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EXHIBIT 10.31
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REVOLVING LOAN AND SECURITY AGREEMENT
Dated as of October 2, 1998
BETWEEN
UNIVERSAL ELECTRONICS INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND TERMS ............................................ 1
ARTICLE II COMMITMENTS OF THE BANK; BORROWING PROCEDURES ................... 11
2.1 Commitments ................................................... 11
2.2 Absence of Defaults ........................................... 12
2.3 Disbursements to Other Persons ................................ 12
2.4 Borrowing Procedure ........................................... 12
2.5 Various Types of Loans ........................................ 13
2.6 Continuation and Conversion of Loans .......................... 13
ARTICLE III NOTE EVIDENCING LOANS; REPAYMENTS AND RECORD
KEEPING ...................................................... 13
3.1 Revolving Note ............................................... 13
3.2 Voluntary Repayments ......................................... 14
3.3 Recordkeeping ................................................ 14
ARTICLE IV INTEREST, FEES AND LETTERS OF CREDIT ........................... 14
4.1 Interest, Etc ................................................ 14
4.2 Nonuse Fee ................................................... 14
4.3 Closing Fee .................................................. 15
4.4 Computation of Interest and Fees ............................. 15
4.5 Payment Dates for Interest ................................... 15
4.6 Letter of Credit Fees ........................................ 15
4.7 Request for Issuance of Letters of Credit .................... 15
4.8 Letter of Credit Provisions .................................. 15
4.9 Disbursements ................................................ 16
4.10 Reimbursement By Borrower of Drawings Under Letters of Credit 16
ARTICLE V COLLATERAL; GENERAL TERMS ........................................ 17
5.1 Collateral ................................................... 17
5.2 Further Assurances ........................................... 18
5.3 Inspections .................................................. 18
5.4 Perfection; Locations ........................................ 18
5.5 Power-of-Attorney ............................................ 19
5.6 Assignments .................................................. 19
5.7 Special Collateral ........................................... 19
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5.8 Waivers, etc .................................................... 19
5.9 Set-off ......................................................... 19
5.10 Bank Accounts .................................................. 20
ARTICLE VI APPLICATION OF COLLECTIONS TO LIABILITIES ....................... 20
6.1 Collateral Proceeds Account and Lock Boxes ...................... 20
6.2 Bank as Attorney and Agent-in-Fact .............................. 20
6.3 Application of Proceeds ......................................... 20
6.4 Availability of Proceeds ........................................ 21
6.5 Other Provisions ................................................ 21
ARTICLE VII COLLATERAL; ACCOUNTS ........................................... 22
7.1 Representations and Warranties with respect to Accounts ......... 22
7.2 Verification .................................................... 22
7.3 Covenants with respect to Accounts .............................. 23
7.4 Accounts and Special Collateral ................................. 23
7.5 Power of Attorney ............................................... 23
7.6 Records of Accounts ............................................. 24
ARTICLE VIII COLLATERAL; INVENTORY ......................................... 24
8.1 Inventory ....................................................... 24
8.2 Sale of Inventory ............................................... 25
ARTICLE IX COLLATERAL EQUIPMENT ............................................ 25
9.1 Good Title ...................................................... 25
9.2 Maintenance of Equipment ........................................ 25
9.3 Certificates of Title, etc ...................................... 25
ARTICLE X INSURANCE AND CHARGES ............................................ 26
10.1 Insurance ....................................................... 26
10.2 Charges ......................................................... 26
ARTICLE XI REPRESENTATIONS AND WARRANTIES .................................. 27
11.1 Organization .................................................... 27
11.2 Authorization ................................................... 27
11.3 No Conflicts .................................................... 27
11.4 Validity and Binding Effect ..................................... 27
11.5 No Default ...................................................... 28
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11.6 Financial Statements ........................................... 28
11.7 Insurance ...................................................... 28
11.8 Litigation; Contingent Liabilities ............................. 28
11.9 Ownership of Assets; Liens ..................................... 28
11.10 Subsidiaries ................................................... 29
11.11 Partnerships; Joint Ventures ................................... 29
11.12 Pension and Welfare Plans ...................................... 29
11.13 Regulation U ................................................... 29
11.14 Compliance ..................................................... 30
11.15 Taxes .......................................................... 30
11.16 Investment Borrower Act Representation ......................... 30
11.17 Public Utility Holding Borrower Act Representation ............. 30
11.18 Environmental Matters .......................................... 30
11.19 Accuracy of Information ........................................ 30
11.20 Year 2000 Problem .............................................. 30
ARTICLE XII COVENANTS ........................................................ 31
12.1 Financial Statements and Other Reports ......................... 31
12.1.1 Financial Statements and Reports ............................... 31
12.1.2 Other Reports .................................................. 32
12.2 Notices ........................................................ 32
12.3 Existence ...................................................... 33
12.4 No Change in Line of Business .................................. 33
12.5 Books, Records and Access ...................................... 33
12.6 Insurance ...................................................... 34
12.7 Maintenance of Assets .......................................... 34
12.8 Taxes .......................................................... 34
12.9 Compliance ..................................................... 34
12.10 Use of Proceeds ................................................ 34
12.11 Pension Plans .................................................. 34
12.12 Consolidations, Mergers, Acquisitions .......................... 35
12.13 Dividends and Restricted Payments .............................. 35
12.14 Indebtedness ................................................... 36
12.15 Liens .......................................................... 36
12.16 Investments .................................................... 37
12.17 Capital Expenditures ........................................... 37
12.18 Financial Covenants ............................................ 37
12.18.1 Consolidated EBITDA ............................................ 37
12.18.2 Consolidated Net Worth ......................................... 38
12.18.3 Indebtedness to EBITDA Ratio ................................... 38
12.18.4 Asset Coverage Ratio ........................................... 38
12.19 Other Agreements ............................................... 38
12.20 Unconditional Purchase Options ................................. 39
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12.21 Subsidiary Payments, etc ......................................... 39
ARTICLE XIII CONDITIONS PRECEDENT ........................................... 39
13.1 Initial Loan and Letter of Credit ................................ 39
13.2 All Loans ........................................................ 40
ARTICLE XIV EVENTS OF DEFAULT .............................................. 41
14.1 Event of Default ................................................. 41
14.2 Termination of Commitments and Effect of Event of Default......... 43
14.3 Collateral ....................................................... 43
14.4 Assembly of Collateral ........................................... 44
14.5 Notice ........................................................... 44
14.6 Sale of Collateral ............................................... 44
14.7 Waiver of Borrower ............................................... 44
ARTICLE XV INCREASED COSTS AND OTHER SPECIAL PROVISIONS .................... 45
15.1 Increased Costs .................................................. 45
15.2 Changes in Law Rendering Certain Loans Unlawful .................. 45
15.3 Funding Losses; Prepayment of Fixed Rate Loans ................... 46
15.4 Basis for Determining Interest Rate Inadequate or Unfair.......... 47
15.5 Right of Bank to Fund through Other Offices ...................... 47
15.6 Discretion of Bank as to Manner of Funding ....................... 47
15.7 Conclusiveness of Statements; Survival of Provisions ............. 47
ARTICLE XVI ENVIRONMENTAL, SAFETY AND HEALTH INDEMNITY AND WAIVER ............ 47
ARTICLE XVII MISCELLANEOUS ................................................... 48
17.1 Waiver and Amendments ............................................ 48
17.2 Notices .......................................................... 48
17.3 Expenses ......................................................... 49
17.4 General Indemnity ................................................ 49
17.5 Information ...................................................... 50
17.6 Severability ..................................................... 50
17.7 Law .............................................................. 50
17.8 Successors ....................................................... 50
17.9 WAIVER OF JURY TRIAL ............................................. 50
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LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Note
Exhibit B - Form of Patent and Trademark Assignment
Exhibit C - Forms of Opinions of Counsel
Schedule 5.4 - Locations of Collateral, Books and Records, Chief
Executive Office and list of Affiliates
Schedule 8.1 - Inventory Stored With Bailee, Warehouseman or Other
Third-Party
Schedule 10.1 - Insurance
Schedule 11.1 - Organization
Schedule 11.5 - Defaults
Schedule 11.8 - Litigation and Contingent Liabilities
Schedule 11.9 - Liens
Schedule 11.10 - Subsidiaries
Schedule 11.11 - Partnerships and Joint Ventures
Schedule 11.12 - ERISA Matters
Schedule 11.14 - Compliance Matters
Schedule 11.18 - Environmental Matters
Schedule 12.14 - Outstanding Indebtedness
Schedule 12.15 - Existing Liens
Schedule 12.16 - Existing Investments
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REVOLVING LOAN AND SECURITY AGREEMENT
THIS REVOLVING LOAN AND SECURITY AGREEMENT (this "Agreement"), made as
of the 2nd day of October, 1998, between BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association (the "Bank"), and UNIVERSAL
ELECTRONICS INC., a Delaware corporation (the "Borrower").
WITNESSETH:
WHEREAS, the Borrower has requested that the Bank make revolving loans
to, and issue letters of credit to or for the account of, the Borrower; and
WHEREAS, the Bank is willing to make such loans and issue such letters
of credit, subject to the terms and conditions hereof;
NOW THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
The following words, terms and/or phrases shall have the meanings set
forth thereafter and such meanings shall be applicable to the singular and
plural form thereof, giving effect to the numerical difference; whenever the
context so requires, the use of "it" in reference to Borrower shall mean
Borrower as identified at the beginning of this Agreement:
"Accounts" is defined in Section 5.1.
"Acquisition" means, with respect to any Person, (a) the acquisition by
such Person of all or substantially all of the assets of any other Person (or a
division or ongoing business thereof), whether through the purchase of assets,
through merger, consolidation or otherwise (other than a Person that is a
Subsidiary of the Borrower or one of its Subsidiaries prior to such purchase of
assets) or (b) an Investment by such Person in any other Person as a result of
which such other Person becomes a Subsidiary of such first Person.
"Adjusted Reference Rate" means, at any time, the higher of (a) the
Reference Rate or (b) the Federal Funds Rate plus one-half of one percent (0.5%)
per annum.
"Adjusted Reference Rate Loan" means a Loan bearing interest at the
Adjusted Reference Rate.
" Affiliate" means any "Person" (hereinafter defined) in which Borrower,
one or more partners of Borrower, one or more equity interest holders of
Borrower, "Subsidiary" (hereinafter defined), and/or "Parent" (hereinafter
defined), individually, jointly and/or severally, now or
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at any time or times hereafter, has or have an equity or other ownership
interest equal to or in excess of 50% of the total equity of or other ownership
interest in such Person.
"and/or" means one or the other or both, or any one or more or all, of
the things or Persons in connection with which the conjunction is used.
"Applicable Margin" means (a) from the Effective Date to but not
including the first (1st) anniversary of the Effective Date, 1.75% per annum
with respect to IBOR Loans and Fixed Rate Loans and 0.125% per annum with
respect to the Non-Use Fee and (b) from and including the first (lst)
anniversary of the Effective Date and thereafter, the Applicable Margin shall be
determined as of the last day of each fiscal quarter of each fiscal year of the
Borrower on a trailing basis, based on the Borrower's Consolidated EBITDA as of
the last day of each of the four fiscal quarters immediately preceding the date
of any determination of the Applicable Margin hereunder and such Applicable
Margin shall equal the percentage per annum set forth below in the following
table:
Applicable Margin
Trailing Four- for IBOR Loans Applicable Margin
Quarter Consolidated EBITDA and Fixed Rate Loans for Non-Use Fee
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Equal to or greater than 1.25% per annum 0.1250% per annum
$13,500,000
Equal to or greater than 1.50% per annum 0.1250% per annum
$10,500,000 but less than
$13,500,000
Equal to or greater than 1.75% per annum 0.1250% per annum
$7,500,000 but less than
$10,500,000
Less than $7,500,000 2.00% per annum 0.1875% per annum
Any change in the Applicable Margin shall become effective two (2) Banking Days
following delivery by the Borrower to the Bank of a quarterly compliance
certificate pursuant to Section 12.1.1(d) evidencing that the Borrower's
Consolidated EBITDA for the four fiscal quarters immediately preceding the date
of determination for the Applicable Margin warrants an adjustment to the
Applicable Margin, whether upward or downward. Notwithstanding the foregoing,
but subject to Section 4.1(d), at any time an Event of Default exists or an
Unmatured Event of Default with respect to the Borrower's obligations under
Section 12.1.1 exists, the Applicable Margin shall be determined as if the
trailing four-quarter Consolidated EBITDA was less than $7,500,000 until such
Event of Default or Unmatured Event of Default is cured or waived by the Bank.
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"Application" means any application by Borrower, in a form and
containing terms and provisions acceptable to Bank, for the issuance by Bank of
a Letter of Credit.
"Approved Acquisition" means any Acquisition by any Person (the
"Purchaser") of all or substantially all of the Stock, equity interests or
assets of another Person (the "Target") provided that (a) such transaction has
been approved by the board of directors or other similar body of the Target and
if necessary under applicable law, the shareholders or other owners of the
Target have also so approved such transaction, (b) the Target is engaged in
substantially the same lines of business as engaged in by the Purchaser
immediately prior to such transaction, (c) immediately before and after giving
effect to such transaction, there shall not exist an Event of Default or an
Unmatured Event of Default, and (d) if the total consideration payable for such
Acquisition, whether in cash, property or by the face amount of an instrument
evidencing Indebtedness, exceeds $1,000,000, the Bank shall have given its prior
written consent thereto.
"Bank" is defined in the Preamble.
"Banking Day" means (a) a day other than a Saturday, Sunday or a legal
holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois and San Francisco,
California and (b) relative to the making, continuing, prepaying or repaying of
an IBOR Loan, any day on which dealings in Dollars are carried on in the
interbank market.
"Borrower" is defined in the Preamble.
"Capital Expenditures" shall mean for any period, the sum of (a) the
aggregate amount of all expenditures of Borrower and its Subsidiaries for fixed
or capital assets made during such period which, in accordance with GAAP, would
be classified as capital expenditures; and (b) the aggregate amount of all
Capitalized Lease Liabilities paid or payable during such period.
"Capitalized Lease" means any lease which is or should be capitalized on
the balance sheet of the lessee under such lease in accordance with GAAP.
"Capitalized Lease Liabilities" shall mean all monetary obligations of
Borrower or any of its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, would be classified as a Capitalized Lease, and,
for purposes of this Agreement and each of the Other Agreements, the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP, and the stated maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalents" means (a) investments in direct obligations of the
United States of America or of any agency or instrumentality thereof whose
obligations constitute full faith and credit obligations of the United States of
America, provided that any such obligations shall mature within one year of the
date of issuance thereof; (b) investments in commercial paper
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rated at least P-1 by Moody's Investors Service, Inc. or at least A-1 by
Standard & Poors Corporation maturing within 270 days of the date of issuance
thereby; and (c) investments in certificates of deposits and bankers acceptances
issued by (i) the Bank, (ii) any Person controlling the Bank or (iii) any United
States commercial bank having capital and surplus of not less then $100,000,000
and which have a maturity of one year or less.
"Charges" means all national, federal, state, county, city, municipal
and/or other governmental (or any instrumentality, division, agency, body or
department thereof including without limitation the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to the "Collateral" (as hereinafter defined), Borrower's
business, Borrower's ownership and/or use of any of its assets, and/or
Borrower's income and/or gross receipts.
"Collateral" is defined in Section 5.1.
"Commitment" is defined in Section 2.1.
"Consolidated EBITDA" means, at any date of determination, the sum for
such period of the Consolidated Net Income of Borrower, plus the aggregate
amount deducted, in determining Borrower's consolidated net income for such
period, in respect of (a) total interest expense (including any interest expense
in respect of Capitalized Lease Liabilities), plus (b) tax expense, plus (c)
depreciation, amortization and other similar non-cash charges, all determined in
accordance with GAAP.
"Consolidated Net Income" means the consolidated net income of Borrower
and its Subsidiaries, less taxes and excluding extraordinary or non-recurring
gains, all determined in accordance with GAAP.
"Consolidated Net Worth" means the consolidated net worth of Borrower
and its Subsidiaries.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Account" means an Account with respect to which the Obligor
thereof is a resident of any State or Commonwealth of the United States of
America.
"Domestic Inventory" means Inventory which is located in any State or
Commonwealth of the United States of America.
"Domestic Subsidiary" means a Subsidiary of the Borrower that is
incorporated or otherwise formed under the corporate, partnership or other
applicable governing law of any State or Commonwealth of the United States of
America.
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"Effective Date" means the date upon which Borrower satisfies the
conditions precedent for the initial Loan or Letter of Credit.
"Environmental Laws" means the Resource Conservation and Recovery Act;
the Comprehensive Environmental Response, Compensation and Liability Act; any
so-called "Superfund" or "Superlien" law; the Toxic Substances Control Act; and
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree or other requirement regulating, relating to, or
imposing liability or standards of conduct (including, but not limited to,
permit requirements, and emission or effluent restrictions) concerning any
Hazardous Materials or any hazardous, toxic or dangerous waste, substance or
constituent, or any pollutant or contaminant or other substance, whether solid,
liquid or gas, as now or at any time hereafter in effect.
"Equipment" is defined in Section 5.1.
"Event of Default" means the occurrence of any one or more of the events
described in Section 14.1 after giving effect to any applicable periods of
notice and/or cure which are provided for in said Section 14.1 or in any
instrument referred to in Sections or (c) thereof.
" Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)" on the preceding Banking Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Banking Day, the rate for such day will be the
arithmetic mean as determined by Bank of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of three leading brokers of Federal funds transactions in New York
City selected by Bank.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fixed Rate" means, at any time, the rate of interest applicable to any
Loan denominated by Borrower and Bank as a Fixed Rate Loan for the Interest
Period applicable to such Loan, as agreed to by Borrower and Bank,
telephonically or in writing, at the time of the making of such Loan as set
forth in Section 2.4(c) and 4.1(c). Such Fixed Rate is intended to reflect
Bank's approximate cost of funds with respect to each Fixed Rate Loan, as
determined by Bank in its sole and absolute discretion, determined and provided
to Borrower on a non-discriminatory manner with respect to all commercial
banking customers of Bank for whom Bank has extended credit based upon its fixed
rate lending program as in effect at the time of the making of such Fixed Rate
Loan. Bank shall have no obligation to disclose to Borrower its actual cost of
funds, how such cost of funds was determined or any element thereof.
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"Fixed Rate Loan" means a Loan bearing interest at the Fixed Rate as set
forth in Section 4.1(c)hereof.
"GAAP" means generally accepted accounting principles as from time to
time in effect.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantee Liability" of any Person means any agreement, undertaking or
arrangement by which such Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
Indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation in respect of any Guarantee Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount (or maximum principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in (or for the purposes of) any Environmental Law, or any pollutant or
contaminant, and shall include, but not be limited to, petroleum, including
crude oil or any fraction thereof which is liquid at standard conditions of
temperature or pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute), any radioactive material, including, but not limited to, any source,
special nuclear or by-product material as defined at 42 U.S.C. section 2011 et.
seq., as amended or hereafter amended, polychlorinated biphenyls, and asbestos
in any form or condition.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates.
"IBOR Loan" means a Loan which bears interest at a rate determined by
reference to the IBOR Rate (Adjusted).
" IBOR Office" means the office or offices of Bank which shall be making
or maintaining the IBOR Loans of Bank hereunder or such other office or offices
through which Bank determines its IBOR Rate. An IBOR Office may be, at the
option of Bank, either a domestic or foreign office.
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"IBOR Rate" means, with respect to any IBOR Loan for any Interest
Period, the rate per annum at which Dollar deposits in immediately available
funds are offered by Bank to major banks in the interbank market as at or about
11:00 a.m. Chicago time two Banking Days prior to the beginning of such Interest
Period for delivery on the first day of such Interest Period, and in an amount
equal or comparable to the amount of Bank's IBOR Loan for such Interest Period.
"IBOR Rate (Adjusted)" means, relative to any IBOR Loan for any
Interest Period, a rate per annum determined pursuant to the following formula:
IBOR Rate = IBOR Rate
------------------------------
(Adjusted) 1.00 - IBOR Reserve Percentage
The IBOR Rate (Reserve Adjusted) for any Interest Period for any IBOR Loan will
be determined by Bank on the basis of the IBOR Reserve Percentage in effect two
(2) Banking Days before the first day of such Interest Period.
"IBOR Reserve Percentage" means, for any day in any Interest Period for
any IBOR Loan, the percentage in effect on such day as prescribed by the Board
of Governors of the Federal Reserve System (or any successor thereto) or other
U.S. government agency for determining the maximum reserve requirement
(including, without limitation, any marginal, basic, emergency, supplemental,
and other reserves and taking into account any transitional adjustments or other
scheduled changes in reserve requirements) for banks in respect of liabilities
or assets (with a term equal to such Interest Period) consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D of the Federal
Reserve Board, or any other applicable regulation or other liabilities or assets
which Bank determines are actually maintained and attributable to or allocable
to such IBOR Loan. In determining such amount, Bank may use any reasonable
averaging and attribution methods.
"Indebtedness" means all obligations and liabilities of Borrower to any
Person (including without limitation all debts, claims and indebtedness for
borrowed money) whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and however
arising, whether under written or oral agreement, by operation of law, or
otherwise; excluding, however, trade payables arising in the ordinary course of
business, normal and customary business accruals and other employee-related
obligations and liabilities not constituting indebtedness for borrowed money.
Indebtedness includes, without limiting the generality of the foregoing: (a)
obligations or liabilities of any Person that are secured by any lien, claim,
encumbrance, or security interest upon property owned by Borrower even though
Borrower has not assumed or become liable for the payment therefor; (b)
obligations or liabilities created or arising under any lease of real or
personal property, or conditional sale or other title retention agreement with
respect to property used and/or acquired by Borrower, even though the rights and
remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (c) Hedging Obligations and (d) Capitalized Lease
Liabilities.
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"Interest Period" means, with respect to any IBOR Loan or Fixed Rate
Loan, the period commencing on the borrowing date of such IBOR Loan or Fixed
Rate Loan or any applicable date of conversion or continuation and (a) with
respect to IBOR Loans, ending one, two, three or six months thereafter and (b)
with respect to Fixed Rate Loans, ending on such day as the Borrower shall
select not to exceed 30 days from the making of such Loan or the conversion to
such Loan, as selected by Borrower pursuant to Sections 2.4(c), 2.5 or 2.6, as
the case may be; provided that
(i) if such Interest Period would otherwise end on a day which is not a
Banking Day, such Interest Period shall end on the next following Banking Day
(unless with respect to IBOR Loans such next following Banking Day is the first
Banking Day of a calendar month, in which case such Interest Period shall end on
the immediately preceding Banking Day);
(ii) if with respect to IBOR Loans, there exists no day numerically
corresponding to the day such Loan was made in the month in which the last day
of such Interest Period would otherwise fall, such Interest Period shall end on
the last Banking Day of such month; and
(iii) Borrower shall not be permitted to select an Interest Period that
ends on a date later than the Termination Date.
"Investment" of any Person means, without duplication, (a) any
investment, made in cash or by delivery of any kind of property or asset, in any
other Person, whether by acquisition of shares of stock or similar interest,
Indebtedness or other obligation or security, or by loan, advance or capital
contribution, or otherwise, (b) any Guarantee Liability of such Person and (c)
any ownership or similar interest held by such Person in any other Person. The
amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"Letter of Credit" means a standby or commercial letter of credit issued
by Bank pursuant to an Application and for the account of Borrower, in such form
and containing such terms as Bank shall require.
"Letter of Credit Commitment" means the obligation of Bank to issue
Letters of Credit in accordance with the terms of Section 2.1(b)
"Letter of Credit Facility Amount" means the lesser of (a) $3,000,000
minus the aggregate of all drawings which have been honored but have not been
reimbursed under any Letter of Credit or (b) an amount equal to the Revolving
Loan Commitment minus the outstanding principal amount of all Revolving Loans.
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"Letter of Credit Liabilities" means, at any time of determination, but
without duplication, an amount equal to the sum of (a) the aggregate amount
available to be drawn under outstanding Letters of Credit plus (b) the aggregate
amount of all drawings which have been honored but have not been reimbursed
under any Letter of Credit.
"Liabilities" means all obligations and liabilities of Borrower to Bank
(including, without limitation, all Letter of Credit Liabilities, Hedging
Obligations, debts, claims, and Indebtedness) whether primary or secondary,
direct or indirect, absolute or contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable, however evidenced,
created, incurred, acquired or owing and however arising, whether under this
Agreement or the Other Agreements (hereinafter defined), or by oral agreement or
operation of law or otherwise.
"Lien" means any mortgage, pledge, hypothecation, judgment lien or
similar legal process, title retention lien, or other lien, encumbrance or
security interest, including, without limitation, the interest of a vendor under
any conditional sale or other title retention agreement and the interest of a
lessor under any Capitalized Lease.
"Loan" is defined in Section 2.1.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole; (b) a material impairment of the ability of any Borrower to perform
under this Agreement or any Other Agreement; or (c) a material adverse effect
upon the legality, validity, binding effect or enforceability against the
Borrower of this Agreement or any Other Agreement.
"Non-Domestic Inventory" means Inventory which does not constitute
Domestic Inventory.
"Note" and "Revolving Note" means the promissory note of the Borrower
referred to in Section 3.1 hereof.
"Obligor" means any Person who is and/or may become obligated to
Borrower under or on account of any Account.
"Occupational Safety and Health Law" means the Occupational Safety and
Health Act of 1970 and any other federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning employee health and/or
safety.
"Other Agreements" means each Application, the Note, the Patent and
Trademark Assignment, the Supplemental Documentation, and any agreements,
instruments and documents, including without limitation guaranties, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, leases, financing statements and all other written matter
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heretofore, now and/or from time to time hereafter executed by and/or on behalf
of Borrower and delivered to Bank.
"Patent and Trademark Assignment" is defined in Section 5.2.
"Payment Date" means (a) with respect to any IBOR Loan or Fixed Rate
Loan, the last day of each Interest Period with respect thereto and, with
respect to IBOR Loans if such Interest Period is in excess of three months, the
day three months after the commencement of such Interest Period and thereafter
the last day of the Interest Period with respect thereto; (b) with respect to
any Adjusted Reference Rate Loan, the last day of each month commencing on the
first such date to occur after an Adjusted Reference Rate Loan is made or an
IBOR Loan or a Fixed Rate Loan is converted into such Adjusted Reference Rate
Loan; and (c) as to the nonuse fee, the last day of each calendar quarter,
commencing on the first such date to occur after the date hereof.
"Permitted Encumbrances" means (a) Liens for current Charges not
delinquent or for Charges being contested in good faith, by appropriate
proceedings and with respect to which the Borrower is maintaining adequate
reserves if required in accordance with GAAP, (b) Liens which arise in the
ordinary course of business for sums not due or sums which the Borrower is
contesting in good faith, by appropriate proceedings and with respect to which
the Borrower is maintaining adequate reserves if required in accordance with
GAAP, but which do not involve any deposits, advances or Indebtedness or the
deferred purchase price of property or services, (c) Liens granted by any
Subsidiary to secure such Subsidiary's Indebtedness (if any) to the Borrower, or
(d) Liens granted to, or in favor of, the Bank.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (whether national, federal, state,
county, city, municipal or otherwise, including without limitation, any
instrumentality, division, agency, body or department thereof).
"Reference Rate" means the rate of interest publicly announced from time
to time by Bank as its reference rate. The Reference Rate is set by Bank based
on various factors, including Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point in pricing some
loans. The Bank may price loans to its customers at, above or below the
Reference Rate. Any change in the Reference Rate will take effect at the opening
of business on the day specified in the public announcement of a change in the
Bank's Reference Rate.
"Restructuring Charges" means all costs, expenses and other charges paid
or incurred by the Borrower in connection with the write-down of any fixed
assets, accounts receivable, intangibles or inventory, severance and employee
benefit costs, costs relating to the disposition of assets, and all other
special charges paid or incurred in connection with the discontinuation of
Borrower's North American One For All business, as more fully described in
Borrower's Annual Report on SEC Form 10-K dated March 30, 1998.
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"Revolving Loan" is defined in Section 2.1(a).
"Revolving Loan Commitment" is defined in Section 2.1(a).
"Special Collateral" is defined in Section 5.7.
"Stock" means all shares, interests, participants or other equivalents
(however designated) of or in a corporation, whether or not voting, including
but not limited to common stock, warrants, preferred stock, convertible
debentures and all agreements, instruments and documents convertible, in whole
or in part, into any one or more or all of the foregoing.
"Subsidiary" means any Person at least a majority of whose issued and
outstanding Stock or other ownership interests now or at any time or times
hereafter is owned by Borrower or Parent, as the case may be, and/or one or more
of their respective Subsidiaries.
"Supplemental Documentation" is defined in Section 5.2.
"Termination Date" is defined in Section 2.1(a).
"UCC" means the Uniform Commercial Code as from time to time in effect
in the State of Illinois or other applicable jurisdiction.
"Unmatured Event of Default" means any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
Except as otherwise defined in this Agreement or the Other Agreements,
all words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the UCC.
ARTICLE II
COMMITMENTS OF THE BANK; BORROWING PROCEDURES
SECTION 2.1 Commitments. Subject to the terms and conditions of this
Agreement, Bank agrees:
(a) Revolving Loan Commitment. To make loans to Borrower (herein
collectively called the "Revolving Loans" and individually called a
"Revolving Loan") on a revolving basis from time to time from the
Effective Date to the Termination Date, in such amounts as Borrower may
from time to time request; provided that the aggregate principal amount
of all Revolving Loans from time to time outstanding shall not exceed
$15,000,000 minus the aggregate amount of all Letter of Credit
Liabilities. The foregoing commitment is herein called the "Revolving
Loan Commitment". The Revolving Loan Commitment shall terminate on the
date which is the earlier of (i)
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_____________, 2001 or (ii) if sooner, the date upon which the
Commitments are terminated pursuant to Section 14.2 hereof (the
"Termination Date"). Subject to this Agreement, Revolving Loans which
have been repaid may be reborrowed.
(b) Letter of Credit Commitment. To issue standby or commercial
Letters of Credit from time to time on any Banking Day from the
Effective Date to the Banking Day immediately prior to the Termination
Date in an aggregate outstanding amount not exceeding the Letter of
Credit Facility Amount. Each Letter of Credit shall be issued pursuant
to an Application and shall be subject to the applicable provisions of
Section 3 hereof.
The Revolving Loans are herein collectively called the "Loans" and individually
called a "Loan" and the Revolving Loan Commitment and the Letter of Credit
Commitment are herein collectively called the "Commitments" and individually
called a "Commitment".
SECTION 2.2 Absence of Defaults. Each request for a Revolving Loan or
any Letter an Credit shall constitute an automatic warranty and representation
by Borrower to Bank that there does not then exist an Event of Default or an
Urunatured Event of Default on the date of such request and on the date of
receipt of the proceeds of such Loan or such Letter of Credit.
SECTION 2.3 Disbursements to Other Persons. Borrower hereby authorizes
and directs Bank to disburse, for and on behalf of Borrower and for Borrower's
account, each Letter of Credit and the proceeds of Loans made by Bank to
Borrower pursuant to this Agreement to such Person or Persons as Borrower or any
Person specified in writing by Borrower shall direct in writing.
SECTION 2.4 Borrowing Procedure.
(a) Adjusted Reference Rate Loans. Each request for a proposed borrowing
of an Adjusted Reference Rate Loan shall be made on a Banking Day upon written
or telephonic notice from Borrower received by Bank prior to 2:00 p.m., Chicago,
Illinois time, on such Banking Day. Such notice shall specify (i) the borrowing
date (which shall be a Banking Day) and (ii) the amount of such Loan. Subject to
the satisfaction of the applicable conditions precedent set forth herein, Bank
shall pay over such funds to Borrower on the requested borrowing date. Each
Adjusted Reference Rate Loan shall be in a minimum amount of $100,000 and an
integral multiple of $100,000.
(b) IBOR Loans. Each request for a proposed borrowing of an IBOR Loan
shall be made upon at least two (2) Banking Days' prior written or telephonic
notice from Borrower received by the Bank prior to 2:00 p.m., Chicago, Illinois
time. Such notice shall specify (i) the borrowing date (which shall be a Banking
Day), (ii) the amount of such Loan, and (iii) the initial Interest Period for
such Loan. Subject to the satisfaction of the applicable conditions precedent
set forth herein, the Bank shall pay over such funds to Borrower on the
requested borrowing
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date. Each IBOR Loan shall be in a minimum amount of $500,000 and an integral
multiple of $100,000.
(c) Fixed Rate Loans. Each request for a proposed borrowing of a Fixed
Rate Loan shall be made on a Banking Day upon written or telephonic notice from
Borrower received by the Bank prior to 2:00 p.m., Chicago, Illinois time. Such
notice shall specify (i) the borrowing date (which shall be a Banking Day), (ii)
the amount of such Loan, and (iii) the initial Interest Period for such Loan.
Subject to the satisfaction of the applicable conditions precedent set forth
herein, the Bank shall pay over such funds to Borrower on the requested
borrowing date. Each Fixed Rate Loan shall be in a minimum amount of $10,000 and
an integral multiple of $1,000.
SECTION 2.5 Various Types of Loans. On the terms and subject to the
conditions of this Agreement, all or any portion of the Loans shall be
maintained as either Adjusted Reference Rate Loans, IBOR Loans, Fixed Rate Loans
or combinations thereof (each a "type" of Loan), as Borrower shall specify. Not
more than 5 IBOR Loans having different Interest Periods shall be outstanding at
any one time. Not more than 3 Fixed Rate Loans having different Interest Periods
shall be outstanding at any one time.
SECTION 2.6 Continuation and Conversion of Loans. Borrower may elect to
(i) continue any outstanding IBOR Loan or Fixed Rate Loan from the then current
Interest Period for such Loan into a subsequent Interest Period to begin on the
last day of such current Interest Period or (ii) convert all or any part
(subject to the limits set forth below) of any outstanding IBOR Loan or Fixed
Rate Loan into a different type of Loan by giving Bank prior written or
telephonic notice of such continuation or conversion by 2:00 p.m., Chicago time,
(a) in the case of conversion into an Adjusted Reference Rate Loan, on the day
of such conversion and (b) in the case of continuation of or conversion into an
IBOR Loan or Fixed Rate Loan, at least one Banking Day with respect to Fixed
Rate Loans and three Banking Days with respect to IBOR Loans prior to the date
of such continuation or conversion; provided that any conversion of an IBOR Loan
or Fixed Rate Loan on a day other than the last day of an Interest Period
therefor shall be subject to the provisions of Section 15.3. Each such notice
shall specify (i) the effective date of continuation or conversion (which shall
be a Banking Day), (ii) the IBOR Loan or Fixed Rate Loan (or portion thereof) to
be continued or converted and (iii) if applicable, the Interest Period for such
IBOR Loan or Fixed Rate Loan after giving effect to such continuation or
conversion. Absent timely notice of continuation or conversion, each IBOR Loan
or Fixed Rate Loan shall automatically convert to an Adjusted Reference Rate
Loan on the last day of the current Interest Period or at any time an Event of
Default exists.
ARTICLE III
NOTE EVIDENCING LOANS; REPAYMENTS AND RECORD KEEPING
SECTION 3.1 Revolving Note. The Revolving Loans shall be evidenced by a
promissory note (herein called the "Note" or "Revolving Note") substantially in
the form set forth as Exhibit A, with appropriate insertions, dated the date
hereof, payable to the order of
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Bank in the maximum principal amount of $15,000,000, which Note shall mature and
be payable in full on the Termination Date.
SECTION 3.2 Voluntary Repayments. In addition to the application of
collections to the Liabilities contemplated by Article VI, Borrower may from
time to time, on any Banking Day voluntarily repay the principal of the
Revolving Loans in whole or in part without any premium or penalty, except as
contemplated by Article XV; provided, however, that any partial repayment of
principal shall be in a minimum amount of $500,000 and in an integral multiple
of $100,000. Borrower shall promptly confirm any telephonic notice of repayment
in writing.
SECTION 3.3 Recordkeeping. Bank shall record in its records the date
and amount of each Loan made and Letter of Credit issued hereunder, each
repayment thereof and the other information provided for thereon. The aggregate
unpaid principal amount so recorded shall be rebuttable presumptive evidence of
the principal amount owing and unpaid on the Note and any Letter of Credit. The
failure to so record any such information shall not however limit or otherwise
affect the obligations of Borrower hereunder, under the Note or any Application
to pay the principal amount of all Revolving Loans, Letters of Credit or any
other of the Liabilities.
ARTICLE IV
INTEREST, FEES AND LETTERS OF CREDIT
SECTION 4.1 Interest, Etc. Borrower hereby promises to pay interest on
the unpaid principal amount of any Loan for the period commencing on the date
such Loan is made until such Loan is paid in full, as follows:
(a) with respect to any portion of the Loan being maintained as Adjusted
Reference Rate Loan, at a rate per annurn equal to the Adjusted Reference Rate
from time to time in effect;
(b) with respect to any portion of the Loan being maintained as an IBOR
Loan, at a rate per annum equal to the IBOR Rate (Adjusted) applicable to each
Interest Period for such Loan plus the Applicable Margin; and
(c) with respect to any portion of the Loan being maintained as a Fixed
Rate Loan, at a rate per annurn equal to the Fixed Rate applicable to each
Interest Period for such Loan plus the Applicable Margin.
(d) with respect to all Loans at any time any Event of Default shall
exist, at a rate per annum equal to the Adjusted Reference Rate in effect from
time to time plus two percent (2.0%)
SECTION 4.2 Nonuse Fee. The Borrower agrees to pay to the Bank a nonuse
fee equal to the product of the Applicable Margin times the daily average of the
unused amount of
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the Revolving Loan Commitment during the period from and including the Effective
Date to and including the Termination Date. Such nonuse fee shall be payable on
each Payment Date and on the Termination Date for any period then ending for
which such nonuse fee shall not have been paid.
SECTION 4.3 Closing Fee. Concurrently with its execution and delivery of
this Agreement, the Borrower shall pay to Bank, in full, a nonrefundable closing
fee of $25,000.
SECTION 4.4 Computation of Interest and Fees. Interest, the nonuse fee
set forth in Section 4.2 and the letter of credit fee set forth in Section 4.6
shall be computed on the actual number of days elapsed on the basis of a year
consisting of 360 days. The interest rate applicable to each Adjusted Reference
Rate Loan shall change simultaneously with each change in the Adjusted Reference
Rate.
SECTION 4.5 Payment Dates for Interest. Interest shall be payable, in
arrears, on each Payment Date.
SECTION 4.6 Letter of Credit Fees. The Borrower hereby agrees to pay to
Bank a letter of credit fee with respect to all standby letters of credit (but
not with respect to commercial letters of credit) calculated upon the aggregate
amount available to be drawn under outstanding standby Letters of Credit at a
per annum rate equal to 50% of the Applicable Margin with respect to IBOR
Loans. Such fee shall be payable, in arrears, on each Payment Date and on the
Termination Date for any period then ending for which such fee shall not have
been paid following the issuance of a standby Letter of Credit. In addition to,
and not in lieu of, the foregoing, Borrower hereby agrees to pay to Bank, upon
demand from time to time, all fees and administrative expenses of Bank in
connection with the issuance, amendment, maintenance, modification (if any) and
administration of each Letter of Credit (whether standby or commercial Letters
of Credit), in accordance with Bank's standard schedule of fees as in effect
from time to time.
SECTION 4.7 Request for Issuance of Letters of Credit. From time to
time, upon receipt by Bank of a properly completed Application for a Letter of
Credit, together with such other documents, instruments and/or agreements as
Bank may reasonably require, Bank shall issue a Letter of Credit on such terms
as have been requested by Borrower and are consistent with this Agreement and
satisfactory to Bank. Notwithstanding the foregoing, Bank shall not be required
to issue any Letter of Credit if, before or after giving effect to the issuance
of such Letter of Credit (a) the Letter of Credit Liabilities exceed or would
exceed the Letter of Credit Facility Amount or (b) an Event of Default or an
Unmatured Event of Default exists or would result therefrom.
SECTION 4.8 Letter of Credit Provisions. Each standby Letter of Credit
shall, by its terms, expire on a date (its "Expiry Date") which is not later
than 365 days from its date of issuance. Each commercial Letter of Credit shall,
by its terms, expire on a date (its "Expiry Date") which is not later than 180
days from its date of issuance. As long as no Event of
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Default or Unmatured Event of Default then exists, by delivery to Bank of a
written request therefor at least thirty (30) days prior to the Expiry Date of
any Letter of Credit, Bank shall extend the Expiry Date of such Letter of Credit
for an additional period not to exceed 365 days in the case of standby Letters
of Credit, and 180 days in the case of commercial Letters of Credit, from its
then Expiry Date. Any Letter of Credit which has an Expiry Date on or after the
Termination Date must be secured by cash collateral or other collateral
acceptable to the Bank in an amount not less than the stated amount of such
Letter of Credit.
SECTION 4.9 Disbursements. Bank will notify Borrower promptly of the
presentment for payment of any Letter of Credit, together with notice of the
date (a "Disbursement Date") such payment shall be made. Subject to the terms
and provisions of such Letter of Credit, Bank shall make such payment to the
beneficiary (or its designee) of such Letter of Credit. In the event Bank shall
make payment of any Letter of Credit prior to 5:00 p.m., Chicago, Illinois time
on any Disbursement Date, provided there are sufficient available funds in the
Collateral Proceeds Account (as determined pursuant to Section 6.4 hereof) on
the Disbursement Date, Bank shall charge such Account on the Disbursement Date
in the amount so paid by the Bank with respect to such Letter of Credit and
interest shall not be payable with respect to such amount. Subject to Section
4.10, if the available funds in the Collateral Proceeds Account on the
Disbursement Date are insufficient to reimburse the Bank for the amount so paid
with respect to any Letter of Credit, such Account shall be so charged on the
next Business Day immediately following the Disbursement Date when sufficient
available funds have been deposited in the Collateral Proceeds Account and,
subject to Section 4.l(d), interest shall be payable and so charged to the
Account for the period from, and including, the Disbursement Date to, but not
including, the date of such reimbursement at the then applicable Fixed Rate.
SECTION 4.10 Reimbursement By Borrower of Drawings Under Letters of
Credit. Borrower irrevocably agrees to immediately reimburse Bank, on demand,
and without setoff, protest, defense or counterclaim of any kind, for each
payment made by Bank under or pursuant to any Letter of Credit. Borrower's
obligation to reimburse Bank for payments and disbursements made by Bank under
any Letter of Credit shall be absolute and unconditional under, other than with
respect to Bank's gross negligence or willful misconduct, irrespective of any
setoff, counterclaim or defense to payment which Borrower may have or have had
against Bank or any other Person, including, without limitation, (a) any defense
based on the failure of the demand for payment under such Letter of Credit, (b)
any draft, demand or certificate or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient, (c) the
legality, validity, regularity or enforceability of such Letter of Credit, (d)
the identity of the transferee of such Letter of Credit, and (e) the sufficiency
of any transfer if such Letter of Credit is transferable. Borrower assumes all
risks of the acts or omissions of the user of any Letters of Credit and all
risks of the misuse of a Letter of Credit other than due to Bank's gross
negligence, or willful misconduct. Neither Bank nor any of its correspondents
shall be responsible, (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document specified in an Application even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent, or forged, (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or
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any of the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason, (iii) for
errors, omissions, interruptions or delays in transmission of delivery of any
messages, by mail, cable, telegraph, telex or otherwise, (iv) for any error,
neglect, default, suspension or insolvency of any correspondents of Bank, (v)
for errors in translation or for errors in interpretation of technical terms not
constituting gross negligence or willful misconduct, (vi) for any loss or delay,
in the transmission or otherwise, of any such document or draft or of proceeds
thereof, (vii) for the misapplication by the beneficiary of a Letter of Credit
or of the proceeds of any drawing under such Letter of Credit, (viii) for any
consequences arising from causes beyond the control of Bank including, without
limitation, any act or omission, rightful or wrongful, of any present or future
de jure or de facto governmental authority or (ix) for any other circumstances
whatsoever, in making or failing to make payment under any Letter of Credit,
except only that Borrower shall have a claim against Bank, and Bank shall be
liable to Borrower, to the extent of any direct, as opposed to consequential,
damages suffered by Borrower which Borrower proves were caused by Bank's gross
negligence or willful misconduct. None of the above shall affect, impair or
prevent the vesting of any of the rights or powers of Bank. Bank shall have the
right to transmit the terms of any Letter of Credit without translating them.
ARTICLE V
COLLATERAL; GENERAL TERMS
SECTION 5.1 Collateral. To secure the prompt payment to Bank of the
Liabilities and the prompt, full and faithful performance by Borrower of all of
the provisions to be kept, observed or performed by Borrower under this
Agreement and/or the Other Agreements, Borrower grants to Bank a security
interest in and to all of Borrower's now existing and/or owned and hereafter
arising and/or acquired: (a) accounts, chattel paper, contract rights,
instruments, documents, patents, trademarks, tradenames, and general intangibles
(sometimes hereinafter individually and collectively referred to as "Accounts"),
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) inventory ("Inventory"); (c) goods (other than Inventory),
equipment, machinery, vehicles and fixtures, together with all accessions
thereto and all substitutions, renewals, improvements and replacements of and
additions thereto (sometimes hereinafter individually and collectively referred
to as "Equipment"); (d) monies, reserves, deposits, deposit accounts and
interest or dividends thereon, securities, cash, cash equivalents and other
property now or at any time or times hereafter in the possession or under the
control of Bank or its bailee; (e) books and records and (f) all products and
proceeds of the foregoing including without limitation proceeds of insurance
policies insuring the foregoing (all of the foregoing personal property and any
property pursuant to which a lien is granted in favor of the Bank pursuant to
the Supplemental Documentation is hereinafter sometimes individually and
sometimes collectively referred to as "Collateral"). Borrower shall make
appropriate entries upon its financial statements and its books and records
disclosing Bank's security interest in the Collateral.
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SECTION 5.2 Further Assurances. Borrower shall execute and/or deliver to
Bank, at any time and from time to time hereafter at the request of Bank, all
agreements, instruments, documents and other written matter (hereinafter,
individually and/or collectively, referred to as "Supplemental Documentation"),
including but not limited to a Patent and Trademark Collateral Assignment
substantially in the form of Exhibit B hereto (the "Patent and Trademark
Assignment"), that Bank reasonably may request, in a form and substance
acceptable to Bank, to perfect and maintain perfected Bank's security interest
in the Collateral and to consummate the transactions contemplated in or by this
Agreement and the Other Agreements. Borrower, irrevocably, hereby makes,
constitutes and appoints Bank (and all Persons designated by Bank for that
purpose) as Borrower's true and lawful agent (and attorney-in-fact) to sign the
name of Borrower on the Supplemental Documentation and to deliver the
Supplemental Documentation to such Persons as Bank in its sole and absolute
discretion, may elect. Borrower agrees that a carbon, photographic or
photostatic copy, or other reproduction, of this Agreement or of any financing
statement, shall be sufficient as a financing statement.
SECTION 5.3 Inspections. Bank (by any of its officers, employees and/or
agents) shall have the right, upon reasonable notice, at any time or times
during Borrower's usual business hours, to inspect the Collateral and all
related records (and the premises upon which it is located) and to verify the
amount and condition of or any other matter relating to the Collateral. All
costs, fees and expenses incurred by Bank, or for which Bank has become
obligated, in connection with such inspection and/or verification shall
constitute part of the Liabilities, payable by Borrower to Bank on demand.
SECTION 5.4 Perfection; Locations. Borrower warrants and represents to,
and covenants with, Bank that: (a) Bank's security interest in the Collateral is
now and at all times hereafter shall be perfected (other than with respect to
Non-Domestic Inventory, but subject to this Section 5.4) and has and shall at
all times have a first priority, subject to Liens permitted by Section 12.15;
(b) the offices and/or locations where Borrower keeps the Collateral and
Borrower's books and records concerning the Collateral are at the locations
specified on Schedule 5.4 hereto, and Borrower shall not remove such books and
records and/or the Collateral therefrom and shall not keep any of such books and
records and/or the Collateral at any other office or location unless Borrower
gives Bank written notice thereof at least ten days prior thereto and the same
is within the continental United States of America (unless such Collateral or
books and records are located outside of the United States of America as of the
date hereof as disclosed on Schedule 5.4, in which event any change in the
locations of such Collateral or books and records may be made to another
location outside of the United States of America with the Bank's prior written
consent, which shall not be unreasonably withheld); and (c) the address of the
Borrower's chief executive office is set forth on Schedule 5.4. Borrower, by
written notice delivered to Bank at least ten days prior thereto, shall advise
Bank of Borrower's opening of any new office or place of business, any change in
the location of its chief executive office, or its closing of any existing
office or place of business and any new office or place of business shall be
within the continental United States of America. Borrower hereby covenants and
agrees that upon the occurrence of any Event of Default, upon the request of
Bank made at its sole and absolute discretion, Borrower shall take such actions
as shall be
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necessary or desirable in order to perfect the Bank's security interest and Lien
in and to the Borrower's Non-Domestic Inventory. Borrower shall provide evidence
of such perfection, including opinions of counsel, as Bank shall require and all
costs and expenses of such perfection, including recording fees and taxes,
counsel fees and expenses, and all other amounts shall be payable by Borrower.
All costs, fees and expenses which are incurred by Bank in connection with any
matter referred to in this Section 5.4 shall be part of the Liabilities, payable
by Borrower to Bank on demand.
SECTION 5.5 Power-of-Attorney. Effective at any time that there shall be
an Event of Default, Bank, in its sole and absolute discretion, may take control
of, in any manner, and may endorse Borrower's name to any of the items of
payment or proceeds of any Collateral above and, pursuant to the provisions of
this Agreement, Bank shall apply the same to and on account of the Liabilities.
For the purposes of this Section, Borrower, irrevocably, hereby makes,
constitutes and appoints Bank (and all persons designated by Bank for that
purpose) as Borrower's true and lawful agent (and attorney-in-fact), with power,
without notice to Borrower, to take any such actions.
SECTION 5.6 Assignments. Bank, in its sole and absolute discretion,
without waiving or releasing any obligation, liability or duty of Borrower under
this Agreement or the Other Agreements or any Event of Default, may at any time
or times hereafter, but shall be under no obligation to, pay, acquire and/or
accept an assignment of any security interest, lien, encumbrance or claim
asserted by any Person against the Collateral. All sums paid by Bank in respect
thereof and all costs, fees and expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto incurred by Bank on
account thereof shall be part of the Liabilities payable by Borrower to Bank on
demand.
SECTION 5.7 Special Collateral. Immediately upon Borrower's receipt of
that portion of the Collateral evidenced by an agreement, instrument and/or
document other than as relates to Accounts as such ("Special Collateral")
Borrower shall mark the same to show that such Special Collateral is subject to
a security interest in favor of Bank and shall deliver the original thereof to
Bank, together with appropriate endorsement and/or other specific evidence of
assignment (in form and substance acceptable to Bank).
SECTION 5.8 Waivers, etc. No authorization given by Bank pursuant to
this Agreement or the Other Agreements to sell any specified portion of
Collateral or any items thereof, and no waiver by Bank in connection therewith
shall establish a custom or constitute a waiver of any prohibition contained in
this Agreement against such sales, with respect to any portion of the Collateral
or any item thereof not covered by said authorization.
SECTION 5.9 Set-off. Borrower agrees that the Bank shall have all rights
of setoff and bankers' liens provided under applicable law, and in addition
thereto, Borrower agrees that at any time (a) any amount owing by Borrower under
or in connection with this Agreement or the Note is then due to the Bank or (b)
any Event of Default exists Bank may apply to the
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payment of such amount any and all balances, credits, deposits, accounts or
monies of the Borrower then or thereafter held by the Bank.
SECTION 5.10 Bank Accounts. Except as the Bank may expressly agree,
Borrower agrees to maintain, and to cause its Domestic Subsidiaries to maintain,
with the Bank all of its and their depository accounts. The Bank shall have a
lien on and security interest in all such accounts of Borrower. Borrower shall
obtain Bank's prior written approval of all disbursements or other accounts to
be maintained by Borrower with any financial institution other than Bank.
Nothing contained in this Section 5.10 shall be deemed to restrict the right of
Borrower's Subsidiaries, other than Domestic Subsidiaries, to open depository
accounts with banks or financial institutions other than Bank.
ARTICLE VI
APPLICATION OF COLLECTIONS TO LIABILITIES
SECTION 6.1 Collateral Proceeds Account and Lock Boxes. Borrower shall
establish and shall maintain a special account at Bank's 231 South LaSalle
Street, Chicago, Illinois office (the "Collateral Proceeds Account") into which
are deposited all checks, drafts, cash and other remittances in payment or as
proceeds of, or on account of, its Accounts or Collateral which are received in
the Lock Boxes referred to below. Borrower shall establish and shall maintain
one or more post office lock box arrangements acceptable to Bank (each, a "Lock
Box") into which are received payments from such Borrower's Obligors.
SECTION 6.2 Bank as Attorney and Agent-in-Fact. In addition to any other
agreements between Bank and Borrower regarding the Lock Boxes, Borrower hereby
appoints Bank, or any Person whom Bank may from time to time designate, as
Borrower's attorney and agent-in-fact with power to open and have access to each
Lock Box, to remove mail and any checks, drafts, cash and other remittances in
payment or as proceeds of, or on account of, its Accounts or other Collateral
which are received in each such Lock Box, and to deposit any such drafts, cash
and other remittances into the Collateral Proceeds Account. Neither Bank nor any
of the directors, officers, employees or agents of Bank will be liable for any
acts of commission or omission on or for any error in judgment or mistake of
fact or law, unless the same shall have resulted from gross negligence or
willful misconduct.
SECTION 6.3 Application of Proceeds. Borrower hereby authorizes Bank,
and Bank will, subject to the provisions of this Section 6.3 apply the whole or
any part of any amounts deposited in Borrower's Collateral Proceeds Account
against the Liabilities in such order of application as Bank may determine,
provided, however, that no check, draft or other instrument deposited in a
Collateral Proceeds Account and applied to any Liabilities shall constitute
final payment to Lender unless and until such item of payment has actually been
collected. All available balances in the Collateral Proceeds Account (determined
in accordance with Section 6.4, below) in excess of the Liabilities shall be
credited to the Borrower's operating account at the Bank when and as such
amounts become available pursuant to Section 6.4.
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SECTION 6.4 Availability of Proceeds. Notwithstanding anything to the
contrary herein, for purposes of determining the Banking Day on which a check,
draft or other instrument deposited in a Collateral Proceeds Account is applied
to payment of any Liabilities,
(a) cash, wire transfers and other immediately available funds
shall be applied on the Banking Day actually received and deposited in
the Collateral Proceeds Account if received herein on or before 12:30
p.m., Chicago time on such Banking Day, otherwise on the next Banking
Day following receipt thereof;
(b) checks and other items of payment not constituting
immediately available funds shall be applied on the first Banking Day on
which such funds would be available to Lender if the drawee of such
check or other item used the same "availability schedules" as that used
by Bank; and
(c) Funds in the Collateral Proceeds Account are not available
if, in the reasonable determination of the Bank, they are subject to any
writ, levy, order or similar judicial or regulatory order or process.
SECTION 6.5 Other Provisions. Notwithstanding anything to the contrary
herein
(a) If the balances in the Collateral Proceeds Account are not
sufficient to pay Bank for any returned items, Borrower agrees to pay
Bank on demand the amount due Bank. If the balances in the Collateral
Proceeds Account are not sufficient to compensate Bank for any fees or
charges due Bank in connection with the Lock Boxes or the Collateral
Proceeds Account, Borrower agrees to pay Bank on demand the amount due
Bank.
(b) Borrower hereby authorizes Bank, without prior notice, from
time to time to debit any other account Borrower may have with Bank for
the amount or amounts due Bank under subsection (a).
(c) Borrower may not terminate this Article VI except with the
written consent of Bank or upon payment in full of the Liabilities and
termination of this Agreement.
(d) Bank will not be liable to Borrower for any expense, claim,
loss, damage or cost ("Damages") arising out of or relating to its
performance under this Agreement, other than those Damages which result
directly from its acts or omissions constituting negligence. In no event
will Bank be liable for any special, indirect, exemplary or
consequential damages, including but not limited to lost profits.
(e) Bank will be excused from failing to act or delay in acting,
and no such failure or delay shall constitute a breach of Article VI
hereof or otherwise give rise to any liability of Bank, if (i) such
failure or delay is caused by circumstances beyond Bank's reasonable
control, including but not limited to legal constraint, emergency
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conditions, action or inaction of governmental, civil or military
authority, fire, strike, lockout or other labor dispute, war, riot,
theft, flood, earthquake or other natural disaster, breakdown of public
or private or common carrier communications or transmission facilities,
equipment failure, or act, negligence or default of Borrower or (ii)
such failure or delay resulted from Bank's reasonable belief that the
action would have violated any guideline, rule or regulation of any
governmental authority.
(f) Borrower agrees that (i) it will not withdraw any monies
from the Collateral Proceeds Account until such time as Bank no longer
claims any interest in the Collateral Proceeds Account and the monies
deposited and to be deposited in the Collateral Proceeds Account and
(ii) it will not permit the Collateral Proceeds Account to become
subject to any other pledge, assignment, lien, charge or encumbrance of
any kind, nature or description, other than Bank's security interest
referred to herein.
ARTICLE VII
COLLATERAL; ACCOUNTS
SECTION 7.1 Representations and Warranties with respect to Accounts.
With respect to Accounts, except as otherwise disclosed by Borrower to Bank in
writing, and except as would, individually or in the aggregate, have a Material
Adverse Effect, Borrower warrants and represents to Bank that so long as this
Agreement shall remain in effect and any Liabilities remain outstanding: (a)
they are genuine, in all respects what they purport to be and are not evidenced
by a judgment or a negotiable instrument; (b) they represent undisputed, bona
fide transactions completed in accordance with the terms and provisions
contained in the invoices and other documents delivered to Bank with respect
thereto subject, however, to customary returns and disputed items arising in the
ordinary course of business; (c) the amounts thereof, and/or all invoices and
statements delivered to Bank with respect thereto, are actually and absolutely
owing to Borrower and are not contingent for any reason; (d) there are no
setoffs, counterclaims or disputes existing or asserted with respect thereto and
Borrower has not made any agreement with any Obligor thereof for any deduction
therefrom except a regular discount allowed by Borrower in the ordinary course
of its business for prompt payment; (e) there are no facts, events or
occurrences which in any way impair the validity or enforcement thereof or tend
to reduce the amount payable thereunder from the amount thereof which may be
shown on any invoices and statements delivered to Bank with respect thereto; (f)
to Borrower's knowledge, all Obligors have the capacity to contract and are
solvent; (g) the services furnished and/or goods sold giving rise thereto are
not subject to any lien, claim, encumbrance or security interest except that of
Bank; (h) Borrower has no knowledge of any fact or circumstance which would
impair the validity or collectibility thereof; and (i) to the best of Borrower's
knowledge, there are no proceedings or actions which are threatened or pending
against any Obligor which might result in any material adverse change in its
financial condition.
SECTION 7.2 Verification. Any of Bank's officers, employees or agents
shall have the right, at any time or times hereafter, in Bank's name or in the
name of a nominee of
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Bank, to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone, telegraph or otherwise. All costs, fees and
expenses relating thereto which are incurred by Bank (or for which Bank becomes
obligated) shall be part of the Liabilities, payable by Borrower to Bank on
demand.
SECTION 7.3 Covenants with respect to Accounts. Unless Bank notifies
Borrower in writing to the contrary, Borrower shall: (a) promptly upon
Borrower's learning thereof, inform Bank, in writing, of any material delay in
Borrower's performance of any of its obligations to any Obligor and of any
assertion of any claims, offsets or counterclaims by any Obligor and of any
allowances, credits and/or other monies granted by Borrower to any Obligor other
than as may arise in the ordinary course of the Borrower's business and which
would not, individually or in the aggregate, result in a material adverse change
in the Borrower's business or financial condition taken as a whole or its
ability to pay the Liabilities; (b) not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature with respect to any Account, including any of the terms relating thereto
other than as may arise in the ordinary course of the Borrower's business and
which would not, individually or in the aggregate, result in a material adverse
change in the Borrower's business or financial condition taken as a whole or its
ability to pay the Liabilities; (c) promptly upon Borrower's receipt or learning
thereof, furnish to and inform Bank of all material adverse information relating
to the financial condition of any Obligor; and (d) keep all goods returned by
any Obligor and all goods repossessed or stopped in transit by Borrower from any
Obligor segregated from other property of Borrower, immediately notify Bank of
Borrower's possession of such goods, and hold the same as trustee for Bank until
otherwise directed in writing by Bank.
SECTION 7.4 Accounts and Special Collateral. Bank shall have the right,
at any time there shall exist any Event of Default, in its sole and absolute
discretion, upon notice thereof to Borrower: (a) to notify any or all Obligors
that the Accounts and Special Collateral have been assigned to Bank and that
Bank has a security interest therein; (b) to direct such Obligors to make all
payments due from them to Borrower upon the Accounts and Special Collateral
directly to Bank; (c) to enforce payment of and collect, by legal proceedings or
otherwise, the Accounts and Special Collateral in the name of Bank and Borrower;
and (d) to take control, in any manner, of any item of payment or proceeds
referred to Section 6.
SECTION 7.5 Power of Attorney. Effective at any time that there shall
exist any Event of Default, Borrower irrevocably hereby designates, makes,
constitutes and appoints Bank (and all Persons designated by Bank), as
Borrower's true and lawful agent (and attorney-in-fact), without notice to
Borrower and at such time or times hereafter as Bank, in its sole and absolute
discretion, may determine, in Borrower's or Bank's name: (a) to demand payment
of the Accounts and Special Collateral; (b) to enforce payment of the Accounts
and Special Collateral by legal proceedings or otherwise; (c) to exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts
and Special Collateral; (d) to settle, adjust, compromise, extend or renew the
Accounts and Special Collateral; (e) to settle, adjust or compromise any legal
proceedings brought to collect the Accounts and Special Collateral; (f) to
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sell or assign the Accounts and Special Collateral upon such terms, for such
amounts and at such time or times as Bank deems advisable; (g) to discharge and
release the Accounts and Special Collateral; (h) to take control, in any manner,
of any item of payment or proceeds referred to in Section 6; (i) to prepare,
file and sign Borrower's name on any notice of lien, assignment or satisfaction
of lien or similar document in connection with the Accounts and Special
Collateral; (j) to prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or similar document against any Obligor; (k) to do all acts and
things necessary, in Bank's sole discretion, to fulfill Borrower's obligations
under this Agreement; (1) to endorse the name of Borrower upon any of the items
of payment or proceeds referred to in Section 6 and to deposit the same to the
account of Bank to and on account of the Liabilities; (m) to endorse the name of
Borrower upon any chattel paper, document, instrument, invoice, freight bill,
bill of lading or similar document or agreement relating to the Accounts and
Special Collateral; and (n) to sign the name of Borrower to verifications of the
Accounts and Special Collateral and notices thereof to Obligors.
SECTION 7.6 Records of Accounts. Borrower shall keep accurate and
complete records of its Accounts, which records shall be made available to Bank
at all times hereafter (during Borrower's customary business hours and upon
reasonable notice) for Bank's inspection, copying, verification or otherwise.
ARTICLE VIII
COLLATERAL; INVENTORY
SECTION 8.1 Inventory. Borrower warrants and represents to and covenants
with Bank that so long as this Agreement shall remain in effect and any
Liabilities remain outstanding and except as Bank may otherwise expressly agree
in writing: (a) Inventory shall be kept only at the locations set forth on
Schedule 5.4; (b) Borrower, immediately upon demand by Bank therefor, shall
execute and deliver to Bank such information relating to Inventory as Bank may
reasonably request; (c) Borrower does now keep and hereafter at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's costs therefor and selling price
thereof and the withdrawals therefrom and additions thereto all of which records
shall be available (during Borrower's usual business hours upon reasonable
notice), upon demand, to any of Bank's officers, employees or agents for
inspection and copying thereof; (d) all Inventory is now and hereafter at all
times shall be of good and merchantable quality, free from defects, other than
Inventory which becomes scrap or obsolete in the ordinary course of business;
(e) Domestic Inventory stored at Borrower's Cypress, California location or with
Cal-Switch, Carson, California; Phillips Sound & Vision, El Paso, Texas or
Cerritos Terminal Services, Anaheim, California or any other location containing
a material amount of Domestic Inventory (as reasonably determined by Bank) shall
at all times be subject to a third-party consent and waiver in form and
substance satisfactory to Bank (each a "Third-party Consent"); provided that the
Borrower shall have a reasonable period of time, not to exceed sixty (60) days
following the Effective Date, to deliver to Bank such Third-party Consents with
respect to the Domestic Inventory located at the four (4) specific locations
identified in this Section 8.1(e); and (f) any of Bank's officers, employees or
agents shall have
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the right, upon reasonable notice, now and at any time or times hereafter during
Borrower's usual business hours, to inspect and examine inventory and to check
and test the same as to quality, quantity, value and condition. Upon the
occurrence of any Event of Default, Bank, at its sole discretion, may require
the Borrower to provide Third-Party Consents with respect to all Domestic and
Non-Domestic Inventory. All costs, fees and expenses which are incurred by Bank
in connection with any matter referred to in this Section 8.1 (or which Bank
becomes obligated to pay) shall be part of the Liabilities, payable by Borrower
to Bank on demand.
SECTION 8.2 Sale of Inventory. Until an Event of Default, Borrower may
sell Inventory in the ordinary course of its business (which does not include a
transfer in partial or total satisfaction of Indebtedness). In no event shall
Borrower make any sale of Inventory which would cause a breach of Section 8.1.
SECTION 8.3 Responsibility for Inventory. Borrower shall be liable or
responsible for: (a) the safekeeping of Inventory; (b) any loss or damage
thereto or destruction thereof occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee or forwarding agency thereof or
other person whomsoever.
ARTICLE IX
COLLATERAL EQUIPMENT
SECTION 9.1 Good Title. Borrower warrants and represents to Bank that
Borrower has good, indefeasible, and merchantable title, free and clear of all
liens, claims and encumbrances (other than Permitted Encumbrances), to, and
ownership of, all Equipment (other than Equipment leased by Borrower under
operating leases incurred in the ordinary course) and that all of such Equipment
is and shall be located on each of Borrower's places of business specified in
Schedule 5.4 and that Equipment shall be kept and/or maintained solely thereat.
SECTION 9.2 Maintenance of Equipment. Borrower shall keep and maintain
the Equipment in good operating condition and repair (normal wear and tear
excepted) and shall make all necessary replacements thereof and renewals thereto
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall not permit any such items to become a
fixture to real estate or accession to other personal property.
SECTION 9.3 Certificates of Title, etc. Borrower, immediately on demand
by Bank, shall deliver to Bank any and all evidence of ownership of Equipment,
including, without limitation, certificates of title to and applications for
title to, any Equipment.
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ARTICLE X
INSURANCE AND CHARGES
SECTION 10.1 Insurance. Borrower, at its sole cost and expense, shall
keep and maintain: (a) the Collateral insured for the full insurable value
against loss or damage by fire, theft, explosion, sprinklers and all other
hazards and risks ordinarily insured against by other owners or users of such
properties in similar businesses: and (b) business interruption insurance and
public liability and property damage insurance relating to Borrower's ownership
and use of its assets. All such policies of insurance shall be in form and with
insurers recognized as adequate by prudent business persons and all such
policies shall be in such amounts as may be satisfactory to Bank. Upon request
of Bank, Borrower shall deliver at least annually to Bank, or sooner if
requested by Bank, the original (or certified) copy of each policy of insurance,
or a certificate of insurance, and evidence of payment of all premiums for each
such policy. Schedule 10.1 hereto sets forth a description of each of such
policies of insurance and evidence of payment therefor as of the date hereof.
Such policies of insurance (except those of public liability and property
damage) shall contain an endorsement, in a form and substance acceptable to
Bank, showing loss payable to Bank. Such endorsement or an independent
instrument furnished to Bank, shall provide that the insurance companies will
give Bank at least thirty days' written notice before any such policy or
policies of insurance shall be altered or cancelled and that no act or default
of Borrower or any other person shall affect the right of Bank to recover under
such policy or policies of insurance in case of loss or damage. Borrower shall
direct all insurers under such policies of insurance (except those of public
liability and property damage) that in the event of a loss or claim, to pay all
proceeds payable thereunder directly to Bank for deposit in the Collateral
Proceeds Account. During such time, if any, as there shall exist an Event of
Default, Borrower, irrevocably, makes, constitutes and appoints Bank (and all
officers, employees or agents designated by Bank) as Borrower's true and lawful
agent (and attorney-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, indorsing the name of Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and for making all determinations and decisions with
respect to such policies of insurance. In the event 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 Bank, without waiving or releasing any obligation or Event of
Default by Borrower hereunder, may at any time or times thereafter (but shall be
under no obligation to) obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto which Bank deems
advisable. All sums so disbursed by Bank, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be part of the
Liabilities, payable by Borrower to Bank on demand.
SECTION 10.2 Charges. (a) Borrower shall pay promptly, when due, all of
the Charges other than Permitted Encumbrances; and/or (b) Borrower shall not
permit the Charges to arise, or to remain, and will promptly discharge the same,
other than Permitted Encumbrances. In the event Borrower, at any time or times
hereafter, shall fail to pay the Charges or to obtain such discharges, Borrower
shall so advise Bank thereof in writing; Bank may, without waiving or releasing
any obligation or liability of Borrower hereunder or any
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Event of Default, in its sole and absolute discretion, at any time or times
thereafter, make such payment, or any part thereof, or obtain such discharge and
take any other action with respect thereto which Bank deems advisable. All sums
so paid by Bank and any expenses, including reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall be part of the
Liabilities, payable by Borrower to Bank on demand.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
To induce the Bank to make each Loan and to issue each Letter of Credit,
Borrower makes the following representations and warranties, all of which shall
be true and correct as of the date each Loan is made and each Letter of Credit
is issued:
SECTION 11.1 Organization. Except as disclosed on Schedule 11.1,
Borrower and all of its Subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
respective incorporation or formation. Borrower and all of its Subsidiaries are
in good standing and are duly qualified to do business in each jurisdiction
where, because of the nature of their respective activities or properties, such
qualification is required except where the failure to be so qualified has not
had not and could not reasonably be expected to have a Material Adverse Effect.
SECTION 11.2 Authorization. Borrower is duly authorized, has full
corporate power and authority, and holds all requisite governmental licenses,
permits and other approvals, to execute and deliver this Agreement, the Note,
and any Other Agreements and is and will continue to be duly authorized, have
full corporate power and authority and hold all requisite governmental licenses,
permits and other approvals necessary to borrow monies hereunder and to perform
its obligations under this Agreement, the Note and any such Other Agreements.
The execution, delivery and performance by Borrower of this Agreement, the Note,
and any Other Agreements and the borrowings hereunder, do not and will not
require any consent or approval of any Governmental Authority except any that
have been obtained and are in full force and effect or, as to which the failure
to obtain and/or maintain in effect has not had and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 11.3 No Conflicts. The execution, delivery and performance by
Borrower of this Agreement, the Note, and any Other Agreements do not and will
not conflict with (a) any provision of law, (b) Borrower's articles of
incorporation and by-laws, (c) any agreement binding upon Borrower or (d) any
court or administrative order or decree applicable to Borrower, and do not and
will not require, or result in, the creation or imposition of any Lien on any
asset of Borrower (other than in favor of Bank) or any of its Subsidiaries.
SECTION 11.4 Validity and Binding Effect. This Agreement, the Note, and
any Other Agreements, when duly executed and delivered, will be legal, valid and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms,
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except as enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of creditors'
rights or by general principles of equity limiting the availability of equitable
remedies.
SECTION 11.5 No Default. Except as disclosed on Schedule 11.5, neither
Borrower nor any of its Subsidiaries is in default under any agreement or
instrument to which Borrower or such Subsidiary is a party or by which any of
their respective properties or assets is bound or affected, which default has
had or could reasonably be expected to have a Material Adverse Effect. No Event
of Default or Unmatured Event of Default has occurred and is continuing.
SECTION 11.6 Financial Statements. Borrower's audited financial
statements as at December 31, 1997 and unaudited consolidated financial
statements as at March 31, 1998, copies of which have been furnished to the
Bank, have been prepared in conformity with GAAP applied on a basis consistent
with that of the preceding fiscal year and period and present fairly the
consolidated financial condition of Borrower and its Subsidiaries as at such
dates and the results of their operations for the periods then ended, subject
(in the case of any interim financial statement) to year-end audit adjustments.
Since March 31, 1998, there has been no material adverse change in the financial
condition of Borrower, any of its Subsidiaries or Borrower and its Subsidiaries
taken as a whole.
SECTION 11.7 Insurance. In addition to the insurance maintained by the
Borrower pursuant to Section 10.1 hereof, Borrower and each of its Subsidiaries
maintains insurance to the extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated and which is adequate to
insure Borrower and each of its Subsidiaries against risks which could
reasonably be expected to be encountered by it in the conduct of its business.
SECTION 11.8 Litigation; Continent Liabilities.
(a) Except for those referred to in Schedule 11.8 or disclosed
in the financial statements referred to in Section 11.6, no claims,
litigation, arbitration proceedings or governmental proceedings are
pending or, to the knowledge of the Borrower, overtly threatened against
or are affecting Borrower or any of its Subsidiaries, or any of their
respective properties, assets or revenues, the results of which has had
or could reasonably be expected to have a Material Adverse Effect.
(b) Other than any liability incident to the claims, litigation
or proceedings disclosed in Schedule 11.8, or disclosed in the financial
statements referred to in Section 11.6, neither Borrower nor any of its
Subsidiaries has any contingent liabilities which are material to
Borrower, any of its Subsidiaries or Borrower and its Subsidiaries taken
as a whole.
SECTION 11.9 Ownership of Assets; Liens. Borrower and each of its
Subsidiaries owns good and marketable title to all of its properties and assets,
real and personal, tangible and
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intangible, of any nature whatsoever which are material to the operation of its
respective business. None of such property, revenues or assets of the Borrower
or any of its Subsidiaries is subject to any Lien except: (a) Liens disclosed in
the financial statements referred to in Section 11.6, (b) Liens listed on
Schedule 11.9, and (c) Permitted Encumbrances.
SECTION 11.10 Subsidiaries. As of the date hereof, Borrower has no
Subsidiaries except as listed on Schedule 11.10. Schedule 11.10 sets forth, for
each Subsidiary of Borrower, a complete and accurate statement as of the date
hereof of (a) Borrower's and each such Subsidiary's percentage ownership of each
of their respective Subsidiaries and (b) the country, state or other
jurisdiction of formation or incorporation of each such Subsidiary.
SECTION 11.11 Partnerships: Joint Venture. Neither Borrower nor any of
its Subsidiaries is a partner or joint venturer in any partnership or joint
venture other than the partnerships and joint ventures listed on Schedule 11.11.
Schedule 11.11 sets forth, for each partnership or joint venture that is not a
Subsidiary of Borrower, a complete and accurate statement as of the date hereof
of (a) Borrower's and each Subsidiary's percentage ownership of each such
partnership or joint venture and (b) the country, state or other jurisdiction of
formation or incorporation, as appropriate, of each such partnership or joint
venture.
SECTION 11.12 Pension and Welfare Plans. Each Pension Plan complies in
all material respects with all applicable statutes and governmental rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither Borrower nor any ERISA Affiliate has withdrawn from
any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as
defined in sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted to terminate any Pension Plan; no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under section
302(f) of ERISA; no condition exists or event or transaction has occurred in
connection with any Pension Plan or Multiemployer Plan which could result in the
incurrence by Borrower, any Subsidiary, any ERISA Affiliate of any material
liability, fine or penalty; and neither Borrower nor any Subsidiary nor any
ERISA Affiliate is a "contributing sponsor" as defined in section 4001(a)(13) of
ERISA of a "single-employer plan" as defined in section 4001(a)(15) of ERISA
which has two or more contributing sponsors at least two of whom are not under
common control. Except as listed in Schedule 11.12, neither Borrower nor any of
its Subsidiaries has any contingent liability with respect to any
post-retirement benefit under any Welfare Plan which covers retired or
terminated employees and their beneficiaries, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 11.13 Regulation U. Neither Borrower nor any of its Subsidiaries
is engaged in the business of purchasing or selling Margin Stock or extending
credit to others for the purpose of purchasing or carrying Margin Stock, and no
part of the proceeds of any borrowing hereunder will be used to purchase or
carry any Margin Stock or for any other purpose which would violate any of the
margin regulations of the Federal Reserve Board.
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SECTION 11.14 Compliance. Except as described on Schedule 11.14,
Borrower and all of its Subsidiaries are in compliance with all statutes,
judicial or administrative orders, licenses, permits and governmental rules and
regulations applicable to them, except where the failure to comply has not had
and could not reasonably be expected to have a Material Adverse Effect.
SECTION 11.15 Taxes. Borrower and each of its Subsidiaries has filed all
tax returns and reports which are required to have been filed by it and has paid
all of its Taxes which are due and payable, except such taxes, if any, as are
being diligently contested in good faith and by appropriate proceedings and as
to which appropriate reserves or other appropriate provisions (including but not
limited to any which may be required by GAAP) have been set aside on its books.
Borrower is not aware of any proposed assessment against Borrower or any of its
Subsidiaries for additional taxes (or any basis for any such assessment) which
has had or could reasonably be expected to have a Material Adverse Effect.
SECTION 11.16 Investment Borrower Act Representation. Neither Borrower
nor any of its Subsidiaries is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Borrower Act of
1940, as amended.
SECTION 11.17 Public Utility Holding Borrower Act Representation.
Neither Borrower nor any of its Subsidiaries is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" within the meaning of the Public Utility Holding Borrower Act of 1935,
as amended.
SECTION 11.18 Environmental Matters. Except as disclosed on Schedule
11.18 and to the Borrower's knowledge, Borrower and each of its Subsidiaries is
in compliance with all Environmental Laws.
SECTION 11.19 Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower in
writing to Bank for purposes of or in connection with this Agreement or any
Other Agreement, or any transaction contemplated hereby or thereby is, and all
other such factual information hereafter furnished by or on behalf of the
Borrower to Bank will be, true and accurate in every material respect on the
date as of which such information is dated or certified and as of the date of
execution and delivery of this Agreement by Bank, and such information is not,
or shall not be, as the case may be, incomplete by omitting to state any
material fact necessary to make such information not misleading.
SECTION 11.20 Year 2000 Problem. Borrower has conducted a comprehensive
review and assessment of its and its Subsidiary's computer applications with
respect to the Year 2000 Problem (as hereinafter defined). Based on the
foregoing review and assessment, Borrower reasonably believes that (a) it will
not incur material expenditures to modify or replace applications in order to
address the Year 2000 Problem and (b) the Year 2000 Problem will not result in a
material adverse change in the Borrower's and any Subsidiary's business
condition
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(financial or otherwise), operations, properties or prospects taken as a whole,
or its ability to repay the Liabilities. Borrower has no knowledge of any Year
2000 Problem affecting any of its or its Subsidiary's material suppliers,
vendors or customers which Borrower reasonably believes will result in a
material adverse change in the Borrower's or such Subsidiary's business
condition (financial or otherwise), operations, properties or prospects taken as
a whole or its ability to repay the Liabilities. As used herein, the term "Year
2000 Problem" shall mean the capability of any applicable mainframe computer
system, computer network, personal computer, computed assisted design or
computer assisted manufacturing system to recognize and correctly calculate
dates on or after January 1, 2000 or to otherwise perform its intended functions
in a proper manner in connection with data containing any date on or after
January 1, 2000.
ARTICLE XII
COVENANTS
From the date of this Agreement and thereafter until all Liabilities
(other than Liabilities which expressly survive termination of this Agreement)
are paid in full, Borrower agrees that, unless the Bank shall otherwise consent
in writing, it will comply with the provisions of this Section 12.
SECTION 12.1 Financial Statements and Other Reports. Borrower will
furnish, or cause to be furnished, to Bank:
SECTION 12.1.1 Financial Statements and Reports:
(a) Annual Audited Financial Statements of Borrower. Within 90
days after each fiscal year of Borrower, a copy of the annual audited
consolidated financial statements of the Borrower and its Subsidiaries,
prepared in accordance with GAAP, which statements shall have been
prepared by an independent certified public accounting firm acceptable
to the Bank;
(b) Monthly Unaudited Financial Statements of Borrower. Within
30 days after the end of each calendar month (other than the last month
of each year), a copy of the unaudited consolidated financial statements
of the Borrower and its Subsidiaries, prepared in the same manner as the
financial statements referred to in the preceding subsection (a), signed
by the Borrower's chief financial officer and consisting of a balance
sheet as at the close of such month and an income statement for the
period from the beginning of the fiscal year to the close of such month;
(c) Quarterly Financial Statements of Borrower. Within 30 days
after the end of each fiscal quarter of each fiscal year of the Borrower
(other than the last fiscal quarter of each fiscal year), a copy of the
unaudited consolidated financial statement of the Borrower and its
Subsidiaries, prepared in the same manner as the financial statements
referred to in the preceding subsection (a), signed by the Borrower's
chief
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financial officer and consisting of a statement of funds flow for the
period from the beginning of the applicable fiscal year to the close of
such fiscal quarter; and
(d) Officer's Certificate. Within 45 days after the end of each
fiscal quarter of the Borrower (including the last fiscal quarter of
each fiscal year), a certificate of Borrower's chief financial officer
dated the last day of such fiscal quarter containing a statement that no
Event of Default or Unmatured Event of Default has occurred and is
continuing, or, if there is any such event, describing it and the steps,
if any, being taken to cure it, and containing a computation of, and
showing compliance with, each of the financial ratios and restrictions
contained in this Section 12.
SECTION 12.1.2 Other Reports:
(a) SEC and Other Reports. Copies of each filing and report made
by Borrower or any of its Subsidiaries with or to any securities
exchange or the Securities and Exchange Commission and of each written
communication from Borrower or any of its Subsidiaries to shareholders
generally, contemporaneously with the filing or making thereof;
(b) Report of Changes in Schedule Information. Promptly from
time to time, a written report of any change in the information set
forth in Schedules 11.10 or 11.11 concerning Borrower or any of its
Subsidiaries;
(c) Other Reports. Any information required to be provided
pursuant to other provisions of this Agreement or any Other Agreements,
and promptly from time to time, such other reports or information as the
Bank may reasonably request.
SECTION 12.2 Notices. The Borrower will notify the Bank in writing of
any of the following immediately upon the occurrence thereof:
(a) Default. The occurrence of an Event of Default or Unmatured
Event of Default;
(b) Litigation, Etc. The institution of any litigation, action
or proceeding affecting Borrower or any of Borrower's Subsidiaries,
whether or not considered to be covered by insurance, where the amount
claimed or at issue is $1,000,000 or more; the commencement of any labor
controversy or dispute which has had or could reasonably be expected to
have a Material Adverse Effect; or the occurrence of any adverse
development with respect to any litigation, action, proceeding, labor
controversy or dispute, or contract or agreement;
(c) Judgments, Etc. The entry of any judgment or decree in any
litigation, action or proceeding involving Borrower or any Subsidiary of
Borrower if the amount
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for which any such Person will be liable or responsible as a result
thereof, individually or in the aggregate, exceeds $500,000;
(d) Pension Plans and Welfare Plans. The occurrence of a
Reportable Event with respect to any Pension Plan; the filing of a
notice of intent to terminate a Pension Plan by Borrower or any ERISA
Affiliate; the institution of proceedings to terminate a Pension Plan by
the PBGC or any other Person; the withdrawal in a "complete withdrawal"
or a "partial withdrawal" as defined in sections 4203 and 4205,
respectively, of ERISA by Borrower or any ERISA Affiliate from any
Multiemployer Plan; the failure of Borrower or any ERISA Affiliate to
make a required contribution to any Pension Plan, including but not
limited to any failure to pay an amount sufficient to give rise to a
Lien under section 302(f) of ERISA; the taking of any action with
respect to a Pension Plan which could result in the requirement that
Borrower or any ERISA Affiliate furnish a bond or other security to the
PBGC or such Pension Plan; the occurrence of any other event with
respect to any Pension Plan which could result in the incurrence by
Borrower or any ERISA Affiliate of any liability, fine or penalty; or
the incurrence of any material increase in the contingent liability of
Borrower, or any of its Subsidiaries with respect to any Welfare Plan
which covers retired or terminated employees and their beneficiaries;
(e) Material Adverse Effect. The occurrence of any event or
condition, or the existence of any facts or circumstances, constituting,
or which could reasonably be expected to have, a Material Adverse
Effect;
(f) Other Notices. Any notices required to be provided pursuant
to any Other Agreement or the other provisions of this Agreement, and
notice of the occurrence of such other events as the Bank may reasonably
from time to time specify.
SECTION 12.3 Existence. Except for any merger, consolidation,
acquisition or similar transaction permitted under Section 12.12, subject to the
Bank's prior written consent, which consent shall not be unreasonably withheld
or delayed, Borrower will maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, its respective existence as a corporation
or other form of business organization, as the case may be, and all rights,
privileges, licenses, patents, patent rights, copyrights, trademarks, trade
names, trade styles, franchises and other authority to the extent material and
necessary for the conduct of its respective business in the ordinary course as
conducted from time to time.
SECTION 12.4 No Change in Line of Business. Borrower will engage, and
cause each of its Subsidiaries to engage, in substantially the same types and
fields of business as it is engaged in on the date hereof, and such other
activities as may be incidental or related thereto, and no other.
SECTION 12.5 Books, Records and Access. Borrower will maintain, and
cause each of its Subsidiaries to maintain, complete and accurate books and
records in which full and correct entries in conformity with GAAP shall be made
of all dealings and transactions in
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relation to its respective business and activities. Upon reasonable notice,
Borrower will permit, and cause each of its Subsidiaries to permit, access by
the Bank and its agents or employees to the Collateral in order to conduct field
examinations or other reviews and to Borrower's and its Subsidiaries' books and
records and its respective place or places of business at intervals to be
reasonably determined by the Bank and without hindrance or delay.
SECTION 12.6 Insurance. In addition to any insurance which the Borrower
is required to maintain pursuant to Section 10.1 hereof, the Borrower will
maintain, and cause each of its Subsidiaries to maintain, insurance to such
extent and against such hazards and liabilities as is hereof commonly maintained
by companies similarly situated and which is adequate to insure the Borrower and
each of its Subsidiaries against risks which could reasonably be expected to be
encountered by it in the conduct of its business.
SECTION 12.7 Maintenance of Assets. The Borrower will maintain, preserve
and keep, and cause each of its Subsidiaries to maintain, preserve and keep, its
properties in operating condition and repair, ordinary wear and tear excepted,
and from time to time make, and cause each of its Subsidiaries to make, all
necessary and proper repairs, renewals, replacements, additions, betterments and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained in all material respects unless the Borrower or such
Subsidiary determines in good faith that the continued maintenance thereof is no
longer economically desirable.
SECTION 12.8 Taxes. Borrower will pay, and will cause each of its
Subsidiaries to pay, when due, all of its Taxes unless and only to the extent
that Borrower or such Subsidiary is diligently contesting such Taxes in good
faith and by appropriate proceedings and Borrower or such Subsidiary has set
aside on its books appropriate reserves or other appropriate provisions therefor
(including but not limited to any as may be required by GAAP).
SECTION 12.9 Compliance. The Borrower will comply, and cause each of its
Subsidiaries to comply, with all statutes, judicial or administrative orders,
licenses, permits, and governmental rules and regulations applicable to it,
except where such noncompliance does not have and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 12.10 Use of Proceeds. The Borrower will use the proceeds of
the Loans to refinance existing Indebtedness, to finance the working capital
requirements of the Borrower and its Subsidiaries, for Investments permitted by
Section 12.16, for Capital Expenditures to the extent permitted by Section 12.17
and to finance Approved Acquisitions. The Borrower will not use or permit any
proceeds of the Loans to be used, either directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of "purchasing or carrying"
any Margin Stock, and will furnish to Bank upon request, a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in
Regulation U of the Federal Reserve Board.
SECTION 12.11 Pension Plans. The Borrower will not, and will not permit
any of its Subsidiaries to, permit any condition to exist in connection with any
Pension Plan which
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could constitute grounds for the PBGC to institute proceedings to have such
Pension Plan terminated or a trustee appointed to administer such Pension Plan.
The Borrower will not fail, and will not permit any of its Subsidiaries to fail,
to make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f) of ERISA. The Borrower
will not engage in, or permit to exist or occur, or permit any of its
Subsidiaries to engage in, or permit to exist or occur, any other condition,
event or transaction with respect to any Pension Plan which could result in the
incurrence by the Borrower or any of its Restricted Subsidiaries of any
liability, fine or penalty.
SECTION 12.12 Consolidations, Mergers, Acquisitions. The Borrower will
not, and will not permit any of its Subsidiaries to, be a party to any merger,
liquidation, dissolution, consolidation, or Acquisition, except that
(a) any Subsidiary of the Borrower may liquidate, or dissolve
voluntarily into, or may merge with and into, the Borrower or any other
wholly-owned Subsidiary of the Borrower;
(b) the assets or stock of any Subsidiary of the Borrower may be
purchased or otherwise acquired by the Borrower or any Domestic
Subsidiary of the Borrower;
(c) the Borrower may merge with any other Person, and any other
Person may liquidate or dissolve voluntarily into the Borrower, as long
as the Borrower is the surviving Person;
(d) the Borrower may create additional Subsidiaries and may make
Acquisitions of Subsidiaries pursuant to transactions which are Approved
Acquisitions, provided that promptly following the creation or
Acquisition of a Subsidiary which is a Domestic Subsidiary, the Borrower
shall pledge the Stock or other equity interest in such newly-created or
acquired Domestic Subsidiary to the Bank pursuant to documentation
satisfactory to Bank pursuant to which the Borrower shall grant to the
Bank a first-priority perfected lien and security interest in and to
such Stock or equity interests and shall take such other actions as Bank
shall reasonably request in order to perfect and confirm such lien and
security interest; or
(e) Borrower may complete the Acquisition described on Schedule
12.14.
provided, however, that no transaction otherwise permitted by this Section shall
be permitted if immediately before or after giving effect thereto any Unmatured
Event of Default or Event of Default shall have occurred and be continuing or
would result therefrom.
SECTION 12.13 Dividends and Restricted Payments.
(a) Without the prior written consent of the Bank, the Borrower
will not apply declare, pay or make any dividend or distribution on any
shares of any class of Stock
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(now or hereafter outstanding) or on any warrants, options or other
rights with respect to any Stock (now or hereafter outstanding), other
than dividends or distributions payable in its common stock or warrants
to purchase its common stock or split-ups or reclassifications of its
stock into additional or other shares of its common stock; or
(b) Without the prior written consent of the Bank, the Borrower
will not apply any of its property, funds or assets to the purchase,
redemption, sinking fund or other retirement of any shares of its Stock
or to any warrants, options or other rights with respect to such shares
of its Stock; provided, however, the Borrower may redeem up to 1,000,000
shares of common Stock during the period from the Effective Date to the
Termination Date so long as immediately before and after giving effect
to any such redemption (i) neither an Event of Default nor an Unmatured
Event of Default shall have occurred and be continuing and (ii) the
ratio of (x) the Borrower's consolidated Indebtedness to (y) the
Borrower's consolidated Indebtedness plus the Borrower's Consolidated
Net Worth is less than 40.0%.
SECTION 12.14 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or permit to exist, or
otherwise become or be liable in respect of, any Indebtedness other than,
without duplication, the following:
(a) Indebtedness under the terms of this Agreement and the Other
Agreements;
(b) Indebtedness outstanding on the date hereof and disclosed in
the financial statements referred to in Section 11.6 or in Schedule
12.14; and
(c) Indebtedness existing on the date hereof of a Subsidiary of
the Borrower owing to the Borrower or to another Subsidiary of the
Borrower disclosed in the financial statements referred to in Section
11.6 or in Schedule 12.14.
SECTION 12.15 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create or permit to exist any Lien with respect to any of
its property (whether real, personal or mixed), revenues or assets, whether now
owned or hereafter arising or acquired, except:
(a) Liens granted in favor of the Bank;
(b) Liens of carrier's, warehousemen, mechanics, materialmen,
repairmen, landlords and other like statutory Liens arising in the
ordinary course of business securing obligations which are not overdue
or which are being diligently contested in good faith and by appropriate
proceedings and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained on its books;
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(c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits;
(d) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies;
(e) Liens in existence on the date hereof and identified on
Schedule 12.15; and
(f) Permitted Encumbrances.
SECTION 12.16 Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make or permit to exist any Investment in any
Person, except for, without duplication:
(a) Investments existing on the date hereof and identified and
disclosed in the financial statements referred to in Section 11.6 or
Schedule 12.16;
(b) advances to its employees or employees of any of its
Subsidiaries for travel or other ordinary business expenses, in amounts
which are reasonable and consistent with the Borrower's past practices;
(c) shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(d) Investments permitted under Section 12.12;
(e) minority Investments in less than all or substantially all
of the Stock, equity interests or assets of another Person in any
transaction or series of transactions not constituting an Acquisition;
and
(f) Cash Equivalents.
SECTION 12.17 Capital Expenditures. The Borrower will not, and will not
permit any Subsidiary to, make any Capital Expenditures in any fiscal year of
the Borrower if, after giving effect thereto, the aggregate of all Capital
Expenditures made by the Borrower and its Subsidiaries in such fiscal year would
exceed $4,000,000;
SECTION 12.18 Financial Covenants.
SECTION 12.18.1 Consolidated EBITDA. The Borrower will not permit its
Consolidated EBITDA plus Restructuring Charges, determined as of the last day of
each fiscal
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quarter of each fiscal year of the Borrower on a trailing, four-fiscal quarter
basis, to be less than (a) $5,000,000 for the fiscal quarters ending June 30,
1998, September 30, 1998 and December 31, 1998 and (b) $7,500,000 for the fiscal
quarter ending March 31, 1999 and $7,500,000 for each fiscal quarter thereafter.
SECTION 12.18.2 Consolidated Net Worth. The Borrower will not permit
its Consolidated Net Worth, determined as of the last day of each fiscal quarter
of each fiscal year of Borrower, to be less than the "Minimum Required Amount".
As used herein, the Minimum Required Amount shall mean $38,000,000 and such
Minimum Required Amount shall increase as of January 1, 1998 and each January
1, thereafter, by an amount equal to 50% of the Borrower's cumulative positive
Consolidated Net Income earned in the fiscal year completed on the December 3
immediately preceding the relevant January 1 of each year (but without
subtraction for any negative Consolidated Net Income for such fiscal year);
provided, however, that for purposes of this Section 12.18.2, the calculation of
Consolidated Net Worth shall not be reduced by the redemption of up to 1,000,000
shares of the Borrower's common Stock made in accordance with Section 12.13(b)
hereof during the period from the Effective Date to the Termination Date.
SECTION 12.18.3 Indebtedness to EBITDA Ratio. The Borrower will not
permit the ratio of its (a) consolidated Indebtedness to (b) Consolidated EBITDA
plus Restructuring Charges, determined as of the last day of each fiscal quarter
of each fiscal year of the Borrower on a trailing, four-fiscal quarter basis, to
be greater than (i) 3.0:1.0 for the fiscal quarters ending June 30, 1998,
September 30, 1998 and December 31, 1998 and (ii) 2.0:1.0 for the fiscal quarter
ending March 31, 1999 and 2.0:1.0 for each fiscal quarter thereafter.
SECTION 12.18.4 Asset Coverage Ratio. The Borrower will not permit its
Asset Coverage Ratio, determined as of the last day of each calendar month, to
be less than 1.25:1.00. As used herein, the term "Asset Coverage Ratio" shall
mean the ratio of (a) the sum of (i) cash on deposit in demand deposit accounts
maintained by Borrower with Bank plus (ii) Cash Equivalents of Borrower and its
Subsidiaries plus (iii) Borrower's Domestic Accounts, as reflected on Borrower's
books and records plus (iv) Borrower's Domestic Inventory, valued at lower of
(x) the Borrower's cost (on a "first in-first out" basis) or (y) fair market
value, but not exceeding the Maximum Inventory Value (as hereinafter defined) to
(b) the outstanding principal amount of the Loans hereunder plus the aggregate
amount of Letter of Credit Liabilities; and the term "Maximum Inventory Value"
shall mean an amount equal to 75% of the sum of (1) cash on deposit in demand
deposit account maintained by Borrower with Bank, plus (ii) Cash Equivalents of
the Borrower and it Subsidiaries; plus (iii) Borrower's Domestic Accounts, as
reflected on Borrower's books and records.
SECTION 12.19 Other Agreements. The Borrower will not, and not permit
any of its Subsidiaries to, enter any agreement containing any provision which
would be violated or breached by the performance by Borrower or such Subsidiary
of its obligations hereunder or under any Other Agreement or any instrument or
document to be delivered by Borrower in connection herewith.
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SECTION 12.20 Unconditional Purchase Options. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into or be a party to any
contract for the purchase of materials, supplies or other property or services,
if such contract requires that payment be made by it regardless of whether or
not delivery is ever made of such materials, supplies or other property or
services.
SECTION 12.21 Subsidiary Payments, etc. The Borrower will not, and not
permit any of its Subsidiaries to, enter into any agreement prohibiting the
ability of any of the Borrower's Subsidiaries to make any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of loans
or advances, reimbursements of management and other intercompany charges,
expenses and accruals or other returns on investments, or any other agreement or
arrangement which restricts the ability of any such Subsidiary to make any
payment, directly or indirectly, to the Borrower.
ARTICLE XIII
CONDITIONS PRECEDENT
SECTION 13.1 Initial Loan and Letter of Credit. The obligation of Bank
to make the initial Loan or issue the initial Letter of Credit is, in addition
to the conditions precedent set forth in Section 13.2, subject to the condition
precedent that Bank shall have received all of the following, each duly executed
and dated such date as shall be satisfactory to Bank, and in form and substance
satisfactory to Bank:
(a) Agreements. This Agreement, the Note, the Patent and
Trademark Assignment, and in the case of a Letter of Credit, the
Application therefor.
(b) Authorization. Evidence of the due authorization and
incumbency of the officers of Borrower executing and delivering this
Agreement and the Other Agreements, including specimen signatures of
each such officer.
(c) Consents, etc. Certified copies of all documents evidencing
any necessary consents and governmental approvals (if any) with respect
to this Agreement or any other document provided for hereunder.
(d) Opinions of Counsel. The opinions of Rose Helen Perez and
Richard A. Firehammer, counsels to the Borrower, addressed to Bank,
substantially in the forms of Exhibit C hereto.
(e) Confirmatory Certificate. A duly completed certificate
confirming satisfaction of the conditions set forth in Section 13.2
signed by the President, a Senior Vice President or Chief Financial
Officer of Borrower.
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(f) Articles and By-Laws. Copies of the articles of
incorporation and by-laws of Borrower, certified by the Secretary,
Assistant Secretary or other senior officer of Borrower.
(g) Financing Statements, etc. Duly executed and completed UCC
financing statements, together with such documents as Bank may require
pursuant to Section 5.1 and 5.2.
(h) Lien Searches. UCC, tax lien and judgment searches recently
performed against Borrower in such jurisdictions as the Bank may require
and the results of all such searches shall be satisfactory to Bank.
(i) Good Standing. Evidence of recent date of the good standing
of Borrower in the States of Delaware, Ohio, California and such other
jurisdictions as the Bank may require. Evidence of Insurance. Evidence
of insurance as required by Section 10.1 of this Agreement.
(k) Lien Terminations. The Bank shall have received such UCC
termination statements and other releases and satisfactions with respect
to all existing UCC filings and other liens against Borrower as shall be
necessary to terminate of record all such filings, other than with
respect to Liens permitted by Section 12.15.
(l) Payment of Expenses. Borrower shall have paid, in full, all
costs and expenses of Bank, including reasonable fees and expenses of
counsel to the Bank, contemplated by Section 17.3.
(m) Lock Boxes and Collateral Proceeds Account. Borrower shall
have opened the Lock Boxes and Collateral Proceeds Account contemplated
by Article VI hereof, all required notices to Obligors and other
third-parties referred to thereunder shall have been given and the Lock
Boxes and Collateral Proceeds Account shall, in all respects, be
operational.
(n) Closing Fee. Borrower shall have paid, in full, the closing
fee referred to in Section 4.3.
(o) Other. Such other documents as Bank may reasonably request.
SECTION 13.2 All Loans and Letter of Credit. The obligation of the Bank
to make the initial Loan or issue the initial Letter of Credit and each
subsequent Loan or Letter of Credit is subject to the following conditions
precedent that: (a) No Event of Default or Unmatured Event of Default, shall
have occurred and be continuing on the date of such requested Loan or
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Letter of Credit or will result from the making of such Loan or the issuance of
such Letter of Credit, (b) the warranties of Borrower contained in this
Agreement and the Other Agreements shall be true and correct as of the date of
such requested Loan or Letter of Credit, with the same effect as though made on
the date of such Loan or Letter of Credit, (c) no Material Adverse Effect shall
have occurred and be continuing and (d) in the case of any Letter of Credit, the
Borrower shall have executed and delivered an Application therefor and all
warranties of Borrower contained therein shall be true and correct as of the
date of issuance of such Letter of Credit.
ARTICLE XIV
EVENTS OF DEFAULT
SECTION 14.1 Event of Default. Each of the following shall constitute an
Event of Default under this Agreement:
(a) Non-Payment. Default in the payment when due of (i) any
principal of any Loan and the continuance of such default for two (2)
Banking Days after notice thereof to the Borrower from the Bank or (ii)
any interest on any Loan or any fee hereunder and the continuance of
such default for five (5) Banking Days after notice thereof to the
Borrower from the Bank.
(b) Non-Payment of Other Indebtedness. Default in the payment
when due, whether by acceleration or otherwise (subject to any
applicable grace period), of any Indebtedness in a principal amount
equal to or greater than $250,000 of, or guaranteed by, the Borrower or
any Subsidiary (other than (i) any Indebtedness of any Subsidiary to the
Borrower or to any other Subsidiary and (ii) the Indebtedness evidenced
by the Note).
(c) Acceleration of Other Indebtedness. Any event or condition
shall occur which results in the acceleration of the maturity of any
Indebtedness in a principal amount equal to or greater than $250,000 of,
or guaranteed by, the Borrower or any Subsidiary (other than (i) any
Indebtedness of any Subsidiary to the Borrower or to any other
Subsidiary and (ii) the Indebtedness evidenced by the Note) or enables
the holder or holders of such other Indebtedness or any trustee or agent
for such holders (any required notice of default having been given and
any applicable grace period having expired) to accelerate the maturity
of such other Indebtedness.
(d) Other Obligations. Default in the payment when due, whether
by acceleration or otherwise, or in the performance or observance
(subject to any applicable grace period) of (i) any obligation or
agreement of the Borrower or any Subsidiary to or with the Bank (other
than any obligation or agreement of the Borrower hereunder, under the
Other Agreements or under the Note), or (ii) any material obligation or
agreement of the Borrower or any Subsidiary to or with any other Person
providing for payments
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in a total amount equal to a greater than $250,000 (other than (x) any
such material obligation or agreement constituting or related to
Indebtedness, (y) trade accounts payable, and (z) any material
obligation or agreement of any Subsidiary to the Borrower or to any
other Subsidiary), except only to the extent that the existence of any
such default is being contested by the Borrower or such Subsidiary, as
the case may be, in good faith and by appropriate proceedings and the
Borrower or such Subsidiary shall have set aside on its books such
reserves or other appropriate provisions therefor as may be required by
GAAP.
(e) Insolvency. The Borrower or any Subsidiary becomes
insolvent, or generally fails to pay, or admits in writing its inability
to pay, its debts as they mature, or applies for, consents to, or
acquiesces in, the appointment of a trustee, receiver or other custodian
for the Borrower or such Subsidiary or for a substantial part of the
property of the Borrower or such Subsidiary, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for the Borrower or any Subsidiary or for a
substantial part of the property of the Borrower or any Subsidiary and
is not discharged within 30 days; or any bankruptcy, reorganization,
debt arrangement or other proceeding under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding, is instituted by or
against the Borrower or any Subsidiary and, if instituted against the
Borrower or any Subsidiary is consented to or acquiesced in by the
Borrower or such Subsidiary or remains for 30 days undismissed; or any
warrant of attachment or similar legal process is issued against any
substantial part of the property of the Borrower or any Subsidiary which
is not released within 30 days of service.
(f) Pension Plans. (i) The institution by the Borrower or any
ERISA Affiliate of steps to terminate any Pension Plan if, in order to
effectuate such termination, (a) the Borrower or any ERISA Affiliate
would be required to make a contribution to such Pension Plan or would
incur a liability or obligation to such Pension Plan and immediately
after giving effect to the payment or satisfaction of such contribution,
liability or obligation (if made or undertaken by the Borrower or any
Subsidiary) an Event of Default or Unmatured Event of Default would
exist and be continuing; (ii) the institution by the PBGC of steps to
terminate any Pension Plan; or (iii) a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under
section 302(f) of ERISA.
(g) Agreements. Default in the performance of any of the
Borrower's agreements in this Agreement or in any Other Agreement (and
not constituting an Event of Default under any of the other subsections
of this Section 14.1) and continuance of such default for 30 days after
notice thereof to the Borrower from the Bank.
(h) Warranty. Any warranty made by the Borrower in this
Agreement or in any Other Agreement is untrue or misleading in any
material respect when made or deemed made; or any schedule, statement,
report, notice, certificate or other writing
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furnished by the Borrower to the Bank is untrue or misleading in any
material respect on the date as of which the facts set forth therein are
stated or certified; or any certification made or deemed made by the
Borrower to the Bank is untrue or misleading in any material respect on
or as of the date made or deemed made.
(i) Litigation. There shall be entered against the Borrower or
any Subsidiary one or more judgments or decrees in excess of $1,500,000
in the aggregate at any one time outstanding for the Borrower and all
Subsidiaries, excluding those judgments or decrees (i) that shall have
been outstanding less than 30 calendar days from the entry thereof or
(ii) for and to the extent which the Borrower or any Subsidiary is
insured and with respect to which the insurer has assumed responsibility
in writing or for and to the extent which the Borrower or any Subsidiary
is otherwise indemnified if the terms of such indemnification and the
Person providing such indemnification are satisfactory to the Bank.
(j) Lock Boxes and Collateral Proceeds Amount. Except as
contemplated by Section 6.5 hereof, the Lock Boxes and the Collateral
Proceeds Account are terminated or are no longer in effect as set forth
herein.
SECTION 14.2 Termination of Commitments and Effect of Event of Default.
Upon an Event of Default, Bank may declare the Commitments to be terminated and
the Note and all other Liabilities to be due and payable, whereupon the
Commitments shall immediately terminate and the Note and all other Liabilities
shall become immediately due and payable, all without further notice of any
kind. Bank shall promptly advise Borrower of any such declaration but failure to
do so shall not impair the effect of such declaration. Notwithstanding the
foregoing, the effect as an Event of Default of any event described in Section
14 may be waived by Bank. Upon any such termination, the Borrower shall provide
cash collateral or other collateral satisfactory to the Bank with respect to the
Letter of Credit Liabilities. All of Bank's rights and remedies under this
Agreement and the Other Agreements are cumulative and non-exclusive.
Notwithstanding any provision of this Article XIV to the contrary, it shall not
be an Event of Default under this Agreement so long as (a) Borrower notifies
Bank promptly upon occurrence of the event or events constituting such Event of
Default, (b) Borrower promptly and in good faith commences such actions as shall
be necessary or appropriate to cure such Event of Default, if such Event of
Default is, by its nature, in Bank's reasonable opinion, capable of such cure
and Borrower completes such cure within thirty (30) days of such notice or such
longer period as shall be agreed to by Bank and (c) at the time of such Event of
Default and during the pendency of such cure as set forth herein, there shall
not exist any Material Adverse Effect.
SECTION 14.3 Collateral. Upon an Event of Default, Bank, in its sole and
absolute discretion, may: (a) exercise any one or more of the rights and
remedies accruing to a secured party under the UCC (b) enter, with or without
process of law and without breach of the peace, any premises where the
Collateral or the books and records of Borrower related thereto is or may be
located, and without charge or liability to Bank therefor seize and remove the
Collateral
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(and copies of Borrower's books and records in any way relating to the
Collateral) from said premises and/or remain upon said premises and use the same
(together with said books and records) for the purpose of collecting, preparing
and disposing of the Collateral, and Borrower hereby grants Bank a security
interest in said books and records for the purpose above stated; and (c) sell or
otherwise dispose of the Collateral at public or private sale on commercially
reasonable terms for cash or credit. The proceeds of such dispositions shall
first be applied toward the payment of the Liabilities, then toward the payment
of expenses reasonably and actually incurred by the Bank in effecting any such
sale or other disposition of the Collateral, including without limitation
reasonably and actually incurred attorneys' fees and expenses, and then the
remaining balance, if any, shall be remitted to the Borrower.
SECTION 14.4 Assembly of Collateral. Upon an Event of Default, Borrower,
immediately upon demand by Bank, shall assemble the Collateral and make it
available to Bank at a place or places to be designated by Bank which is
reasonably convenient to Bank and Borrower. Borrower recognizes that in the
event Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement or the Other Agreements, no remedy of law will
provide adequate relief to Bank, and agrees that Bank shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
SECTION 14.5 Notice. Any notice required to be given by Bank of a sale,
lease, other disposition of the Collateral or any other intended action by Bank,
shall be made as set forth in Section 17.2 hereof not less than five Banking
Days prior to such proposed action and shall constitute commercially reasonable
and fair notice to Borrower thereof.
SECTION 14.6 Sale of Collateral. Upon an Event of Default, Borrower
agrees that Bank may, if Bank deems it reasonable, postpone or adjourn any such
sale of the Collateral from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such postponed or
adjourned sale, without being required to give a new notice of sale. Borrower
agrees that Bank has no obligation to preserve rights against prior parties to
the Collateral. Further, Borrower waives and releases any cause of action and
claim against Bank as a result of Bank's possession, collection or sale of the
Collateral, any liability or penalty for failure of Bank to comply with any
requirement imposed on Bank relating to notice of sale, holding of sale or
reporting of sale of the Collateral.
SECTION 14.7 Waiver of Borrower. In the event Bank seeks possession of
the Collateral through replevin or other court process, Borrower hereby
irrevocably waives: (a) any bond, surety or security required as an incident to
such possession, and (b) any demand for possession of the Collateral prior to
the commencement of any suit or action to recover possession thereof. The Bank
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if it takes such action for that purpose as the
Borrower shall request in writing, but failure of the Bank to comply with any
such request shall not of itself be deemed a failure to exercise reasonable
care, and no failure of the Bank to preserve or protect any rights with respect
to the Collateral against prior parties, or to do any act with respect to
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preservation of the Collateral not so requested by the Borrower shall be deemed
a failure to exercise reasonable care in the custody of preservation of any
Collateral.
ARTICLE XV
INCREASED COSTS AND OTHER SPECIAL PROVISIONS
SECTION 15.1 Increased Costs. If (i) Regulation D of the Board of
Governors of the Federal Reserve System, or (ii) after the date hereof, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Bank (or any IBOR Office of Bank) with
any request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency
(A) shall subject Bank (or any IBOR Office of Bank) to any tax,
duty or other charge with respect to its IBOR Loans, the Notes or its
obligation to make IBOR Loans, or shall change the basis of taxation of
payments to Bank of the principal of or interest on its IBOR Loans or
any other amounts due under this Agreement in respect of its IBOR Loans
or its obligation to make IBOR Loans (except for changes in the rate of
tax on the overall net income of Bank or its IBOR Office imposed by the
jurisdiction in which Bank's principal executive office or IBOR Office
is located); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve
included in the determination of interest rates pursuant to Section 4),
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, Bank (or any IBOR Office
of Bank); or
(C) shall impose on Bank (or its IBOR Office) any other
condition affecting its IBOR Loans, the Notes or its obligation to make
IBOR Loans;
and the result of any of the foregoing is to increase the actual cost to (or in
the case of Regulation D referred to above, to impose an actual cost on) Bank
(or any IBOR Office of Bank) of making or maintaining any IBOR Loan, or to
reduce the actual amount of any sum received or receivable by Bank (or its IBOR
Office) under this Agreement or under the Notes with respect thereto, then
within 10 days after demand by Bank (which demand shall be accompanied by a
statement setting forth in reasonable detail the basis of such demand), Borrower
shall pay directly to Bank such additional amount or amounts as will compensate
Bank for such actual increased cost or such actual reduction.
SECTION 15.2 Changes in Law Rendering Certain Loans Unlawful. In the
event that any change in (including the adoption of any new) any applicable law
or regulation, or any change in the interpretation of any applicable law or
regulation by any governmental or other
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regulatory body charged with the administration thereof, should make it (or in
the good faith judgment of Bank raise a substantial question as to whether it
is) unlawful for Bank to make, maintain or fund IBOR Loans, then Bank shall
promptly notify Borrower and, so long as such circumstances shall continue, (a)
Bank shall have no obligation to make or convert into IBOR Loans and (b) on the
last day of the current Interest Period for each IBOR Loan (or, in any event, if
Bank so requests, on such earlier date as may be required by the relevant law,
regulation or interpretation), such IBOR Loan shall, unless then repaid in full,
automatically convert to an Adjusted Reference Rate Loan.
SECTION 15.3 Funding Losses; Prepayment of Fixed Rate Loans.
(a) Borrower hereby agrees that upon demand by Bank (which
demand shall be accompanied by a statement setting forth in reasonable
detail the basis for the calculations of the amount being claimed)
Borrower will indemnify Bank against any net loss or expense which Bank
(or its IBOR Office) may sustain or incur (including, without
limitation, any net loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by Bank
(or its IBOR Office) to fund or maintain any IBOR Loan), as reasonably
determined by Bank, as a result of (a) any payment or prepayment or,
conversion of any IBOR Loan on a date other than the last day of an
Interest Period for such Loan (other than any such payment made at the
request of the Bank pursuant to Section 15.2 as required by any relevant
law, regulation or interpretation) or (b) any failure of Borrower to
borrow or convert any Loan (or any portion thereof) on a date specified
therefor in a notice of borrowing or conversion pursuant to this
Agreement. For this purpose, all notices to Bank pursuant to this
Agreement shall be deemed to be irrevocable.
(b) Each prepayment of a Fixed Rate Loan, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid, and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date
earlier than the scheduled payment date for such amount as required by
this Agreement. The prepayment fee shall be equal to the amount (if any)
by which:
(i) the additional interest which would have been
payable during the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by
the Bank by placing the amount prepaid on deposit in the domestic
certificate of deposit market, the eurodollar deposit market, or other
appropriate money market selected by the Bank for a period starting on
the date on which it was prepaid and ending on the last day of the
interest period for such Portion (or the scheduled payment date for the
amount prepaid, if earlier).
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SECTION 15.4 Basis for Determining Interest Rate Inadequate or Unfair.
If with respect to any Interest Period deposits in Dollars (in the applicable
amount) are not being offered to Bank in the interbank IBOR market for such
Interest Period, or Bank determines (which determination shall be binding and
conclusive on Borrower) that by reason of circumstances affecting the interbank
IBOR market adequate and reasonable means do not exist for ascertaining the
applicable IBOR Rate or Bank otherwise determines that the IBOR Rate will not
adequately and fairly reflect the cost to Bank of maintaining or funding such
Loans for such Interest Period; Bank shall promptly notify Borrower thereof and,
so long as such circumstances shall continue, (a) Bank shall be under no
obligation to make or convert into IBOR Loans and (b) on the last day of the
current Interest Period for each IBOR Loan, such Loan shall, unless then repaid
in full, automatically convert to an Adjusted Reference Rate.
SECTION 15.5 Right of Bank to Fund through Other Offices. Bank may, if
it so elects, fulfill its commitment as to any IBOR Loan by causing a foreign
branch or affiliate of Bank to make such Loan, provided that in such event for
the purposes of this Agreement such Loan shall be deemed to have been made by
Bank and the obligation of Borrower to repay such Loan shall nevertheless be to
Bank and shall be deemed held by it, to the extent of such Loan, for the account
of such branch or affiliate.
SECTION 15.6 Discretion of Bank as to Manner of Funding. Notwithstanding
any provision of this Agreement to the contrary, Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if Bank had actually funded and
maintained each IBOR Loan during each Interest Period for such Loan through the
purchase of deposits having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the IBOR Rate for such Interest Period.
SECTION 15.7 Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of Bank pursuant to Section 15 shall be conclusive
absent demonstrable error. Bank may use reasonable averaging and attribution
methods in determining its costs and compensation under Section 15, and the
provisions of such Section shall survive termination of this Agreement.
ARTICLE XVI
ENVIRONMENTAL, SAFETY AND HEALTH INDEMNITY AND WAIVER
(a) Environmental and Safely and Health Indemnity. The Borrower
hereby indemnifies the Bank and agrees to hold the Bank harmless from
and against any and all losses, liabilities, damages, injuries, costs,
expenses and claims of any and every kind whatsoever (including, without
limitation, court costs and attorneys' fees) (i) relating to or arising
under any Environmental Law with respect to any period of time when
Borrower held a fee, leasehold or other possessory interest in or to any
premises subject to such Environmental Law; or (ii) which otherwise may
be paid, incurred or suffered
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by or asserted against the Bank for, with respect to, or as a direct or
indirect result of the violation by the Borrower or any Subsidiary (or
any of their predecessors) of any Environmental Law or Occupational
Safety and Health Law; or (iii) with respect to, or as a direct or
indirect result of (a) the presence on or under, or the escape, seepage,
leakage, spillage, disposal, discharge, emission, threat of release, or
release of any Hazardous Material from, any property allegedly owned or
operated by the Borrower or any Subsidiary (or any of their
predecessors), or any property at which Hazardous Materials allegedly
generated by the Borrower or any Subsidiary (or any of their
predecessors) may have come to be located, or (b) the existence of any
unsafe or unhealthy condition on or at any premises utilized by the
Borrower or any Subsidiary (or any of their predecessors). The
provisions of the undertakings and indemnification set forth in this
Section 16 shall survive satisfaction and payment of the Note and other
liabilities of the Borrower hereunder and any termination of this
Agreement.
(b) Waiver. The Borrower and its successors and assigns hereby
release the Bank from all liability under any Environmental Law, and
waive and agree not to make any claim or bring any cost recovery or
contribution action against the Bank under the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601 et seq., as amended or hereafter amended, or any other
Environmental Law now existing or hereafter enacted, other than with
respect to any act or inaction attributable to the Bank.
ARTICLE XVII
MISCELLANEOUS
SECTION 17.1 Waiver and Amendments. No failure or delay on the part of
the Bank or the holder of the Note in the exercise of any power or right, and no
course of dealing between the Borrower and the Bank or the holder of the Note,
shall operate as a waiver of such power or right, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to the Bank at law or in equity. No notice to or demand on the Borrower not
required hereunder or under the Note shall in any event entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Bank or the holder of the Note to any
other or further action in any circumstances without notice or demand. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Agreement or the Note shall in any event be effective unless the same
shall be in writing and signed and delivered by the Bank. Any waiver of any
provision of this Agreement or the Note, and any consent to any departure by the
Borrower from the terms of any provision of this Agreement or the Note, shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 17.2 Notices. Except as otherwise expressly provided herein, any
notice hereunder to the Borrower or the Bank shall be in writing (including
telecopy communication)
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and shall be given to the Borrower or the Bank at its address or telecopier
number set forth on the signature pages hereof or at such other address or
telecopier number as the Borrower or the Bank may, by written notice, designate
as its address or telecopier number for purposes of notice hereunder. All such
notices shall be deemed to be given when transmitted by telecopier and a
confirmation of receipt is received, personally delivered or, in the case of a
mailed notice, five (5) Banking Days after being sent by registered or certified
mail, postage prepaid, in each case addressed as specified in this Section 17.2,
provided, however, that notices to the Bank under Sections 2.4 or 2.6 shall not
be effective until actually received by the Bank; and provided further that
notices sent by registered or certified mail shall also be sent by telecopy on
the date such notice is mailed.
SECTION 17.3 Expenses. The Borrower agrees, whether or not any Loan is
made hereunder, to pay the Bank upon demand for all reasonable expenses,
including reasonable attorneys' fees and other legal expenses and costs of
collection, incurred by the Bank in connection with (a) the preparation,
negotiation and execution of this Agreement, the Note, the Other Agreements and
any other instrument or document provided for herein or delivered or to be
delivered hereunder or in connection herewith, (b) the preparation, negotiation
and execution of any and all amendments to this Agreement, the Note or any such
Other Agreements, (c) the enforcement of the Borrower's obligations hereunder,
under the Other Agreements or under the Note and (d) all reviews, audits and
field examinations of its books and records and of the Collateral. The Borrower
also agrees to (i) indemnify and hold the Bank harmless from any loss or expense
which may arise or be created by the acceptance of telephonic or other
instructions for making Loans or disbursing the proceeds thereof, and (ii) pay,
and save the Bank harmless from all liability for, any stamp or other tax which
may be payable with respect to the execution or delivery of this Agreement or
the issuance of the Note or any other instrument or document provided for herein
or delivered or to be delivered hereunder or in connection herewith. The
Borrower's foregoing obligations shall survive satisfaction and payment of the
Note and other liabilities of the Borrower hereunder and any termination of this
Agreement.
SECTION 17.4 General Indemnity. The Borrower hereby indemnifies,
exonerates, and holds the Bank and any holder of the Note and each of the
officers, directors, employees and agents of the Bank and any such holder
(collectively, the "Indemnitees") harmless from and against any and all
obligations, losses, liabilities, damages, costs, expenses, actions, suits,
judgments, penalties and claims of any kind whatsoever (including, without
limitation, court costs and reasonable attorneys' fees and disbursements in
connection with any investigative, administrative or judicial proceeding
commenced or threatened (whether or not such Indemnitee shall be designated a
party thereto)) which may be imposed on, incurred by or asserted against any
Indemnitee, in any a manner relating to or arising out of (a) this Agreement or
any other agreement, instrument or document executed and delivered by the
Borrower in connection herewith, (b) the use or intended use of the proceeds of
any Loan or Letter of Credit, or (c) the Borrower's failure to comply with any
tax law or any other law, statute or governmental rule or regulation applicable
to the Borrower (the "Indemnified Liabilities"); provided, however, that the
Borrower shall have no obligation to any Indemnitee hereunder with respect to
(i) Indemnified Liabilities arising from the gross negligence or willful
misconduct of such
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Indemnitee, (ii) any third-party contractual rights to which any Indemnitee is
bound or (iii) the violation of any law, rule, regulation or court or
administrative decree to which any Indemnitee is bound. If and to the extent
that the foregoing undertaking may be unenforceable for any reason whatsoever,
the Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The provisions of and undertakings and indemnification set forth
in this Section 17.4 shall survive satisfaction and payment of the Note and
other liabilities of the Borrower hereunder and any termination of this
Agreement.
SECTION 17.5 Information. The Bank may furnish any information
concerning the Borrower in the possession of the Bank from time to time to
assignees of the rights and/or obligations of the Bank hereunder and to
participants in any Loan (including prospective assignees and participants) and
may furnish information in response to credit inquiries consistent with general
banking practice.
SECTION 17.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 17.7 Law. THIS AGREEMENT AND THE NOTE SHALL BE CONTRACTS MADE
UNDER, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
SECTION 17.8 Successors. This Agreement shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank. The Borrower shall not assign its rights or duties hereunder
without the consent of the Bank.
SECTION 17.9 WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS (a) UNDER THIS AGREEMENT OR ANY OTHER AGREEMENT OR UNDER ANY AMENDMENT.
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ANY OTHER
[Remainder of Page Intentionally Left Blank]
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AGREEMENT OR (b) ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
at Chicago, Illinois, as of the day and year specified at the beginning hereof.
Attest: UNIVERSAL ELECTRONICS, INC.
/s/ RICHARD A. FIREHAMMER By: /s/ PAUL D. ARLING
- ---------------------------------- ----------------------------------
Secretary Name: Paul D. Arling
Richard A. Firehammer, Jr. Title:President and Chief Operating
Officer
Address: 6101 Gateway Drive
Cypress, California 90630
Attention: Mr. Paul D. Arling
President and Chief
Operating Officer
Facsimile Number: (714) 820-1042
Telephone Number: (714) 820-1060
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ CHARLES W. A. HAGEL
---------------------------------
Name: Charles W. A. Hagel
---------------------------------
Title: VICE PRESIDENT
---------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Mr. Charles W. A. Hagel
Vice President
Facsimile Number: (312) 828-1974
Telephone Number: (312) 828-4360
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STATE OF CALIFORNIA)
)SS.:
COUNTY OF ORANGE )
I, JAMES W. TAYLOR, a Notary Public duly qualified, commissioned, sworn
and acting in and for the County and State aforesaid, do hereby certify that
Paul D. Arling, personally known to me to be the President and Chief Operating
Officer of Universal Electronics, Inc., a Delaware corporation, personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and severally acknowledged
that as such President and Chief Operating Officer he signed and delivered the
said instrument as his free and voluntary act, and as the free and voluntary act
and deed of Universal Electronics, Inc., for the uses and purposes therein set
forth.
Given under my hand and official seal, this 18 day of OCTOBER, 1998.
My Commission expires:
JULY 9, 2001 /s/ JAMES W. TAYLOR
- ---------------------------------- ------------------------------------
Notary Public
(NOTARIAL SEAL)
- ------------
JAMES W. TAYLOR
COMMISSION #1141744
[SEAL] NOTARY PUBLIC-CALIfORNIA
ORANGE COUNTY
My Comm. Expires July 9, 2001
59
STATE OF ILLINOIS )
)SS.:
COUNTY OF COOK )
I, ROXANE S. VENENGA, a Notary Public duly qualified, commissioned,
sworn and acting in and for the County and State aforesaid, do hereby certify
that Charles W. A. Hagel, personally known to me to be a Vice President of Bank
of America National Trust and Savings Association, a national banking
association, and personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person,
and acknowledged that as such Vice President, he signed and delivered the said
instrument as his free and voluntary act, and as the free and voluntary act and
deed of Bank of America National Trust and Savings Association, for the uses and
purposes therein set forth.
Given under my hand and official seal, this 22nd day of October, 1998.
My Commission expires:
3-16-2002 /s/ ROXANE S. VENEVGA
- ---------------------------------- ------------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
ROXANE S. VENENGA
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 3-16-2002
60
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES
Locations of Collateral and Books and Records
BORROWER'S LOCATIONS
6101 Gateway Drive
Cypress, California 90630
Phone # (714) 820-1000
1864 Enterprise Parkway West
Twinsburg, Ohio 44087
Phone # (330) 487-1110
See also Borrower's List of Affiliates
Borrower also has employee sales representatives living in
various States operating out of their homes.
THIRD PARTIES' LOCATIONS
Amity Pen
16006 Montoya St.
Azusa, CA 91072
Phone # (626) 969-0863
Amros - Packaging
5712 Brookpark Rd
Cleveland, Ohio 44129
Phone # (216) 741-6070
Circuit Solutions Inc.
34425 Lorain Rd.
N. Ridgeville, Ohio
61
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Cal-Switch
1010 Sandhill Avenue
Carson, CA 90746-1313
Phone # (310) 669-4140
Philips Sound & Vision
12435 Rojas Drive
El Paso, TX
Phone # (915) 778-3191
Cerritos Terminal Services
905 East Katella St.
Anaheim, CA 92806
Phone # (714) 991-0470
Pentex Inc.
6836 Commerce Ave
El Paso, TX 79915
Phone # (915) 774-9100
Kimex Electronics
330-11 Sinjung-Dong, Yangchon-Gu
Seoul, Korea
Phone # 011-822-653-2461
Philips Singapore Pte. Ltd.
Remote Control Systems
Tuner Factory
Toa Payoh, Lorong 1
Singapore 319762
Phone # 011-65-350-2927
62
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
SMK Corp.
5-5 Togoshi 6-chrome, Shinagawa-Ku
Tokyo 142 Japan
Phone # 011-813-3785-2136
WKK Industries
WKK Building
418A Kwun Tong Road
Kowloon, Hong Kong
Phone # 011-852-2357-8888
System X-10 Ltd
Room 1103-4, Hilder Center
2 Sung Ping Street
Hungham, Kowloon, Hong Kong
Cablevision Technologies
Plot 232, Jalan Pknk 2
Sungai Petani Industrial Estate
Kadeh Darulaman, Malaysia
Phone # 011-604-441-3999
Computime Ltd.
7/F How Ming Fty. Bldg.
99 How Ming Street
Kwun Tong, Kowloon, Hong Kong
Phone # 011-852-2970-3938
Displaytech Ltd.
1501-2 Empress Plaza
17-19, Chatham Road South
Tsin Sha Tsui, Kowloon, Hong Kong
Phone # 011-852-2311-2080
63
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Jetta Company Ltd.
Jetta House
19 On Kui Street
On Lok Tsuen
Fanling, Hong, Kong
Phone # 011-852-2680-0268
Jeckson Inc.
1/F, 8/F, &11F DJ Building
173 Hol Bun Road
Kwun Tong, Kowloon, Hong Kong
Phone # 011-852-2389-7337
Some of Borrower's Books and Records are located at Borrower's
outside counsels' offices located in various States.
Chief Executive OFFICE
6101 Gateway Drive
Cypress, California 90630
Phone # (714) 820-1000
Wholly-owned Subsidiaries
One For All (UK) - Not operating
Universal Electronics B.V. - Javastraat 92
(formerly One For All B.V.) 7512 Enschede
Netherlands
One For All GmbH - Postfach 1740
48578 Gronau
Germany
64
SCHEDULE 5.4
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LOCATIONS OF COLLATERAL, BOOKS AND RECORDS, CHIEF EXECUTIVE OFFICE AND LIST OF
AFFILIATES (CONT.)
Business and Trade Names under which Borrower does Business
Borrower transacts business under its corporate name "Universal
Electronics Inc.", and sometimes under the names "Universal" and/or "Universal
Electronics", none of which have been registered as a trade name or Trademark.
In addition, Borrower's corporate name is extremely common, with a variety of
unrelated and unaffiliated companies incorporated and operating under names
substantially similar to Borrower's corporate name. This has caused Borrower to
qualify to do business in Ohio, California and Florida under names different
than Borrower's corporate name. In Ohio, Borrower is qualified to do business
under the name One For All, Inc.; in California, Borrower is qualified to do
business under the name Delaware Universal Electronics, Inc.; and in Florida,
Borrower is qualified to business under the name Universal Electronics of
Delaware, Inc. (with the restructuring, Borrower no longer maintains an office
in Florida).
Additionally, in July 1990, an unrelated and unaffiliated corporation
was incorporated in Delaware and qualified to do business under the name "One
For All Incorporated". In Europe, Borrower transacts business through itself and
through its wholly owned subsidiaries (see List of Affiliates).
Other
Borrower is a publicly-traded corporation and has received a copy of one
Schedule 13D and one Schedule 13G, each filed by Geoffrey Nixon, Mission
Partners, L.P., Liberty Nominees Limited, Horizon Offshore, Ltd., and M Partners
L.P. (copies of which are attached hereto). Other than the Schedules 13D and 13G
stated above, since November 21, 1995, Borrower has not received copies of any
filings required under the Federal securities laws or the securities laws under
any state from any person, entity or group that such person, entity or group has
acquired a sufficient number of shares of the issued and outstanding common
stock of Borrow so as to be or be deemed to be an affiliate of Borrower; and
therefore, to the best of Borrower's knowledge, there are no other Affiliates of
Borrower.
65
SCHEDULE 8.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
INVENTORY STORED WITH BAILEE, WAREHOUSEMAN OR OTHER THIRD-PARTY
See Schedule 5.4.
66
SCHEDULE 10.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LIST AND EVIDENCE OF INSURANCE
See attached 4 pages.
67
- --------------------------------------------------------------------------------
ACCORD EVIDENCE OF PROPERTY INSURANCE CSR JK DATE (MM/DD/YY)
10/13/98
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, ----------
IS IN FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED
UNDER THE POLICY.
- --------------------------------------------------------------------------------
PRODUCER PHONE/FAX COMPANY
(A/C. No. Ext): 213-630-3200
----------------------------
Aon Risk Services, Inc. Federal Insurance Company
707 Wilshire Blvd., Ste. 6000 6500 Wilshire Blvd.
Los Angeles CA 90017 Los Angeles CA 90048-4403
Carole Mitchell
- --------------------------------------
CODE: SUB CODE:
- --------------------------------------
AGENCY
CUSTOMER ID #: UNIV100
- --------------------------------------------------------------------------------
INSURED LOAN NUMBER POLICY NUMBER
3533-58-31
----------------------------------------
Universal Electronics, Inc. EFFECTIVE EXPIRATION CONTINUED UNTIL
6101 Gateway Drive DATE DATE TERMINATION
Cypress CA 90630 04/30/98 04/30/99 [ ] IF CHECKED
----------------------------------------
THIS REPLACES PRIOR EVIDENCE DATED:
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
LOCATION/DESCRIPTION
- --------------------------------------------------------------------------------
COVERAGE INFORMATION
COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTIBLE
- --------------------------------------------------------------------------------
Blanket Real & Personal Property $7,868,000 $5,000
Special Form, Direct Physical Loss, Subject
to all policy conditions and exclusions.
Agreed Amount Endorsement
- --------------------------------------------------------------------------------
REMARKS (Including Special Conditions)
CP 1218 Attached
- --------------------------------------------------------------------------------
CANCELLATION
THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH
POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE
ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND
NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST,
IN ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
- --------------------------------------------------------------------------------
ADDITIONAL INTEREST [ ] MORTGAGEE [ ] ADDITIONAL INSURED
[X] LOSS PAYEE [ ]
NAME AND ADDRESS ----------------------------------------
LOAN #
Bank of America National Trust
and Savings Association ----------------------------------------
231 South LaSalle Street AUTHORIZED REPRESENTATIVE
Chicago IL 60697
/s/ CAROLE MITCHELL
-----------------------
Carole Mitchell
ACCORD 27 (3/93) (C) ACCORD CORPORATION 1993
- --------------------------------------------------------------------------------
68
POLICY NUMBER: 3533-58-31 COMMERCIAL PROPERTY
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
LOSS PAYABLE PROVISIONS
This endorsement modifies insurance provided under the following:
BUILDING AND PERSONAL PROPERTY COVERAGE FORM
BUILDERS' RISK COVERAGE FORM
CONDOMINIUM ASSOCIATION COVERAGE FORM
CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM
STANDARD PROPERTY POLICY
SCHEDULE
PROVISIONS APPLICABLE
- ------------------------------------------
LOSS LENDER'S CONTRACT
PAYABLE LOSS PAYABLE OF SALE
XXX
PREM. BLDG. DESCRIPTION LOSS PAYEE
NO. NO. OF PROPERTY (NAME & ADDRESS)
1 & 2 BLANKET REAL & PERSONAL PROPERTY BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
231 SOUTH LA SALLE STREET
CHICAGO, IL 60697
A. When this endorsement is attached to the STANDARD PROPERTY POLICY CP 00 99
the term Coverage Part in this endorsement is replaced by the term Policy.
The following is added to the LOSS PAYMENT Loss Condition, as indicated in the
Declarations or by an "X" in the Schedule:
B. LOSS PAYABLE
For Covered Property in which both you and a Loss Payee shown in the
Schedule or in the Declarations have an insurable interest, we will:
1. Adjust losses with you; and
CP 12 18 10 91 Copyright, ISO Commercial Risk Services, Inc., 1990
Page 1 of 2
69
ACCORD CERTIFICATE OF LIABILITY INSURANCE
CSR JK DATE (MM/DD/YY)
UNIV100 10/13/98
PRODUCER ------------------------------------
THIS CERTIFICATE IS ISSUED AS A MATTER
Aon Risk Services, Inc. OF INFORMATION ONLY AND CONFERS NO
707 Wilshire Blvd., Ste. 6000 RIGHTS UPON THE CERTIFICATE HOLDER. THIS
Los Angeles CA 90017 CERTIFICATE DOES NOT AMEND, EXTEND OR
ALTER THE COVERAGE AFFORDED BY THE
Carole Mitchell POLICIES BELOW.
Phone NO. 213-630-3200 Fax No.__________ ----------------------------------------
COMPANIES AFFORDING COVERAGE
----------------------------------------
COMPANY
A Federal Insurance Company
----------------------------------------
COMPANY
B
----------------------------------------
COMPANY
C
Universal Electronics, Inc. ----------------------------------------
6101 Gateway Drive COMPANY
Cypress CA 90630 D
- -------------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT
TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN
MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- -------------------------------------------------------------------------------------
CO TYPE OF INSURANCE POLICY NUMBER POLICY EFFECTIVE POLICY EXPIRATION LIMITS
LTR DATE (MM/DD/YY) DATE (MM/DD/YY)
- -----------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY 3533-58-31 04/30/98 04/30/99 GENERAL AGGREGATE $2,000,000
--------------------------------------
A [X] COMMERCIAL GENERAL LIABILITY PRODUCTS-COMP/OP AGG $2,000,000
[ ] [ ] CLAIMS MADE [X] OCCUR --------------------------------------
[ ] OWNERS & CONTRACTOR'S PROT PERSONAL & ADV INJURY $1,000,O00
[ ] --------------------------------------
[ ] ___________________ EACH OCCURRENCE $1,000,000
[ ] --------------------------------------
FIRE DAMAGE (Any one fire) $1,000,000
--------------------------------------
MED EXP (Any one person) $ 10,000
- -----------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY 7323-09-95 04/30/98 04/30/99 COMBINED SINGLE LIMIT $1,000,000
--------------------------------------
A [ ] ANY AUTO BODILY INJURY
[ ] ALL OWNED AUTOS (Per person) $
[X] HIRED AUTOS --------------------------------------
[X] NON-OWNED AUTOS BODILY INJURY
[ ] ___________________ (Per accident)
[ ] --------------------------------------
PROPERTY DAMAGE $
- -----------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY--EA ACCIDENT $
--------------------------------------
[ ] ANY AUTO OTHER THAN AUTO ONLY
[ ] NON-OWNED AUTOS --------------------------------------
[ ] ___________________ EACH ACCIDENT $
--------------------------------------
AGGREGATE $
- -----------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $
[ ] UMBRELLA FORM --------------------------------------
[ ] OTHER THAN UMBRELLA FORM AGGREGATE $
--------------------------------------
$
- -----------------------------------------------------------------------------------------------------------------------------------
WORKERS COMPENSATION AND X WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
--------------------------------------
THE PROPRIETOR/ EL EACH ACCIDENT $1,000,000
A PARTNERS/EXECUTIVE [ ] INCL 7162-97-58 04/30/98 04/30/99 --------------------------------------
OFFICERS ARE [ ] EXCL EL DISEASE-POLICY LIMIT $1,000,000
--------------------------------------
EL DISEASE-EA EMPLOYEE $1,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER
- -----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Certificate Holder is named as Additional Insured as respects their interest in the Named Insures.
- -----------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER CANCELLATION
BOUNTSA SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED
Bank of America National Trust BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL
and Savings Association ENDEAVOR TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE
231 South LaSalle Street HOLDER NAMED TO THE LEFT. SUCH NOTICE SHALL IMPOSE NO
Chicago IL 60697 OBLIGATION OR LIABILITY OF ANY KIND UPON THE COMPANY, ITS
AGENTS OR REPRESENTATIVES.
--------------------------------------------------------------------
ACORD 25-S (1/95) AUTHORIZED REPRESENTATIVE
/s/ CAROLE MITCHELL
-------------------
Carole Mitchell
(C) ACCORD CORPORATION 1988
- -----------------------------------------------------------------------------------------------------------------------------------
70
[LOGO] Aon Risk Services
October 13, 1998
Mr. Peter H. Barrow
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, IL 60602
RE: Universal Electronics, Inc.
Bank Line Request
Commercial Insurance - Premium Payment Confirmation
Dear Mr. Barrow:
Per your request, the following is confirmation of Universal Electronics, Inc.s'
current payment status of their Commercial Insurance policies.
1) Commercial Package - Quarterly Installments, Current To Date (4/30/98-99)
2) Automobile - Paid In Full (4/30/98-99)
3) Workers' Compensation - Quarterly Installment, Current To Date (4/30/98-99)
4) Umbrella Liability - Paid In Full (4/30/98-99)
5) DIC/Earthquake - Paid In Full (2/11/98-4/30/99)
6) Directors & Officers Liability - Paid In Full (4/30/98-99)
7) Fiduciary Liability - Paid In Full (5/9/98-4/30/99)
8) Employment Practices Liability - Paid In Full (2/12/98 to 4/30/99)
9) Foreign Package - Quarterly Installments, Current To Date (4/30/98-99)
10) Marine Cargo - Quarterly Installments, Current To Date (4/30/98-99)
Should you have any questions, please contact our office.
Sincerely,
/s/ JOHN MCKINLEY
John McKinley
Account Manager
[LETTERHEAD]
71
SCHEDULE 11.1
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ORGANIZATION
Borrower's United Kingdom subsidiary may no longer be in good standing due to
Borrower ceasing such subsidiary's operations.
72
SCHEDULE 11.5
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
DEFAULTS
By virtue of the restructuring of Borrower, the shutting down of its Twinsburg,
Ohio facility, and the relocation of its headquarters to its Cypress, California
facility, Borrower may by in violation of certain provisions of that certain
Enterprise Zone Agreement between Borrower and the City of Twinsburg dated June
20, 1995.
73
SCHEDULE 11.8
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LITIGATION AND CONTINGENT LIABILITIES
UNIVERSAL ELECTRONICS INC. v. THE UNITED STATES, 93-11-00740 IN THE UNITED
STATES COURT OF INTERNATIONAL TRADE. Consolidated complaints filed by Borrower
on various dates against the United States seeking a correct interpretation of
the United States Harmonized Tariff Schedules with respect to the importation of
certain of the Company's remote control products.
UNIVERSAL ELECTRONICS INC. Prior Disclosure Administrative Matter brought to the
attention of US Customs by Borrower regarding incorrect classification of
earlier entries. Action reactivated due to recent decision by United States
Court of international Trade in United States v. Snuggles, Inc. (Slip Opinion
96-141) decided on August 20, 1996.
FURST ENERGY INCORPORATED AND DAVID A. BENOIT V. UNIVERSAL ELECTRONICS INC.,
CASE NO. 97CV1479(JEI) IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
NEW JERSEY. Action filed by Furst Energy Incorporated and David A. Benoit Inc.
in March 1997 against the Company alleging that the Company misappropriated
certain proprietary ideas and trade secrets, committed fraud and constructive
fraud, made negligent misrepresentations, engaged in unfair competition,
tortiously interfered with Furst's and Benoit's business and breached a contract
with them. On August 29, 1997, the Court granted the Company's motion to dismiss
Furst's and Benoit's claims for tortious business interference, fraud and
constructive fraud. In addition, the Company filed its answer denying these
claims and has and will continue to vigorously defend against them.
CIRCUIT SOLUTIONS, INC. V. UNIVERSAL ELECTRONICS INC., Case No. 98CV121418 IN
THE COURT OF COMMON PLEAS, LORAIN COUNTY, OHIO. Action filed on June 23, 1998 by
Circuit Solutions, Inc. against Borrower, alleging breach of contract and
further alleging damages in the amount of $110,000. On July 20, 1998, due to a
motion by Borrower, the suit was transferred to the United States District Court
for the Northern District of Ohio, Eastern Division, CIRCUIT SOLUTIONS, INC. V.
UNIVERSAL ELECTRONICS INC., CASE NO. 1:98 CV 1647. This case is in the
preliminary stages of pleading, with Borrower filing its answer on July 24, 1998
denying plaintiff's allegations and claims. Borrower intends to vigorously
defend this action.
74
SCHEDULE 11.8
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LITIGATION
(CONT.)
BRUCE V. VEREECKEN v. UNIVERSAL ELECTRONICS INC., CASE NO. CV 98 06 2506 IN THE
COURT OF COMMON PLEAS, SUMMIT COUNTY, OHIO. Action filed on June 25, 1998 by
Bruce V. Vereecken, a former executive officer of Borrower, alleging the Company
has breached its Separation Agreement and General Release with him, and in
addition, claiming promissory estoppel, unjust enrichment and bad faith.
Vereecken is seeking damages in excess of $25,000. This case is in the
preliminary stages of pleading, with Borrower filing its answer on August 13,
1998 denying plaintiff s allegations and claims. Borrower intends to vigorously
defend this action.
Various other administrative claims for workers' compensation and unemployment.
See also Schedule 11.5.
75
SCHEDULE 11.9
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
LIENS
Society National Bank
The Provident Bank
76
SCHEDULE 11.10
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
SUBSIDIARIES
See Schedules 5.4 and II.1.
77
SCHEDULE 11.11
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
PARTNERSHIPS; JOINT VENTURES
Presently, Borrower has no Partnerships or Joint Ventures in which it is
participating; however, within its business plan, Borrower intends to actively
seek and enter into such relationships when it is determined that it makes
strategic sense. Presently, Borrower is in such discussions with General
Instrument Corporation, Microsoft, Philips, and Scientific Atlanta.
78
SCHEDULE 11.12
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ERISA MATTERS
Universal Electronics Inc. 401K and Profit Sharing Plan.
Borrower has granted options to acquire shares of Borrower's common stock at an
option price equal to the then fair market value of the stock to various
employees and members of Borrower's Board of Directors in 1992 as the Board of
Directors authorized, and in subsequent years pursuant to Borrower's Universal
Electronics Inc. 1993 Stock Incentive Plan, Universal Electronics Inc. 1995
Stock Incentive Plan, Universal Electronics Inc. 1996 Stock Incentive Plan, and
Universal Electronics Inc. 1998 Stock Incentive Plan.
Borrower also provides a standard package of medical, health, vision, dental,
disability and life insurance, and vacations to its employees. Borrower also
provides certain of its executives with additional life insurance. In addition,
Borrower provides certain of its employees with incentive compensation, tuition
reimbursement, and relocation programs, and in certain instances, a severance
program. Also, due to the restructuring of Borrower's organization and
relocation of Borrower's corporate headquarters, Borrower is obligated to
continue certain of Borrower's employees' medical, vision, dental, disability
and life insurance for periods of time ranging from 2 months to 24 months
following such employees' termination from employment.
Borrower has also entered into Salary Continuation Agreements with certain of
its executive officers and non-executive officers.
Borrower is insured for worker's compensation matters in the State of Ohio
through the State of Ohio insurance program.
79
SCHEDULE 11.14
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
COMPLIANCE WITH LAWS
In the event that Borrower is found liable under any of the litigation matters
to which Borrower is a party, Borrower would be deemed to have violated the
applicable laws related to the claims made in connection with such matters.
See also Schedules 11.1 and 11.5.
80
SCHEDULE 11.18
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
ENVIRONMENTAL MATTERS
None to Borrower's knowledge.
81
SCHEDULE 12.14
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
OUTSTANDING INDEBTEDNESS
Pursuant to an agreement to acquire certain assets ("Purchase Agreement"),
Borrower has a contingent obligation to pay $1,000,000 in two installments of
$500,000 each, with the first payable on January 29, 1999 and the second payable
on September 30, 1999, for additional assets described in the Purchase
Agreement, in the event the seller thereunder elects during the month of January
1999 to sell those assets to Borrower. The Purchase Agreement also grants
Borrower the option to acquire those assets on the same terms.
82
SCHEDULE 12.15
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
EXISTING LIENS
See Schedule 11.9.
83
SCHEDULE 12.16
TO THE REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
BANK OF AMERICA NATIONAL TRUST
AND
UNIVERSAL ELECTRONICS INC.
EXISTING INVESTMENTS
None, other than as described in the financial statements referred to in Section
11.6.