any investment in any Person, whether in
cash, securities or other property of any kind, other than an investment in Cash
Equivalents;
(l) Borrower shall not (i) change its jurisdiction of organization,
(ii) amend its Organizational Documents or any shareholder's or similar
agreement including, without limitation, amend its name or (iii) change its
Fiscal Year;
(m) Borrower shall not enter into or maintain any transaction or
agreement with its Affiliates, except in the ordinary course of business in a
manner and to an extent consistent with past practices of Borrower and
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necessary or desirable for the prudent operation of its business and upon fair
and reasonable terms no less favorable to Borrower than would be obtained by
Borrower in a comparable arms-length transaction with a Person who is not an
Affiliate of Borrower;
(n) Borrower shall not enter into any amendment, waiver or
modification of the Subordinated Debt Documents, the Management Agreement or the
Consolidated Income Tax Sharing Agreement other than any amendment, waiver or
modification which decreases the principal, interest, fees, expenses, costs or
other amounts payable by Borrower, or extends the due date of any payment
thereunder, pursuant to any of the foregoing agreements;
(o) Borrower shall not (i) (x) maintain, or permit any ERISA
Affiliate to maintain, or (y) become obligated to contribute, or permit any
ERISA Affiliate to become obligated to contribute, to any Benefit Plan, (ii)
engage, or permit any ERISA Affiliate to engage, in any non-exempt "prohibited
transaction", (iii) incur, or permit any ERISA Affiliate to incur, any
"accumulated funding deficiency", as that term is defined in Section 302 of
ERISA or Section 412 of the IRC, (iv) terminate, or permit any ERISA Affiliate
to terminate, any Benefit Plan in a manner which could result in any material
liability of Borrower or any ERISA Affiliate or the imposition of a lien on the
property of Borrower or any ERISA Affiliate pursuant to Section 4068 of ERISA,
(v) assume, or permit any ERISA Affiliate to assume, any obligation to
contribute to any Multiemployer Plan, (vi) incur, or permit any ERISA Affiliate
to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail
promptly to notify Agent of the occurrence of any Termination Event, (viii) fail
to comply, in all material respects, or permit a ERISA Affiliate to fail to
comply, in all material respects, with the requirements of ERISA or IRC or other
applicable laws in respect of any Benefit Plan, (ix) fail to meet, or permit any
ERISA Affiliate to fail to meet, all minimum funding requirements under ERISA or
IRC or postpone or delay or allow any ERISA Affiliate to postpone or delay any
funding requirement with respect of any Benefit Plan except as permitted by
applicable laws, in each event set forth in clauses (i) through (ix) which would
be reasonably likely to result in a Material Adverse Effect;
(p) Borrower shall maintain and keep in full force and effect each
of the financial covenants set forth below. The calculation and determination of
each such financial covenant, and all accounting terms contained therein, shall
be so calculated and construed in accordance with GAAP, applied on a basis
consistent with the financial statements of Borrower delivered on or before the
Closing Date (provided, however, that such calculations may be affected by any
write downs of goodwill taken in response to FASB releases existing on the
Closing Date or issued at any date thereafter):
(i) NET WORTH. Borrower shall maintain as of the end of (A)
the fiscal quarter ending December 31, 2001 (the "base
quarter") a Net Worth of not less than four million seven
hundred fifty thousand dollars ($4,750,000) and (B) each fiscal
quarter thereafter (each a "current quarter"), a Net Worth of
not less than the sum of (1) four million seven hundred fifty
thousand dollars ($4,750,000) and (2) an aggregate amount equal
to eighty-five percent (85%) of the net income after taxes of
Borrower for each fiscal quarter commencing with the base
quarter through and including the then current quarter,
provided, however, that such aggregate amount shall not be
reduced by the amount of any net loss before taxes of Borrower
for any preceding fiscal quarter.
(ii) FIXED CHARGE COVERAGE RATIO. Borrower shall maintain as
of the end of each fiscal quarter a Fixed Charge Coverage Ratio
of not less than the ratio shown opposite such fiscal quarter
with respect to the four (4) fiscal quarters then ended,
provided that the applicable period being tested on the fiscal
quarter ending September 30, 2002 will be for the three (3)
fiscal quarters then ended:
<Table>
<Caption>
- ---------------------------------------------------------------------------------------
FISCAL QUARTER ENDED FIXED CHARGE COVERAGE RATIO
- ---------------------------------------------------------------------------------------
September 30, 2002 1.00 to 1.00
- ---------------------------------------------------------------------------------------
December 31, 2002 1.00 to 1.00
- ---------------------------------------------------------------------------------------
March 31, 2003 1.00 to 1.00
- ---------------------------------------------------------------------------------------
June 30, 2003 and each fiscal quarter thereafter 1.10 to 1.00
- ---------------------------------------------------------------------------------------
</Table>
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(iii) LEVERAGE RATIO. Borrower shall maintain as of the end of
each fiscal quarter a Leverage Ratio of not greater than the
ratio shown opposite such fiscal quarter with respect to the
four (4) fiscal quarters then ended, provided that the
applicable period being tested on the fiscal quarter ending (i)
December 31, 2001 will be for the one (1) fiscal quarter then
ended, (ii) March 31, 2002 will be for the two (2) fiscal
quarters then ended and (iii) June 30, 2002 will be for the
three (3) fiscal quarters then ended:
<Table>
<Caption>
- ------------------------------------------------------------------------------
FISCAL QUARTER ENDED LEVERAGE RATIO
- ------------------------------------------------------------------------------
September 30, 2002 6.00 to 1.00
- ------------------------------------------------------------------------------
December 31, 2002 3.50 to 1.00
- ------------------------------------------------------------------------------
March 31, 2003 3.50 to 1.00
- ------------------------------------------------------------------------------
June 30, 2003 4.50 to 1.00
- ------------------------------------------------------------------------------
September 30, 2003 5.00 to 1.00
- ------------------------------------------------------------------------------
December 31, 2003 3.50 to 1.00
- ------------------------------------------------------------------------------
March 31, 2004 3.50 to 1.00
- ------------------------------------------------------------------------------
June 30, 2004 4.50 to 1.00
- ------------------------------------------------------------------------------
September 30, 2004 5.00 to 1.00
- ------------------------------------------------------------------------------
December 31, 2004 and each fiscal quarter thereafter 3.50 to 1.00
- ------------------------------------------------------------------------------
</Table>
(iv) CAPITAL EXPENDITURES. Borrower shall not make Capital
Expenditures of an aggregate amount of more than two hundred
fifty thousand dollars ($250,000) during any Fiscal Year.
(v) MINIMUM EBITDA. Borrower shall maintain EBITDA of not
less than the amounts shown opposite such fiscal quarter with
respect to the four (4) quarters then ended, provided that the
applicable period being tested on the fiscal quarter ending (i)
March 31, 2002 will be for the one (1) fiscal quarter then
ended, (ii) June 30, 2002 will be for the two (2) fiscal
quarters then ended and (iii) September 30, 2002 will be for
the three (3) fiscal quarters then ended:
<Table>
<Caption>
- -------------------------------------------------------------------------
FISCAL QUARTER ENDED MINIMUM EBITDA
- -------------------------------------------------------------------------
March 31, 2002 ($326,000)
- -------------------------------------------------------------------------
June 30, 2002 $ 500,000
- -------------------------------------------------------------------------
September 30, 2002 $2,150,000
- -------------------------------------------------------------------------
December 31, 2002 $2,550,000
- -------------------------------------------------------------------------
March 31, 2003 and each fiscal quarter thereafter $2,750,000
- -------------------------------------------------------------------------
</Table>
(q) Borrower shall reimburse Agent for all costs and expenses
including, without limitation, legal expenses and reasonable attorneys' fees
(both in-house and outside counsel), incurred by Agent in connection with the
documentation and consummation of this transaction and any other transactions
between Borrower and Agent, including, without limitation, UCC and other public
record searches, lien filings, Federal Express or similar express or messenger
delivery, appraisal costs, surveys, title insurance and environmental audit or
review costs, and in seeking to collect, protect or enforce any rights in or to
the Collateral or incurred by Agent in seeking to collect any Liabilities and to
administer and enforce any of Agent's rights under this Agreement. Borrower
shall also pay all normal service charges with respect to accounts maintained by
Agent for the benefit of Borrower. All such costs, expenses and charges shall
constitute Revolving Loans hereunder, shall be payable by Borrower to Agent on
demand, and, until paid, shall bear interest at the highest rate then applicable
to Revolving Loans hereunder;
(r) Borrower shall promptly notify Agent in writing of the
occurrence of a (i) Default or an Event of Default; (ii) any default under the
Subordinated Debt Documents, the Management Agreement or the Consolidated Income
Tax Sharing Agreement; (ii) any event which with the giving of notice or lapse
of time, or both, would constitute an event of default under the Subordinated
Debt Documents, the Management Agreement or the Consolidated Income Tax Sharing
Agreement; (iii) any event, development or circumstance whereby any financial
statements furnished to Agent fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or operating
results of Borrower as of the date of such statements or
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whereby any reports furnished to Agent fail in any material respect to present
fairly the financial condition or operating results of Borrower as of the date
of such reports; (v) any accumulated retirement plan funding deficiency which,
if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of IRC, could subject Borrower to a tax imposed by
Section 4971 of IRC; (vi) each and every default by Borrower which might result
in the acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (vii) any other
development in the business or affairs of Borrower which could reasonably be
expected to have a Material Adverse Effect; in each case describing the nature
thereof and the action Borrower proposes to take with respect thereto;
(s) (i) Borrower shall ensure that the Real Property remains
in compliance with all Environmental Laws and shall not place or permit to be
placed any Hazardous Substances on any Real Property except as not prohibited by
applicable law or appropriate governmental authorities;
(ii) Borrower shall establish and maintain a system to assure
and monitor continued compliance with all applicable Environmental Laws which
system shall include periodic reviews of such compliance;
(iii) Borrower shall (i) employ in connection with the use of
the Real Property appropriate technology necessary to maintain compliance with
any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrower shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property;
(iv) In the event Borrower obtains, gives or receives notice
of any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real 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 at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrower
shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which Borrower is aware giving rise to the
Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto;
(v) Borrower shall promptly forward to Agent copies of any
request for information, notification of potential liability, demand letter
relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrower shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that Borrower is required to file under any Environmental Laws. Such
information is to be provided solely to allow Agent to protect Agent's security
interest in the Real Property and the Collateral;
(vi) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
safeguard the health of any Person and to avoid subjecting the Collateral or
Real Property to any lien. If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrower shall fail to comply
with any of the requirements of any Environmental Laws, Agent on behalf of
Lenders may, but without the obligation to do so, for the sole purpose of
protecting Agent's interest in Collateral: (A) give such notices or (B) enter
onto the Real Property (or authorize third parties to enter onto the Real
Property) and take such actions as Agent (or such third parties as directed by
Agent) deem
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reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Prime Rate Revolving Loans shall be paid upon demand by
Borrower, and until paid shall be added to and become a part of the Liabilities
secured by the liens created by the terms of this Agreement or any other
agreement between Agent, any Lender and Borrower;
(vii) Promptly upon the written request of Agent from time to
time, (but prior to the occurrence of an Event of Default not more frequently
than annually), Borrower shall provide Agent, at Borrower's expense, with an
environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right to
require Borrower to post a bond, letter of credit or other security reasonably
satisfactory to Agent to secure payment of these costs and expenses;
(viii) Borrower shall defend and indemnify Agent and Lenders
and hold Agent, Lenders and their respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney's fees, suffered or
incurred by Agent or Lenders under or on account of 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 the Real Property, whether or not the same originates or emerges from
the Real Property or any contiguous real estate, including any loss of value of
the Real Property 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 Agent or any Lender. Borrower's
obligations under this paragraph 15(s)(viii) shall arise upon the discovery of
the presence of any Hazardous Substances at the Real 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. Borrower's
obligation and the indemnifications hereunder shall survive the termination of
this Agreement; and
(ix) For purposes of paragraphs 14(bb) and 15(s), all
references to Real Property shall be deemed to include all of Borrower's right,
title and interest in and to its owned and leased premises.
(t) Neither Borrower or any Affiliate of Borrower shall use any
portion of the proceeds of the Loans, either directly or indirectly, for the
purpose of (i) purchasing any securities underwritten or privately placed by ABN
AMRO Securities (USA) Inc. ("AASI"), an affiliate of Agent, (ii) purchasing from
AASI any securities in which AASI makes a market, or (iii) refinancing or making
payments of principal, interest or dividends on any securities issued by
Borrower or any Affiliate, and underwritten, privately placed or dealt in by
AASI.
(u) Borrower shall, in form and substance satisfactory to Agent in
its sole discretion, on or before March 17, 2003 (i) extend the maturity date of
the principal balance of the Subordinated Notes until a date after March 31,
2005 or (ii) (A) refinance the principal balance of the Subordinated Notes on
substantially the same terms and conditions but in any event not any more
adverse to Agent and/or any Lender, as determined by Agent in its sole
discretion, and (B) in connection with such refinancing extend the maturity date
of the principal balance of the Subordinated Notes until a date after March 31,
2005.
(v) On or before one hundred and eighty (120) days following the
Closing Date, Borrower shall create an automated system to identify Extended
Term Customers and Preferred Customers, which system shall be satisfactory to
Agent in its reasonable discretion.
16. CONDITIONS PRECEDENT.
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(a) The obligation of Agent and each Lender to fund the Term Loan,
to fund the initial Revolving Loan on the Closing Date and to co-sign as
applicant for the initial Letter of Credit on the Closing Date is subject to the
satisfaction or waiver on or before the Closing Date of the following conditions
precedent:
(i) Agent shall have received each of the agreements,
opinions, reports, approvals, consents, certificates and other
documents set forth on the closing document list attached
hereto as SCHEDULE A (the "Closing Document List").
(ii) Since December 31, 2000, no event shall have occurred
which has had or could reasonably be expected to have a
Material Adverse Effect, as determined by Agent in its
reasonable business judgment.
(iii) Agent shall have received payment in full of all fees
and expenses set forth herein payable to it by Borrower on or
before the Closing Date.
(iv) Agent shall have determined that immediately after
giving effect to (A) the making of the initial Loans requested
to be made on the Closing Date and (B) the issuance of the
initial Letters of Credit, if any, requested to be made on the
Closing Date and (C) the payment or reimbursement by Borrower
of Agent for all closing costs and expenses incurred in
connection with the transactions contemplated hereby, on a pro
forma basis the Excess Availability of Borrower shall not be
less than Five Hundred Thousand Dollars ($500,000).
(v) Agent shall have received a certificate from Borrower's
chief executive officer or chief financial officer, pursuant to
which such officer shall certify that in calculating the Excess
Availability described in clause (iv) above, the outstanding
trade payables of Borrower were and are current and not past
due in any material respect.
(vi) The Obligors shall have executed and delivered to Agent
all documents which Agent determines are reasonably necessary
to consummate the transactions contemplated hereby.
(vii) Agent shall have received duly executed agreements
establishing the Lock Box and Blocked Accounts with financial
institutions acceptable to Agent for the collection or
servicing of the Accounts and proceeds of the Collateral.
(viii) Agent shall have completed Collateral examinations and
received appraisals, the results of which shall be satisfactory in form and
substance to the Agent, of the Accounts, Inventory, General Intangibles,
Investment Property, Real Property and Equipment of Borrower and all books and
records in connection therewith.
(ix) Agent shall have received and be satisfied with the
audited financial statements of Borrower for the Fiscal Year
ended December 31, 2000.
(x) There shall exist no default in any obligations or in
compliance with any applicable legal requirement of Borrower
(other than those disclosed to Agent in writing on or prior to
the date hereof).
(xi) Agent shall be satisfied with its due diligence review of
the business and financial affairs of Borrower and its
management and its pre-closing audit of Borrower.
(xii) Agent shall have received the executed legal opinion(s)
of Morgan, Lewis & Bockius, LLP, Carvin, Delaney & Bryson, LLP
and Seegel, Lipshutz & Wilchins, P.C. in form and substance
satisfactory to Agent which shall cover such matters incident
to the transactions contemplated by this Agreement, the Notes,
the Mortgage and related agreements as Agent may reasonably
require (including, without limitation, enforceability and
perfection issues with respect to the Collateral and the Real
Property) and Borrower hereby authorizes and directs such
counsel to deliver such opinions to Agent and Lenders.
(xiii) Agent shall have received landlord, processor or
warehouseman agreements satisfactory to Agent with respect to
all premises leased by Borrower or controlled by any of its
processors, suppliers or customers at which books and records,
Inventory and Equipment are located.
(xiv) Agent shall have received licensor consent letters
satisfactory to Agent with respect to the trademarks licensed
to Borrower pursuant to a license agreement.
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(xv) Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrower's casualty
insurance policies, together with loss payable endorsements on
Agent's standard form of loss payee endorsement naming Agent as
lender loss payee, certified copies of Borrower's liability
insurance policies, together with endorsements naming Agent as
a co-insured, and certified copies of Borrower's key person
life insurance policies on the life of Dawn McCormack, together
with collateral assignments of such policies and each such
insurance policy shall be in an aggregate amount of at least
$1,000,000.
(xvi) Each document (including, without limitation, any
Uniform Commercial Code financing statement and filings with the United State
Patent and Trademark Office or any similar state authority) required by this
Agreement, any Other Agreement or under law or reasonably requested by the Agent
to be filed, registered or recorded in order to create, in favor of Agent, a
perfected security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent shall
have received an acknowledgment copy, or other evidence satisfactory to it, of
each such filing, registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating thereto.
(xvii) No litigation, investigation or proceeding before or by
any arbitrator or governmental body shall be continuing or threatened against
Borrower or against the officers or directors of Borrower (A) in connection with
this Agreement or the Other Agreements or any of the Transactions and which, in
the reasonable opinion of Agent, is deemed material or (B) which if adversely
determined, could, in the reasonable opinion of Agent, have a Material Adverse
Effect on Borrower; and (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to Borrower or the conduct of its
business or inconsistent with the due consummation of the transactions
contemplated by this Agreement or the Other Agreements shall have been issued by
any governmental body.
(xviii)Agent shall have received all environmental studies and
reports prepared by independent environmental engineering firms regarding the
Real Property, the results of which shall be satisfactory to Agent in all
respects.
(xix) Agent shall have reviewed all material contracts of
Borrower including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent.
(xx) Borrower shall be in compliance with all applicable laws
and regulations.
(xxi) No Default or Event of Default shall exist.
(xxii) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
Agent, Lenders and their counsel.
(xxiii)Agent shall have received and reviewed the Pro Forma
Balance Sheet and monthly projections of the Borrower for the first Contract
Year, together with financial projections for the second and third Contract
Year, calculated on an annual basis, and such balance sheet and projections
shall be in form and substance satisfactory to the Agent.
(xxiv) Agent shall have received copies of the executed
Subordinated Debt Documents, each of which shall be in form and substance
satisfactory to Agent, and Agent shall have entered into (a) the Seller
Subordination Agreement with PDL Massachusetts and CNC, (b) the Intercreditor
Agreement with Softech which shall be in form and substance satisfactory to
Agent and (c) the Banc of America Subordination Agreement with Banc of America.
(xxv) Agent shall have entered into the Management
Subordination Agreement with SCC and Borrower and SCC shall have entered into an
amendment to the Management Agreement in form and substance satisfactory to
Agent.
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(xxvi) Agent shall have received fully paid mortgage title
insurance policies (or binding commitments to issue title insurance policies,
marked to Agent's satisfaction to evidence the form of such policies to be
delivered with respect to the Mortgage), in standard ALTA form, issued by a
title insurance company satisfactory to Agent, each in an amount equal to not
less than the fair market value of the Real Property subject to the Mortgage,
insuring the Mortgage to create a valid Lien on the Real Property with no
exceptions which Agent shall not have approved in writing and no survey
exceptions and a survey of the Real Property in a form and substance
satisfactory to Agent.
(xxvii)Agent shall have received approval from its credit
committee for all of the Transactions.
(b) The obligation of Agent or any Lender to make any requested
Loan, or to issue or cause the issuance of any requested Letter of Credit
whether on or at any time after the Closing Date, is subject to the satisfaction
of the conditions precedent set forth below. Each such request shall constitute
a representation and warranty that such conditions are satisfied:
(i) All representations and warranties contained in this
Agreement and the Other Agreements shall be true and correct on
and as of the date of such request, as if then made, other than
representations and warranties that relate solely to an earlier
date;
(ii) No Default or Event of Default shall have occurred, or
would result from the making of the requested Loan or the
issuance of the requested Letter of Credit, which has not been
waived in writing by Agent; and
(iii) Since December 31, 2000, no event has occurred which has
had or could reasonably be expected to have a Material Adverse
Effect.
17. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "EVENT OF DEFAULT" hereunder:
(a) the failure of any Obligor to pay when due, declared due, or
demanded by Agent in accordance with the terms hereof, any of the Liabilities;
(b) the failure of any Obligor to perform, keep or observe any of
the covenants, conditions, promises, agreements or obligations of such Obligor
under this Agreement or any of the Other Agreements;
(c) (i) the making or furnishing by any Obligor to Agent or any
Lender of any representation, warranty, certificate, schedule, report or other
communication within or in connection with this Agreement or the Other
Agreements or in connection with any other agreement between such Obligor and
Agent or such Lender, which is untrue or misleading in any material respect, or
(ii) the failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements of such Obligor under any other
agreement with any Person if such failure has or is reasonably likely to have a
Material Adverse Effect;
(d) the creation (whether voluntary or involuntary) of, or any
attempt to create, any lien or other encumbrance upon any of the Collateral,
other than the Permitted Liens, or the making or any attempt to make any levy,
seizure or attachment thereof;
(e) the commencement of any proceedings (i) in bankruptcy by or
against any Obligor, (ii) for the liquidation or reorganization of any Obligor,
(iii) alleging that such Obligor is insolvent or unable to pay its debts as they
mature, or (iv) for the readjustment or arrangement of any Obligor's debts,
whether under the United States Bankruptcy Code or under any other law, whether
state or federal, now or hereafter existing for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings involving
any Obligor; PROVIDED, HOWEVER, that if such commencement of proceedings against
such Obligor is involuntary, such action shall not constitute an Event of
Default unless such proceedings are not dismissed within forty-five (45) days
after the commencement of such proceedings;
(f) the appointment of a receiver or trustee for any Obligor, for
any of the Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or
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partial liquidation, or the merger or consolidation, of any Obligor which is a
corporation or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such action
shall not constitute an Event of Default unless such appointment is not revoked
or such proceedings are not dismissed within forty-five (45) days after the
commencement of such proceedings;
(g) the entry of any judgment or order in excess of $250,000
against any Obligor which remains unsatisfied or undischarged and in effect for
thirty-five (35) days after such entry without a stay of enforcement or
execution;
(h) the occurrence of a default or event of default under, or the
revocation or termination of, any agreement, instrument or document executed and
delivered by any Person to Agent pursuant to which such Person has guaranteed to
Agent for its benefit and for the ratable benefit of Lenders the payment of all
or any of the Liabilities or has granted Agent for its benefit and for the
ratable benefit of Lenders a security interest in or lien upon some or all of
such Person's real and/or personal property to secure the payment of all or any
of the Liabilities;
(i) the occurrence of a default or event of default under any other
agreement or instrument evidencing indebtedness for borrowed money in excess of
$250,000 executed or delivered by Borrower or pursuant to which agreement or
instrument Borrower or its properties is or may be bound including, without
limitation, the Subordinated Debt Documents;
(j) the occurrence of any event or condition which has or is
reasonably likely to have a Material Adverse Effect;
(k) the occurrence of a Change of Control;
(l) if any Reportable Event shall have occurred or any Benefit Plan
shall be terminated within the meaning of Title IV of ERISA, a trustee shall be
appointed by the appropriate United States District Court to administer any
Benefit Plan, or the PBGC shall institute proceedings to terminate any Benefit
Plan, or there shall be a withdrawal from any Multiemployer Plan, and there
shall be a Material Adverse Effect in the case of any event described in this
paragraph 17(l);
(m) the occurrence of any event specified in Borrower's
Organizational Documents that may result in Borrower's dissolution or
liquidation or Borrower shall file a certificate of dissolution or shall be
liquidated, dissolved or wound-up or shall commence or have commenced against it
any action or proceeding for dissolution, winding up or liquidation; or
(n) the operations of Borrower's manufacturing facility are
interrupted at any time for more than five (5) consecutive Business Days and
such interruption is reasonably likely to have a Material Adverse Effect (as
determined by Agent in its commercially reasonable discretion exercised in good
faith) (a "Business Interruption Trigger Event"), unless Borrower shall (i) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that its per diem cash needs during
such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount described in clause
(i) preceding not later than forty-five (45) days following the initial date of
any such interruption; provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this paragraph 17(n), an Event of Default shall be
deemed to have occurred based upon a Business Interruption Trigger Event if
Borrower shall be receiving the proceeds of business interruption insurance for
a period of thirty (30) consecutive days.
Notwithstanding anything contained in this paragraph 17 or contained
in any other provision of this Agreement or the Other Agreements to the
contrary, in the event of the institution of any proceeding or appointment
described in paragraph 17(e) or paragraph 17(f) hereof against Borrower, Agent
and Lenders shall not be obligated to make advances to Borrower during the
forty-five (45) day grace period provided in paragraph 17(e) or paragraph 17(f).
18. REMEDIES UPON AN EVENT OF DEFAULT.
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(a) Upon the occurrence of an Event of Default described in
paragraph 17(e) or paragraph 17 (f) hereof, all of the Liabilities shall
immediately and automatically become due and payable, without notice of any
kind. Upon the occurrence of any other Event of Default, all of the Liabilities
may, at the option of Agent at the direction of Required Lenders, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default, Agent may exercise
from time to time any rights and remedies available to it under the UCC and
under any other applicable law in addition to, and not in lieu of, any rights
and remedies expressly granted in this Agreement or in any of the Other
Agreements and all of Agent's rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Agent may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
into any of Borrower's premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Agent shall have the right to
store the same at any of Borrower's premises without cost to Agent. At Agent's
request, Borrower shall, at Borrower's expense, assemble the Collateral and make
it available to Agent at one or more places to be designated by Agent and
reasonably convenient to Agent and Borrower. Borrower recognizes that if
Borrower fails to perform, observe or discharge any of its Liabilities under
this Agreement or the Other Agreements, no remedy at law will provide adequate
relief to Agent or Lenders, and Borrower agrees that Agent and Lenders shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed reasonably
and properly given if given at least ten (10) calendar days before such
disposition. Any proceeds of any disposition by Agent of any of the Collateral
may be applied by Agent to the payment of expenses in connection with the
Collateral including, without limitation, legal expenses and reasonable
attorneys' fees (both in-house and outside counsel) and any balance of such
proceeds may be applied by Agent toward the payment of such of the Liabilities,
and in such order of application, as Agent may from time to time elect.
19. INDEMNIFICATION. Borrower agrees to defend (with counsel reasonably
satisfactory to Agent), protect, indemnify and hold harmless Agent and each
Lender, each affiliate or subsidiary of Agent or such Lender, and each of their
respective officers, directors, employees, attorneys and agents (each an
"Indemnified Party") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature (including, without limitation, the
disbursements and the reasonable fees of counsel for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto and any
fees associated with a broker or similar Person), which may be imposed on,
incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations including, without limitation, securities, Environmental Laws and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any Other Agreement, or any act, event or transaction related or
attendant thereto, the making and the management of the Loans or any Letters of
Credit or the use or intended use of the proceeds of the Loans or any Letters of
Credit; PROVIDED, HOWEVER, that Borrower shall not have any obligation hereunder
to any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, Borrower
shall satisfy such undertaking to the maximum extent permitted by applicable
law. Any liability, obligation, loss, damage, penalty, cost or expense covered
by this indemnity shall be paid to each Indemnified Party on demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Revolving Loans hereunder from the date incurred by each
Indemnified Party until paid by Borrower, be added to the Liabilities of
Borrower and be secured by the Collateral. The provisions of this paragraph 19
shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
20. REGARDING AGENT.
(a) APPOINTMENT. Each Lender hereby designates LaSalle to act as
Agent for such Lender under this Agreement and the Other Agreements. Each Lender
hereby irrevocably authorizes Agent to take such
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action on its behalf under the provisions of this Agreement and the Other
Agreements and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto
and Agent shall hold all Collateral, payments of principal and interest, fees
(except the fees set forth in subparagraphs 6(d), 6(e), 6(g) and 6(h)), charges
and collections (without giving effect to any collection days) received pursuant
to this Agreement, for the ratable benefit of Lenders. Agent may perform any of
its duties hereunder by or through its agents or employees. As to any matters
not expressly provided for by this Agreement, Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; PROVIDED, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Agreements or applicable law unless
Agent is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
(b) NATURE OF DUTIES. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Other Agreements. Neither Agent nor any of its officers, directors, employees or
agents shall be (i) liable for any action taken or omitted by them as such
hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct, or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by Borrower or any
officer thereof contained in this Agreement, or in any Other Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any Other
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement, or any Other Agreement or for any failure of
Borrower to perform its obligations hereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any Other Agreement, or to inspect the properties, books or records
of Borrower. The duties of Agent as respects the Loans to Borrower shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.
(c) LACK OF RELIANCE ON AGENT AND RESIGNATION.
(i) Independently and without reliance upon Agent or any
other Lender, each Lender has made and shall continue to make
(A) its own independent investigation of the financial
condition and affairs of Borrower in connection with the making
and the continuance of the Loans hereunder and the taking or
not taking of any action in connection herewith, and (B) its
own appraisal of the creditworthiness of Borrower. Agent shall
have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its
possession before making of the Loans or at any time or times
thereafter except as shall be provided by Borrower pursuant to
the terms hereof. Agent shall not be responsible to any Lender
for any recitals, statements, information, representations or
warranties herein or in any agreement, document, certificate or
a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any Other
Agreement, or of the financial condition of Borrower, or be
required to make any inquiry concerning either the performance
or observance of any of the terms, provisions or conditions of
this Agreement, the Notes, the Other Agreements or the
financial condition of Borrower, or the existence of any Event
of Default or any Default.
(ii) Agent may resign on sixty (60) days' written notice to
each of Lenders and Borrower and upon such resignation, the
Required Lenders will promptly designate a successor Agent
reasonably satisfactory to Borrower.
(iii) Any such successor Agent shall succeed to the rights,
powers and duties of Agent, and the term "Agent" shall mean
such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the
part of such former Agent. After any Agent's resignation as
Agent, the provisions of this paragraph 20, shall inure to
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its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
(d) CERTAIN RIGHTS OF AGENT. If Agent shall request instructions
from Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Agreement, Agent shall be entitled
to refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
(e) RELIANCE. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Agreements and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
(f) NOTICE OF DEFAULT. Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder or
under the Other Agreements, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the Other Agreements, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, THAT, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
(g) INDEMNIFICATION. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Loans (or, if no Loans are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Agreement; PROVIDED THAT, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
(h) AGENT IN ITS INDIVIDUAL CAPACITY. With respect to the
obligation of Agent to lend under this Agreement, the Loans made by it shall
have the same rights and powers hereunder as any other Lender and as if it were
not performing the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
(i) DELIVERY OF DOCUMENTS. To the extent Agent receives documents
and written information from Borrower pursuant to paragraphs 12(c), (d), (e),
(f) or (g) of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
(j) BORROWER'S UNDERTAKING TO AGENT. Without prejudice to its
obligations to the Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall PRO TANTO
satisfy Borrower's obligations to make payments for the account of the Lenders
or the relevant one or more of them pursuant to this Agreement.
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21. NOTICES. All written notices and other written communications with
respect to this Agreement shall be sent by ordinary, certified or overnight
mail, by telecopy or delivered by reputable courier or in person to: LaSalle
Business Credit, Inc., 565 Fifth Avenue, New York, New York 10017, Attention:
District Credit Manager,
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068-1791
Attention: Lowell Citron, Esq.
Telephone: (212) 262-6700
Facsimile: (973) 422-2929
LaSalle Business Credit, Inc.
135 South LaSalle Street
Suite 425
Chicago, Illinois 60603-4105
Attention: Michael Carsella, Esq.
Telephone: (312) 904-7805
Facsimile: (312) 904-7425
and in the case of Borrower shall be sent to Borrower at its principal place of
business as set forth on the first page of this Agreement, with copies to
Capital Partners, One Pickwick Plaza, Suite 310, Greenwich, Connecticut 06830,
Attention: Brian D. Fitzgerald/William Schlueter (facsimile no. (203) 625-0423)
and to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York
10178-0060, Attention: Samuel B. Fortenbaugh III (facsimile no. (212) 309-6273)
and in the case of any Lender shall be sent to such Lender at its address set
forth on the signature page hereto or in a Commitment Transfer Supplement or at
such other address as may be designated by any party from time to time in a
notice complying as to delivery with the terms of this paragraph to the other
parties. Any notice, if mailed or delivered via reputable courier or by hand
delivery and properly addressed with postage or delivery costs prepaid, shall be
deemed given when received; any notice, if transmitted by telecopy, shall be
deemed given when transmitted, provided receipt is confirmed.
22. CHOICE OF GOVERNING LAW AND CONSTRUCTION. This Agreement and the Other
Agreements are submitted by Borrower to Agent for Agent's acceptance or
rejection at Agent's principal place of business as an offer by Borrower to
borrow monies from Agent and Lenders now and from time to time hereafter, and
shall not be binding upon Agent or any Lender or become effective until accepted
by Agent on behalf of Lenders, in writing, at said place of business. If so
accepted by Agent on behalf of Lenders, this Agreement and the Other Agreements
shall be deemed to have been made at said place of business. THIS AGREEMENT AND
THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK AS TO INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION,
EFFECT, AND IN ALL OTHER RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY
OF THE INTEREST RATE AND OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY
INTERESTS IN THE COLLATERAL, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS
OF THE RELEVANT JURISDICTION. If any provision of this Agreement shall be held
to be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or remaining provisions of this
Agreement.
23. FORUM SELECTION AND SERVICE OF PROCESS. To induce Agent on behalf of
Lenders to accept this Agreement, Borrower irrevocably agrees that, subject to
Agent's sole and absolute election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY,
MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE
OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS HAVING SITUS
WITHIN THE CITY OF NEW YORK, STATE OF NEW YORK. BORROWER HEREBY CONSENTS AND
SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED WITHIN
SAID CITY AND STATE. Borrower hereby irrevocably appoints and designates the
Secretary of State of New York, whose address is Albany, New York (or
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any other person having and maintaining a place of business in such state whom
Borrower may from time to time hereafter designate upon ten (10) days written
notice to Agent and who Agent has agreed in writing in its sole discretion is
satisfactory and who has executed an agreement in form and substance
satisfactory to Agent agreeing to act as such attorney and agent), as Borrower's
true and lawful attorney and duly authorized agent for acceptance of service of
legal process. Borrower agrees that service of such process upon such person
shall constitute personal service of such process upon Borrower. BORROWER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST BORROWER BY AGENT OR ANY LENDER IN ACCORDANCE WITH THIS
PARAGRAPH.
24. MODIFICATION AND BENEFIT OF AGREEMENT.
(a) This Agreement and the Other Agreements may not be modified,
altered or amended except by an agreement in writing signed by Borrower, Agent
and Required Lenders as provided in subparagraph (b) below. Borrower may not
sell, assign or transfer this Agreement, or the Other Agreements or any portion
thereof including, without limitation, Borrower's rights, titles, interest,
remedies, powers or duties thereunder.
(b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrower may, subject to the provisions of this paragraph
24(b), from time to time enter into written supplemental agreements to this
Agreement, the Notes or the Other Agreements executed by Borrower, for the
purpose of adding or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of Lenders, Agent or Borrower thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all the Lenders and with respect to clause (v) below, the consent of
Agent:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or increase any of the Advance Rates,
or decrease the rate of interest or reduce any principal
payment due on the Loans or fee payable by Borrower to Lenders
pursuant to this Agreement (it being understood and agreed,
however, that any vote to rescind any acceleration of the
Liabilities made pursuant to paragraph 18 hereof shall only
require the vote of the Required Lenders).
(iii) alter the definition of the term Required Lenders or
alter, amend or modify this paragraph 24(b).
(iv) release any Collateral during any calendar year having
an aggregate value in excess of $2,000,000, other than
Collateral which is permitted to be sold or otherwise disposed
of pursuant to paragraph 5(a) hereof.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Loan to be made if after giving
effect thereto the total of Revolving Loans outstanding
hereunder would exceed one hundred and ten percent (110%) of
the Borrowing Base for more than sixty (60) consecutive
Business Days.
Any such supplemental agreement shall apply equally to each of the Lenders
and shall be binding upon Borrower, the Lenders and Agent and all future holders
of the Liabilities. In the case of any waiver, Borrower, Agent and Lenders shall
be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
Notwithstanding the foregoing, Agent may at its discretion and without the
consent of the Required Lenders, voluntarily permit the outstanding Revolving
Loans at any time to exceed the Borrowing Base by up to one hundred and ten
percent (110%) of the Borrowing Base for up to sixty (60) consecutive Business
Days. For purposes of the preceding sentence, the discretion granted to Agent
hereunder shall not preclude involuntary overadvances that may result from time
to time due to the fact that the Borrowing Base was unintentionally exceeded for
any reason, including, but not limited to, Collateral previously deemed to be
either "Eligible Accounts" or "Eligible Inventory", as applicable, becomes
ineligible, collections of Accounts applied to reduce outstanding Revolving
Loans are thereafter returned for insufficient funds or overadvances are made to
protect or preserve the Collateral. In the event Agent involuntarily permits the
outstanding Revolving Loans to exceed
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the Borrowing Base by more than ten percent (10%), Agent shall decrease such
excess in as expeditious a manner as practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Loans made after Agent
has determined the existence of involuntary overadvances shall be deemed to be
involuntary overadvances and shall be decreased in accordance with the preceding
sentence.
In the event that Agent requests the consent of a Lender pursuant to this
paragraph 24 and such consent is denied, then Agent may, at its option, require
such Lender to assign its interest in the Loans to Agent or to a Designated
Lender for a price equal to the then outstanding principal amount thereof plus
accrued and unpaid interest and fees (including prepayment fees, if any) due
such Lender, which interest and fees shall be paid upon consummation of such
assignment. In the event Agent elects to require any Lender to assign its
interest to Agent or to the Designated Lender, Agent will so notify such Lender
in writing within forty five (45) days following such Lender's denial, and such
Lender will assign its interest to Agent or the Designated Lender, as
applicable, no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, Agent or
the Designated Lender, as appropriate, and Agent.
25. PARTICIPATIONS AND ASSIGNMENT.
(a) Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Loans to other financial institutions (each such
transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Loans held by it or other
Liabilities payable hereunder as fully as if such Transferee were the direct
holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to the
Lender which granted an interest in its Loans or other Liabilities payable
hereunder to such Transferee had such Lender retained such interest in the Loans
hereunder or other Liabilities payable hereunder and in no event shall Borrower
be required to pay any such amount arising from the same circumstances and with
respect to the same Loans or other Liabilities payable hereunder to both such
Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee's
interest in the Loans.
(b) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Agreements to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Loans hereunder (each a "Purchasing Lender"), in
minimum amounts of not less than $5,000,000, pursuant to a Commitment Transfer
Supplement in the form of EXHIBIT 25(b) attached hereto, executed by a
Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for
recording. Upon such execution, delivery, acceptance and recording, from and
after the transfer effective date determined pursuant to such Commitment
Transfer Supplement, (i) a Purchasing Lender thereunder shall be a party hereto
and, to the extent provided in such Commitment Transfer Supplement, have the
rights and obligations of a Lender hereunder with a Commitment Percentage as set
forth therein, and (ii) the transferor Lender thereunder shall, to the extent
provided in such Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Commitment Transfer Supplement creating a
novation for that purpose. Such Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of
the Commitment Percentages arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Agreements. Borrower hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Agreements. Borrower shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.
(c) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Loans owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Register as the owner of the Loans recorded therein for the
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Agent shall
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receive a fee in the amount of $3,500 payable by the Purchasing Lender upon the
transfer or assignment to such Purchasing Lender.
(d) Borrower authorizes each Lender to disclose to any Transferee
or Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrower which
has been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrower;
provided such Transferee or Purchasing Lender agrees in writing to keep all such
information confidential in accordance with the terms of paragraph 28(e) hereof.
26. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
27. POWER OF ATTORNEY. Borrower acknowledges and agrees that its
appointment of Agent as its attorney-in-fact for the purposes specified in this
Agreement is an appointment coupled with an interest and shall be irrevocable
until all of the Liabilities are paid in full and this Agreement is terminated.
28. WAIVER OF JURY TRIAL; OTHER WAIVERS; CONFIDENTIALITY.
(a) AGENT, EACH LENDER AND BORROWER HEREBY WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL,
ANY ALLEGED TORTIOUS CONDUCT OF BORROWER, AGENT OR LENDERS OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP AMONG
BORROWER, AGENT AND/OR LENDERS. IN NO EVENT SHALL AGENT OR ANY LENDER BE LIABLE
FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY
KIND PRIOR TO THE EXERCISE BY AGENT OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT PRIOR NOTICE OR HEARING.
(c) Borrower hereby waives demand, presentment, protest and notice
of nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(d) Agent's or any Lender's failure, at any time or times
hereafter, to require strict performance by Borrower of any provision of this
Agreement or any of the Other Agreements shall not waive, affect or diminish any
right of Agent or any Lender, thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Agent or any Lender, of an
Event of Default under this Agreement or any default under any of the Other
Agreements shall not suspend, waive or affect any other Event of Default under
this Agreement or any other default under any of the Other Agreements, whether
the same is prior or subsequent thereto and whether of the same or of a
different kind or character. No delay on the part of Agent or any Lender in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Agent
or any Lender unless such suspension or waiver is in writing in compliance with
Paragraph 24(b) hereof.
(e) Borrower has furnished and will furnish to Agent certain
information concerning Borrower which Borrower has advised is non-public,
proprietary or confidential in nature ("CONFIDENTIAL INFORMATION"). Agent
confirms to the Borrower that it is Agent's policy and practice to maintain in
confidence all Confidential Information which is provided to it under agreements
providing for the extension of credit and which is identified to it as such, and
that it will protect the confidentiality of Confidential Information submitted
to it with
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respect to Borrower under this Agreement, commensurate with its efforts to
maintain the confidentiality of its own Confidential Information, PROVIDED,
HOWEVER, that (i) nothing contained herein shall prevent Agent from disclosing
Confidential Information (A) to its affiliates and their respective directors,
officers, and employees and to any legal counsel, auditors, appraisers,
consultants or other persons retained by it or its affiliates as professional
advisors, on the condition that such information not be further disclosed except
in compliance with this paragraph 28(e); (B) under color of legal authority,
including, without limitation, to any regulatory authority having jurisdiction
over it or its operations or to, or under the authority of, any court deemed by
it to be of competent jurisdiction; (C) to any actual or potential Transferee or
Purchasing Lender in Agent's rights and obligations under this Agreement to the
extent such actual or potential Transferee or Purchasing Lender has agreed to
maintain such information in confidence on the basis set forth in this paragraph
28(e); and (D) as necessary in connection with the exercise of its remedies
under this Agreement or any of the Other Agreements; (ii) the terms of this
paragraph 28(e) shall be inapplicable to any information furnished to it which
is in possession prior to the delivery to it of such information by Borrower or
any other authorized Person, or otherwise has been obtained by it on a
non-confidential basis, or which was or becomes available to the public or
otherwise part of the public domain (other than as a result of Agent's failure
or any prospective participant's or assignee's failure to abide hereby), or
which was not non-public, proprietary or confidential when Borrower or any other
authorized Person delivered it to Agent; and (iii) the determination by Agent as
to the application of any of the circumstances described in the foregoing
clauses (i) and (ii) will be conclusive and binding if made in good faith.
(f) Notwithstanding subparagraph (e) above, Borrower consents to
Agent publishing a tombstone or similar advertising material relating to the
financing transaction contemplated by this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 31st day of December, 2001.
LASALLE BUSINESS CREDIT, INC.,
AS A LENDER AND AS AGENT
By: /s/ ANTHONY J. VEITH
Name: Anthony J. Veith
Title: Senior Vice President
Commitment Percentage: 100%
POSSIBLE DREAMS, LTD.
By: /s/ DAWN MCCORMACK
Name: Dawn McCormack
Title: President and CEO
Agreed and Acknowledged solely
with respect to the provisions
related to the Consolidated Income
Tax Sharing Agreement set forth in
paragraph 15(j):
SECURITY CAPITAL CORPORATION
By: /s/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title: Vice Chairman
PD HOLDINGS, INC.
By: /s/ A. GEORGE GEBAUER
Name: A. George Gebauer
Title: President
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