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Exhibit: 10.10FD
CREDIT AND SECURITY AGREEMENT
DATED AS OF OCTOBER 30, 1998
FUNDEX GAMES, LTD., a Nevada corporation (the "Borrower"), and NORWEST
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, including, without limitation, the aggregate
unpaid obligations of customers and other account debtors to the
Borrower arising out of the sale or lease of goods or rendition of
services by the Borrower on an open account or deferred payment basis.
"Advance" has the meaning given in Section 2.1.
"Affiliate" or "Affiliates" means Carl E. Voigt, III, Carl E.
Voigt, IV, and any other Person controlled by, controlling or under
common control with the Borrower, including (without limitation) any
Subsidiary of the Borrower. For purposes of this definition, "control,"
when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Authorized Borrower Representative" means any officer or
agent of the Borrower who is designated by an officer of the Borrower
in a writing delivered to the Lender on or after the date hereof as a
person who is authorized to request Advances to the Borrower hereunder.
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"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Milwaukee, Wisconsin.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota as its "base rate" or, if such
bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Book Net Worth" means the aggregate of the common and
preferred stockholders' equity in the Borrower, determined in
accordance with GAAP.
"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) the sum of
(i) the lesser of (A) 80% of Eligible Accounts
or (B) $2,500,000, plus
(ii) the lesser of (A) the sum of (1) 40% of
Eligible Inventory consisting of parts plus
(2) 60% of Eligible Inventory consisting of
finished goods, or (B) $1,500,000.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital
asset, or for the lease of any other asset whether payable currently or
in the future.
"Collateral" means all of the Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) proceeds of any and all of the foregoing;
(iii) in the case of all tangible goods, all accessions; (iv) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any tangible goods;
(v) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; and (vi) all sums on
deposit in the Special Account.
"Collateral Account" has the meaning given in the Collateral
Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower, NBD Bank and
the Lender.
"Commitment" means the Lender's commitment to make Advances
pursuant to Article II.
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"Credit Facility" means the credit facility being made available to the
Borrower by the Lender pursuant to Article II.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day of
any month during which a Default or Event of Default has occurred, provided
the Lender has given the Borrower written notice of such Default or Event of
Default, and ending on the date the Lender notifies the Borrower in writing
that such Default or Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to three percent (3%) over
the Floating Rate, which rate shall change when and as the Floating Rate
changes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits and
reserves for Accrued Cooperative Advertising, except the following shall not
in any event be deemed Eligible Accounts:
(i) That portion of Accounts unpaid thirty (30) days or more
after the due date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer;
(iv) Accounts owed by any unit of government, whether foreign
or domestic (provided, however, that there shall be included in
Eligible Accounts that portion of Accounts owed by such units of
government for which the Borrower has provided evidence satisfactory to
the Lender that (A) the Lender has a first priority perfected security
interest and (B) such Accounts may be enforced by the Lender directly
against such unit of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the
United States of America which are not (A) backed by a bank letter of
credit naming the Lender as beneficiary or assigned to the Lender, in
the Lender's possession and acceptable to the Lender in all respects,
in its sole discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
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(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary, Affiliate,
officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any lien,
security interest or claim in favor of any Person other than the Lender
or Liberty BIDCO, including, without limitation, any payment or
performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of whether
otherwise eligible, if twenty five percent (25%) or more of the total
amount due under Accounts from such debtor is ineligible under clauses
(i), (ii) or (ix) above; and
(xii) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Inventory" means all Inventory of the Borrower, at the lower
of cost or market value as determined in accordance with GAAP; provided,
however, that the following shall not in any event be deemed Eligible
Inventory:
(i) Inventory that is: in-transit; located at any warehouse,
job site or other premises not approved by the Lender in writing;
located outside of the states, or localities, as applicable, in which
the Lender has filed financing statements to perfect a first priority
security interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, bill of lading or other document of
title; on consignment from any Person; on consignment to any Person or
subject to any bailment unless such consignee or bailee has executed an
agreement with the Lender;
(ii) Supplies, packaging or sample Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, not currently
saleable in the normal course of the Borrower's operations or which has
been owned by the Borrower for more than twelve (12) months;
(v) Inventory that the Borrower has returned, has attempted to
return, is in the process of returning or intends to return to the
vendor thereof,
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(vi) Inventory manufactured by the Borrower pursuant to a
license unless (A) with respect to licenses in effect as of the Funding
Date, either (1) less than ninety (90) days have elapsed since the
Funding Date or (2) the applicable licensor has agreed in writing to
permit the lender to exercise its rights and remedies against such
Inventory, (B) with respect to licenses granted after the date hereof,
the applicable licensor has agreed in writing to permit the Lender to
exercise its rights and remedies against such Inventory; or (C) the
Lender is satisfied that it will be able to exercise its rights and
remedies against such Inventory without the consent or permission of
the applicable licensor.
(vii) Inventory that is subject to a security interest in
favor of any Person other than the Lender or Liberty BIDCO; and
(viii) Inventory otherwise deemed ineligible by the Lender in
its sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but
not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or list herewith
or hereafter furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the sum of the Base Rate
plus one percent (1.0%), which annual rate shall change when and as the Base
Rate changes; provided, however, that the Floating Rate shall be reduced by
one-fourth percent (.25%) effective on, in each case, the first day of the
first calendar month following Lender's receipt of Borrower's audited
financial statements for the fiscal year ending December 31, 1999 and for
the fiscal year ending December 31, 2000 if and only if, in each case, both
Borrower's financial statements show that Net Income during such year equals
or exceeds $500,000 and no Event of Default has occurred and is continuing.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5.
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"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, licenses
and rights under license agreements customer or supplier lists and
contracts, manuals, operating instructions, permits, franchises, the right
to use the Borrower's name, and the goodwill of the Borrower's business.
"Guarantors" means Carl E. Voigt, III and Carl E. Voigt, IV.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including, but not limited to, all securities, securities entitlements,
securities accounts, commodity contracts, commodity accounts, stock, bonds,
mutual fund shares, money market shares and United States of America
Government securities.
"Liberty BIDCO" means Liberty BIDCO Investment Corporation, a Michigan
business and industrial development corporation.
"Loan Documents" means this Agreement, the Note and the Security
Documents.
"Lockbox" has the meaning given in the Lockbox Agreement.
"Lockbox Agreement" means the Lockbox Agreement by and among the
Borrower, NBD Bank and the Lender, of even date herewith.
"Maturity Date" means October 31, 2001.
"Maximum Line" means $2,500,000, unless said amount is reduced pursuant
to Section 2.6, in which event it means the amount to which said amount is
reduced.
"Minimum Interest Charge" has the meaning given in Section 2.2(b).
"NBD Bank" means NBD Bank, N.A.
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"Net Income" means fiscal year-to-date after-tax net income, decreased
by the sum of any extraordinary, non-operating or non-cash income recorded
by the Borrower and increased by any extraordinary, non-cash or
non-operating expense or loss recorded by the Borrower, as determined in
accordance with GAAP.
"Norwest Bank Minnesota" means Norwest Bank Minnesota, National
Association.
"Note" means the Borrower's revolving promissory note, payable to the
order of the Lender in substantially the form of EXHIBIT A hereto and any
note or notes issued in substitution therefor, as the same may hereafter be
amended, supplemented or restated from time to time.
"Obligations" means the Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now or
at any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises
in a transaction involving the Lender alone or in a transaction involving
other creditors of the Borrower, and whether it is direct or indirect, due
or to become due, absolute or contingent, primary or secondary. liquidated
or unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness of the Borrower arising
under this Agreement, the Note, or any other loan or credit agreement or
guaranty between the Borrower and the Lender, whether now in effect or
hereafter entered into.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the
premises legally described in EXHIBIT C attached hereto.
"Receivables" means each and every right of the Borrower to the payment
of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out
of a loan, out of the overpayment of taxes or other liabilities, or
otherwise arises under any contract or agreement, whether such right to
payment is created, generated or earned by the Borrower or by some other
person who subsequently transfers such person's interest to the Borrower,
whether
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such right to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights and
interests (including all liens and security interests) which the borrower may at
any time have by law or agreement against any account debtor or other obligor
obligated to make any such payment or against any property of such account
debtor or other obligor; all including but not limited to all present and future
accounts, contract rights, loans and obligations receivable, chattel papers,
bonds, notes and other debt instruments, tax refunds and rights to payment in
the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Security Documents" means this Agreement, the Collateral Account
Agreement, the Lockbox Agreement, and any other document delivered to the
Lender from time to time to secure the Obligations, as the same may
hereafter be amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subordination Agreement" means the Subordination Agreement of even
date herewith to be executed by Liberty BIDCO in the Lender's favor and
acknowledged by the Borrower, and any other Subordination Agreement accepted
from Liberty BIDCO by the Lender and acknowledged by the Borrower from time
to time, as the same may be amended, supplemented or restated from time to
time.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of directors
of such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by the Borrower, by the Borrower and one or more other Subsidiaries,
or by one or more other Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default pursuant
to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.14 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
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Section 1.2. Cross References. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections And
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
Amount and Terms of the Credit Facility
Section 2. 1. Advances. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make advances to the Borrower from time
to time from the date all of the conditions set forth in Section 4.1 are
satisfied (the "Funding Date") to the Termination Date, on the terms and
subject to the conditions herein set forth (the "Advances"). The Lender
shall have no obligation to make an Advance if, after giving effect to such
requested Advance, the sum of the outstanding and unpaid Advances under this
Section 2.1 or otherwise would exceed the Borrowing Base. The Borrower's
obligation to pay the Advances shall be evidenced by the Note and shall be
secured by the Collateral as provided in Article III. Within the limits set
forth in this Section 2. 1, the Borrower may borrow, prepay pursuant to
Section 2.6 and reborrow. The Borrower agrees to comply with the following
procedures in requesting Advances under this Section 2.1:
(a) The Borrower shall make each request for an Advance to the
Lender before 11:00 a.m. (Milwaukee time) of the day of the requested
Advance. Requests may be made in writing or by telephone, specifying
the date of the requested Advance and the amount thereof. Each request
shall be by an Authorized Borrower Representative. Each oral request
for an Advance shall be conclusively presumed to be by an Authorized
Borrower Representative.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Advance by crediting the same to the Borrower's demand deposit account
maintained with NBD Bank unless the Lender and the Borrower shall agree
in writing to another manner of disbursement. Upon the Lender's
request, the Borrower shall promptly confirm each telephonic request
for an Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrower shall repay all Advances even
if the Lender does not receive such confirmation. Any request for an
Advance, whether written or telephonic, shall be deemed to be a
representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the time of the request.
Section 2.2. Interest; Minimum Interest Charge; Default Interest;
Participations; Usury. Interest accruing on the Note shall be due and
payable in arrears on the first day of each month.
(a) NOTE. Except as set forth in Sections 2.2(c) and 2.2(d),
the outstanding principal balance of the Note shall bear interest at
the Floating Rate.
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(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest
payable pursuant to Section 2.2(a), the Borrower shall pay to the
Lender interest of not less than $60,000 during each year beginning on
the Funding Date And each anniversary thereof (the "Minimum Interest
Charge") during the term of this Agreement, and the Borrower shall pay
any deficiency between the Minimum Interest Charge and the amount of
interest otherwise calculated under Sections 2.2(a) on the date and in
the manner provided in Section 2.4.
(c) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(d) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary contained in
any Loan Document, all agreements which either now are or which shall
become agreements between the Borrower and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest
and other charges exceed the applicable limits imposed by any
applicable usury laws. If any payments in the nature of interest,
additional interest and other charges made under any Loan Document are
held to be in excess of the limits imposed by any applicable usury
laws, it is agreed that any such amount held to be in excess shall be
considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total
liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower
and the Lender. This provision shall never be superseded or waived and
shall control every other provision of the Loan Documents and all
agreements between the Borrower and the Lender, or their successors and
assigns.
Section 2.3. Fees.
(a) ORIGINATION FEE. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $5,000
which is due and payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.3(b),
"Unused Amount" means the Maximum Line reduced by outstanding Advances.
The Borrower agrees to pay to the Lender an unused line fee at the rate
of one-fourth percent (.25%) per annum on the average daily Unused
Amount from the date of this Agreement to and including the Termination
Date, due and payable quarterly in
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arrears on the first day of each January, April, July and October and
on the Termination Date.
(b) AUDIT FEES. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender AS
ITS AUDIT FEES (which fees are currently $ 1,000 per quarter beginning
January 1, 1999), plus reasonable out-of-pocket costs and expenses, and
during Default Periods all reasonable out-of-pocket costs and expenses
incurred in conducting any such audit or inspection.
(d) MISCELLANEOUS FEES. The Borrower hereby agrees to (i) pay
the Lender for all wire transfer charges and automated clearing house
charges and to (ii) pay overadvance charges of $100 per day; provided,
however, that from the first day of any month during which any Default
Period commences or exists at any time, the daily overadvance charge
(if an overadvance exists) shall be $200.
Section 2.4. Computation of Interest and Fees; When Interest Due and
Payable. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed
on the basis of actual number of days elapsed in a year of three hundred
sixty (360) days. Interest shall be payable in arrears on the first day of
each month and on the Termination Date.
Section 2.5. Intentionally Left Blank.
Section 2.6. Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower. Except as otherwise
provided herein, the Borrower may prepay the Advances in whole at any time
or from time to time in part. The Borrower may terminate the Credit Facility
or reduce the Maximum Line at any time if it (i) gives the Lender at least
thirty (30) days prior written notice and (ii) pays the Lender the
termination or line reduction fees in accordance with Section 2.7. Any
reduction in the Maximum Line must be in an amount not less than $100,000 or
an integral multiple thereof. If the Borrower terminates the Credit
Facility, all Obligations shall be immediately due and payable. Upon
termination of the Credit Facility and payment and performance of all
Obligations, the Lender shall release or terminate the Security Interest and
the Security Documents to which the Borrower is entitled by law.
Section 2.7. Termination and Line Reduction Fees. If the Credit
Facility is terminated for any reason as of a date other than the Maturity
Date, the Borrower shall pay the Lender a fee in an amount equal to $5,000
multiplied by the number of months remaining until the Maturity Date;
provided, however, that no termination fee shall be payable if (i) the
Credit Facility is terminated by the Lender in accordance with the
provisions of Section 8.2(a) hereof, (ii) the Lender declares the
Obligations to be due and payable in accordance with Section 8.2(b) hereof,
or (iii) the Credit Facility is terminated on or after the date which
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is eighteen (18) months after the Funding Date on account of refinancing of the
Credit Facility by a Norwest Bank. If the Borrower reduces the Maximum Line, the
Borrower shall pay the Lender a fee in an amount equal to a percentage of the
reduction in the Maximum Line as follows: (i) three percent (3.0%) if the
reduction occurs on or before the first anniversary of the Funding Date; (ii)
two percent (2.0%) if the reduction occurs after the first anniversary of the
Funding Date but on or prior to the second anniversary of the Funding Date; and
(iii) one percent (1.0%) if the reduction occurs after the second anniversary of
the Funding Date.
Section 2.8. Mandatory Prepayment. Without notice or demand, if the sum
of the outstanding principal balance of the Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Advances to the
extent necessary to eliminate such excess. Any payment received by the Lender
under this Section 2.8 or under Section 2.6 may be applied to the Obligations,
in such order and in such amounts as the Lender, in its discretion, may from
time to time determine.
Section 2.9. Payment. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations one (1)
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) Banking Days before
applying them to the Obligations. Notwithstanding anything in Section 2. 1, the
Borrower hereby authorizes the Lender, in its discretion at any time or from
time to time without the Borrower's request and even if the conditions set forth
in Section 4.2 would not be satisfied, to make an Advance in an amount equal to
the portion of the Obligations from time to time due and payable.
Section 2.10. Payment on Non-Banking Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.11. Use of Proceeds. The Borrower shall use the proceeds of
Advances for repayment of existing indebtedness, for ordinary working capital
purposes and for Capital Expenditures.
Section 2.12. Liability Records. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All entries
made on any such record shall be presumed correct until the Borrower establishes
the contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within thirty (30) days
after receipt.
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ARTICLE III
Security Interest; Occupancy; Setoff
Section 3.1. Grant of Security Interest. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Section 3.2. Notification of Account Debtors and Other Obligors. The Lender may
at any time after the occurrence of an Event of Default notify any account
debtor or other person obligated to pay the amount due that such right to
payment has been assigned or transferred to the Lender for security and shall be
paid directly to the Lender. The Borrower will join in giving such notice if the
Lender so requests. At any time after the Borrower or the Lender gives such
notice to an account debtor or other obligor, the Lender may, but need not, in
the Lender's name or in the Borrower's name, (a) demand, sue for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as the Borrower's agent and attorney-in-fact,
notify the United States Postal Service to change the address for delivery of
the Borrower's mail to any address designated by the Lender, otherwise intercept
the Borrower's mail, and receive, open and dispose of the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for the Borrower's account or forwarding such mail to the Borrower's last
known address.
Section 3.3. Assignment of Insurance. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, an), and all policies of insurance now
or at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether or not a Default Period then exists, the Lender may
(but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4. Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default
Period.
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(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good faith deem to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5. License. The Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of
the Borrower for the purpose of selling, leasing or otherwise disposing of
any or all Collateral during any Default Period.
Section 3.6. Financing Statement. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
Fundex Games, Ltd.
2237 Directors Row
Indianapolis, Indiana 43241
Federal Tax Identification No. 35-1846155
Name and address of Secured Party:
Norwest Business Credit, Inc.
100 East Wisconsin Avenue
Suite 1400
Milwaukee, Wisconsin 53202
Federal Tax Identification No. 41-1237652
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Section 3.7. Setoff. The Borrower agrees that the Lender may at any
time or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any Obligation, whether or not due. In addition,
each other Person holding a participating interest in any Obligations shall have
the right to appropriate or setoff any deposit or other liability then owed by
such Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrower the amount of such participating interest.
ARTICLE IV
Conditions of Lending
Section 4.1. Conditions Precedent to the Initial Advances. The Lender's
obligation to make the initial Advances hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to
which the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) The Collateral Account Agreement, properly executed by the
Borrower and NBD Bank.
(e) The Lockbox Agreement, properly executed by the Borrower
and NBD Bank.
(f) The Subordination Agreement, properly executed by Liberty
BIDCO and acknowledged by the Borrower.
(g) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against the Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the
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Security Interest, to the extent the Security Interest is capable of
being perfected by filing.
(h) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's
directors and, if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) the Borrower's
articles of incorporation and bylaws, and (iii) the signatures of the
Borrower's officers or agents authorized to execute and deliver the
Loan Documents and other instruments, agreements and certificates,
including Advance requests, on the Borrower's behalf.
(i) A letter from an officer of the Borrower identifying those
individuals who are authorized to initiate and confirm payment orders
and to sign collateral reports.
(j) A current certificate issued by the Secretary of State of
Nevada, certifying that the Borrower is in compliance with all
applicable organizational requirements of the State of Nevada.
(k) Evidence that the Borrower is duly licensed or qualified
to transact business in Indiana and in all other jurisdictions where
the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification
necessary.
(1) A certificate of an officer of the Borrower confirming, in
his personal capacity, the representations and warranties set forth in
Article V.
(m) An opinion of counsel to the Borrower and the Guarantors,
addressed to the Lender.
(n) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(o) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full
and prompt payment of all Obligations, together, in each case, with an
acknowledgment letter executed by such Guarantor, pursuant to which
such Guarantor acknowledges the legal obligations created by his
guaranty.
(p) A waiver of interest, properly executed by the spouse of
each Guarantor.
(q) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.3 and expenses incurred by the
Lender through such date
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and required to be paid by the Borrower under Section 9.6, including
all legal expenses incurred through the date of this Agreement.
(r) Written authorization from the Borrower to pay proceeds of
the Advances to third parties.
(s) A payoff letter from NBD bank and any other party holding
a loan or capitalized lease which will be paid with the proceeds of the
initial Advances.
(t) Such other documents as the Lender in its sole discretion
may require.
Section 4.2. Conditions Precedent to All Advances. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance, which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Section 5. 1. Corporate Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations; Tax Identification Number. The
Borrower is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Nevada and is duly licensed or
qualified to transact business in Indiana and in all other jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary.
The Borrower has all requisite power and authority, corporate or otherwise,
to conduct its business, to own its properties and to execute and deliver,
and to perform all of its obligations under, the Loan Documents. During its
existence, the Borrower has done business solely under the names set forth
in Schedule 5.1 hereto. The Borrower's chief executive office and principal
place of business is located at the address set forth in Schedule 5.1
hereto, and all of the Borrower's records relating to its business or the
Collateral are kept at that location. All Inventory and Equipment is located
at that location or at one of the other locations set forth in Schedule 5.1
hereto. The Borrower's tax identification number is correctly set forth in
Section 3.6 hereto.
Section 5.2. Authorization of Borrowing; No Conflict as to Law or
Agreements. The execution, delivery and performance by the Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary
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corporate action and do not and will not (i) require any consent or
approval of the borrower's stockholders; (ii) require any authorization,
consent or approval by, or registration, declaration or filing with, or
notice to, any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or
notice as has been obtained, accomplished or given prior to the date hereof;
(iii) violate any provision of any law, rule or regulation (including,
without limitation, Regulation X of the Board of Governors of the Federal
Reserve System) or of any order, writ, injunction or decree presently in
effect having applicability to the Borrower or of the Borrower's articles of
incorporation or bylaws; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other material
agreement, lease or instrument to which the Borrower is a party or by which
it or its properties may be bound or affected; or (v) result in, or require,
the creation or imposition of any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance of any nature (other than
the Security Interest) upon or with respect to any of the properties now
owned or hereafter acquired by the Borrower.
Section 5.3. Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms.
Section 5.4. Subsidiaries. The Borrower has no Subsidiaries.
Section 5.5. Financial Condition: No Adverse Change. The Borrower has
heretofore furnished to the Lender its audited financial statements for its
fiscal year ended December 31, 1997, and its unaudited financial statements
for the fiscal year-to-date period ended September 30, 1998 and those
statements fairly present the Borrower's financial condition on the dates
thereof and the results of its operations and cash flows for the periods
then ended and were prepared in accordance with GAAP, subject to year-end
audit adjustments, inventory verification and other non-recurring
adjustments to such financial statements not typically made for preparing
interim financial statements. Since the date of the most recent financial
statements, there has been no material adverse change in the Borrower's
business, properties or condition (financial or otherwise).
Section 5.6. Litigation. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any
of its Affiliates before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which, if
determined adversely to the Borrower or any of its Affiliates, would have a
material adverse effect on the financial condition, properties or operations
of the Borrower or any of its Affiliates.
Section 5.7. Regulation U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning
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of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
Section 5.8. Taxes. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local
taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may
be, are required to be filed, and the Borrower and its Affiliates have paid
or caused to be paid to the respective taxing authorities all taxes as shown
on said returns or on any assessment received by any of them to the extent
such taxes have become due.
Section 5.9. Titles and Liens. The Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender
and all other Collateral, properties and assets reflected in the latest
financial statements referred to in Section 5.5 and all proceeds thereof,
free and clear of all mortgages, security interests, liens and encumbrances,
except for Permitted Liens. No financing statement naming the Borrower as
debtor is on file in any office except to perfect only Permitted Liens.
Section 5. 10. Plans. Except as disclosed to the Lender in writing
prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any Affiliate
has received any notice or has any knowledge to the effect that it is not in
full compliance with any of the requirements of ERISA. No Reportable Event
or other fact or circumstance which may have an adverse effect on the Plan's
tax qualified status exists in connection with any Plan. Neither the
Borrower nor any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11. Default. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is
a party or by which it or its property is bound or affected, the breach or
default of which could have a material adverse effect on the Borrower's
financial condition, properties or operations.
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Section 5.12. Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the
Borrower or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrower, alleging liability under, violation of, or noncompliance with
any Environmental Law or any license, permit or other authorization
issued pursuant thereto. To the Borrower's best knowledge, no such
matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrower's possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within
twelve (12) months and there is no threat that any such permit will be
withdrawn, terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
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(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrower's
businesses.
Section 5.13. Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of the borrower in
connection with the borrower's request for the credit facilities
contemplated hereby is true and correct in all material respects and, as to
projections, valuations or proforma financial statements, present a good
faith opinion as to such projections, valuations and proforma condition and
results.
Section 5.14. Financing Statements. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents
which is capable of being perfected by filing financing statements. None of
the Collateral or other collateral covered by the Security Documents is or
will become a fixture on real estate, unless a sufficient fixture filing is
in effect with respect thereto.
Section 5.15. Rights to Payment. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents
is (or, in the case of all future Collateral or such other collateral, will
be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, setoff or counterclaim, of the account
debtor or other obligor named therein or in the Borrower's records
pertaining thereto as being obligated to pay such obligation.
ARTICLE VI
Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower WILL comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6. 1. Reporting Requirements. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be
in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Borrower,
the Borrower's audited financial statements with the unqualified
opinion of independent certified public accountants selected by the
Borrower and acceptable to the Lender, which annual financial
statements shall include the Borrower's balance sheet as at the end of
such
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fiscal year and the related statements of the Borrower's income,
retained earnings and cash flows for the fiscal year then ended,
prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, all in reasonable detail
and prepared in accordance with GAAP, together with (i) copies of all
management letters prepared by such accountants; (ii) a report signed
by such accountants stating that in making the investigations necessary
for said opinion they obtained no knowledge, except as specifically
stated, of any Default or Event of Default hereunder and all relevant
facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set
forth in Sections 6.12, 6.13 and 7.10; and (iii) a certificate of the
Borrower's chief financial officer, substantially in the form of
EXHIBIT B, stating (A) that such financial statements have been
prepared in accordance with GAAP, (B) whether or not such officer has
knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (c) all relevant
facts in reasonable detail to evidence, and the computations as to,
whether the Borrower is in compliance with the requirements set forth
in Sections 6.12, 6.13 and 7.10;
(b) as soon as available and in any event within twenty (20)
days after the end of each month, an unaudited/internal balance sheet
and statements of income and retained earnings of the Borrower as at
the end of and for such month and for the year to date period then
ended, prepared, if the Lender so requests, on a consolidating and
consolidated basis to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments, inventory verification and other
non-recurring adjustments to such financial statements not typically
made for preparing interim financial statements (collectively, the
"Adjustments") and accompanied by a certificate of the Borrower's chief
financial officer, substantially in the form of EXHIBIT B hereto
stating (i) that such financial statements have been prepared in
accordance with GAAP, subject to the Adjustments, (ii) whether such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto, and (iii)
all relevant facts in reasonable detail to evidence, and the
computations as to, whether the Borrower is in compliance with the
requirements set forth in Sections 6.12, 6.13 and 7.10;
(c) within fifteen (15) days after the end of each month or
more frequently if the Lender so requires, agings of the Borrower's
accounts receivable and its accounts payable, an inventory
certification report, and a calculation of the Borrower's Accounts,
Eligible Accounts, Inventory and Eligible Inventory as at the end of
such month or shorter time period;
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(d) at least thirty (30) days before the beginning of each
fiscal year of the Borrower, the projected balance sheets and income
statements FOR each month of such year, each in reasonable detail,
representing the Borrower's good faith projections and certified by the
Borrower's chief financial officer as being the most accurate
projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such supporting
schedules and information as the Lender may in its discretion require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting the Borrower of the type
described in Section 5.12 or which seek a monetary recovery against the
Borrower in excess of $ 10,000;
(f) as promptly as practicable, and in any event not later
than five (5) business days after an officer of the Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrower of the
steps being taken by the Borrower to cure the effect of such breach,
default or event;
(g) as soon as possible, and in any event within thirty (30)
days after the Borrower knows or has reason to know that any Reportable
Event with respect to any Plan has occurred, the statement of the
Borrower's chief financial officer setting forth details as to such
Reportable Event and the action which the Borrower proposes to take
with respect thereto, together with a copy of the notice of such
Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within ten ( 10)
days after the Borrower fails to make any quarterly contribution
required with respect to any Plan under Section 412(m) of the Internal
Revenue Code of 1986, as amended, the statement of the Borrower's chief
financial officer setting forth details as to such failure and the
action which the Borrower proposes to take with respect thereto,
together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers exceeding $ 10,000
individually; (ii) credit memos; (iii) any goods returned to or
recovered by the Borrower; and (iv) any change in the persons
constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
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(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(1) promptly after the sending or filing thereof, copies of
ALL REGULAR and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) as soon as filed with the applicable taxing authorities,
and in any event by not later than April 30th of each year or, if a
valid extension of time to file has been obtained in any such year,
August 30th of such year, copies of the state and federal tax returns
and all schedules thereto and an updated personal financial statement
of each individual Guarantor;
(n) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect the Borrower's business or its
financial condition; and
(o) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
Section 6.2. Books and Records: Inspection and Examination. The
Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to the Borrower's business and
financial condition and such other matters as the Lender may from time to
time request in which true and complete entries will be made in accordance
with GAAP, subject to year-end audit adjustments, inventory verification and
other non-recurring adjustments to such financial statements not typically
made for preparing interim financial statements and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate
and financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss
the Borrower's affairs with any of its directors, officers, employees or
agents. The Borrower will permit the Lender, or its employees, accountants,
attorneys or agents, to examine and inspect any Collateral, other collateral
covered by the Security Documents or any other property of the Borrower at
any time during ordinary business hours.
Section 6.3. Account Verification. The Lender may at any time and from
time to time (i) send or require the Borrower to send requests for
verification of accounts and (ii) telephone account debtors and other
obligors to verify accounts. The Lender may also at any time after the
occurrence of an Event of Default send or require the Borrower to send
written notices of assignment to account debtors and other obligors.
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Section 6.4. Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
Section 6.5. Payment of Taxes and Other Claims. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest,
prior to the date on which penalties attach thereto, (b) all federal, state
and local taxes required to be withheld by it, and (c) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a lien
or charge upon any properties of the Borrower; provided, that the Borrower
shall not be required to pay any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made.
Section 6.6. Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent the
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in the Lender's discretion,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security
interests, liens and encumbrances except Permitted Liens.
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Section 6.7. Insurance. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible
and reputable, in such amounts and against such risks as may from time to
time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which
the Borrower operates. Without limiting the generality of the foregoing, the
Borrower will at all times maintain business interruption insurance
including coverage for force majeure and keep all tangible Collateral
insured against risks of fire (including so-called extended coverage),
theft, collision (for Collateral consisting of motor vehicles) and such
other risks and in such amounts as the Lender may reasonably request, with
any loss payable to the Lender to the extent of its interest, and all
policies of such insurance shall contain a lender's loss payable endorsement
for the Lender's benefit acceptable to the Lender. All policies of liability
insurance required hereunder shall name the Lender as an additional insured.
Section 6.8. Preservation of Existence. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall
conduct its business in an orderly and efficient manner.
Section 6.9. Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or
assigned by the Borrower.
Section 6.10. Collateral Account.
(a) If, notwithstanding the instructions to debtors to make
payments to the Lockbox, the Borrower receives any payments on
Receivables or other proceeds of Collateral, the Borrower shall deposit
such payments and proceeds into the Collateral Account. Until so
deposited, the Borrower shall hold all such payments and proceeds in
trust for and as the property of the Lender and shall not commingle
such payments with any of its other funds or property.
(b) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except
after full payment and discharge of all Obligations.
(c) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender from time to time at its discretion may, after
allowing two (2) Banking Days, apply deposited funds in the Collateral
Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to
the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrower will immediately pay
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the Lender, or, for items deposited in the Collateral Account, the bank
maintaining such account, the amount of that item, or such bank at its
discretion may charge any uncollected item to the Borrower's commercial
account or other account. The Borrower shall be liable as an endorser
on all items deposited in the Collateral Account, whether or not in
fact endorsed by the Borrower.
Section 6.11. Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written
notice thereof (or in the case of the agreements contained in Sections 6.5,
6.7 and 6.10, immediately upon the occurrence of such failure, without
notice or lapse of time), the Lender may, but need not, perform or observe
such covenant on behalf and in the name, place and stead of the Borrower
(or, at the Lender's option, in the Lender's name) and may, but need not,
take any and all other actions which the Lender may reasonably deem
necessary to cure or correct such failure (including, without limitation,
the payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or
other obligors, the procurement and maintenance of insurance, the execution
of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrower shall thereupon pay to the
Lender on demand the amount of all monies expended and all costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred
by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as the Borrower's attorney
in fact (which appointment is coupled with an interest) with the right (but
not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of the Borrower any and
all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by the Borrower
under this Section 6.11.
Section 6.12. Minimum Book Net Worth. While any part of the Obligations
remains unpaid, the Borrower shall, unless waived in writing by Lender,
continuously maintain:
(a) from the Funding Date through December 31, 1998, a minimum
Book Net Worth of One Million Two Hundred Thousand Dollars
($1,200,000);
(b) thereafter a minimum Book Net Worth during each fiscal
period from January 1 through December 30 of not less than the Book Net
Worth as of the end of the preceding fiscal year minus Three Hundred
Fifty Thousand Dollars ($350,000); and
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(c) a minimum Book Net Worth as of the end of each fiscal year
after December 31, 1998, of not less than Two Hundred Thousand Dollars
($200,000) more than the Book Net Worth as of the end of the preceding
fiscal year.
Section 6.13. Minimum Net Income. The Borrower will achieve during each
fiscal year ending on or after December 31, 1999 during the term hereof, as
demonstrated on the audited year-end financial statements of the Borrower,
Net Income of not less than $200,000 per fiscal year.
ARTICLE VII
Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
Section 7.1. Liens. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; excluding, however, from the operation of the
foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights, easements and minor irregularities in
title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
Schedule 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents;
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding
the lesser of cost or fair market value thereof and so long as no
Default Period is then in existence and none would exist immediately
after such acquisition; and
(e) the liens and security interests in favor of Liberty BIDCO
so long as its liens and security interests in the Collateral are
subordinate to the liens of the Lender on terms satisfactory to the
Lender.
Section 7.2. Indebtedness. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for
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borrowed money or letters of credit issued on the Borrower's behalf, or any
other indebtedness or liability evidenced by notes, bonds, debentures or similar
obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto;
(c) indebtedness relating to liens permitted in accordance
with Section 7.1; and
(d) indebtedness to Liberty BIDCO, so long as such
indebtedness remains subordinate to the Obligations pursuant to the
terms of the Subordination Agreement.
Section 7.3. Guaranties. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.2 hereto.
Section 7.4. Investments and Subsidiaries.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U. S. corporations rated
"A-1 or "A-2" by Standard & Poor's Corporation or "P-1" or
"P-2" by Moody's Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $ 100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation); and
(ii) travel advances or loans to the Borrower's
officers and employees not exceeding at any one time an
aggregate of $10,000.
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(b) The Borrower will not create or permit to exist
any Subsidiary.
Section 7.5. Dividends. The Borrower will not declare or pay any
dividends (other than dividends payable solely in stock of the Borrower) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 7.6. Sale or Transfer of Assets, Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part
of its assets, or (iii) any Collateral or any interest therein (whether in
one transaction or in a series of transactions) to any other Person other
than (A) the sale of Inventory in the ordinary course of business and (B)
the sale of equipment in any calendar year with an aggregate book value of
not more than $25,000. The Borrower will not liquidate, dissolve or suspend
business operations. The Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate
consideration.
Section 7.7. Consolidation and Merger: Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all the assets
of any other Person.
Section 7.8. Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the
Borrower shall sell or transfer any real or personal property, whether now
owned or hereafter acquired, and then or thereafter rent or lease as lessee
such property or any part thereof or any other property which the Borrower
intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
Section 7.9. Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10. Capital Expenditures. The Borrower will not incur or
contract to incur Capital Expenditures of more than $ 100,000 in the
aggregate during any fiscal year.
Section 7.11. Accounting. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 7.12. Discounts, etc. The Borrower will not, after notice from
the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether before
or after notice from the Lender) modify,
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amend, subordinate, cancel or terminate the obligation of any account
debtor or other obligor of the Borrower.
Section 7.13. Defined Benefit Pension Plans. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14. Other Defaults. The Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15. Place of Business; Name. The Borrower will not transfer
its chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrower will not permit
any tangible Collateral or any records pertaining to the Collateral to be
located in any state or area in which, in the event of such location, a
financing statement covering such Collateral would be required to be, but
has not in fact been, filed in order to perfect the Security Interest. The
Borrower will not change its name.
Section 7.16. Organizational Documents. The Borrower will not amend its
certificate of incorporation, articles of incorporation or bylaws.
Section 7.17. Salaries. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than twenty percent (20%) in any one year, either
individually or for all such persons in the aggregate, or pay any such
increase from any source other than profits earned in the year of payment.
Section 7.18. Change in Ownership. The Borrower will not issue or sell
any stock of the Borrower so as to change the percentage of voting and
non-voting stock owned by each of the Borrower's shareholders, and the
Borrower will not permit or suffer to occur the sale, transfer, assignment,
pledge or other disposition of any or all of the issued and outstanding
shares of stock of the Borrower. Notwithstanding the foregoing, (i) so long
as the Guarantors continue to hold in the aggregate a sufficient number of
shares of stock to control shareholder votes, the Borrower may sell up to
three hundred thousand (300,000) shares in the aggregate of the Borrower's
common stock upon the exercise of options issued to the Borrower's employees
pursuant to the Borrower's 1996 Employee Stock Option Plan and up to fifty
thousand (50,000) shares of the Borrower's common stock upon the exercise of
options issued to the Borrower's directors pursuant to the Borrower's 1996
Stock Option Plan for Non-Employee Directors and (ii) the Borrower's stock
may be pledged to Liberty BIDCO in support of the loans by Liberty BIDCO to
the Borrower; provided, however, that the Lender's agreement to such pledge
shall not be deemed or construed to constitute or imply any agreement by the
Lender to the transfer of such stock upon enforcement of such pledge.
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ARTICLE VIII
Events of Default, Rights and Remedies
SECTION 8.1. Events of Default. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become
due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(d) The Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his
debts as they mature, or make an assignment for the benefit of
creditors; or the. Borrower or any Guarantor shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or him or for all or any substantial part of its or his property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of the Borrower or such Guarantor, as the
case may be; or the Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Borrower
or any such Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower or any Guarantor;
(e) A petition shall be filed by or against the Borrower or
any Guarantor under the United States Bankruptcy Code naming the
Borrower or such Guarantor as debtor;
(f) Any representation or warranty made by the Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by the Borrower (or any of its officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(g) The rendering against the Borrower of a final judgment,
decree or order for the payment of money in excess of $25,000 and the
continuance of such judgment,
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decree or order unsatisfied and in effect for any period of thirty (30)
consecutive days without a stay of execution;
(h) A "default" or "event of default" as defined therein,
which gives the applicable lender the right to accelerate or demand
payment of indebtedness, occurs under any bond, debenture, note or
other evidence of indebtedness of the Borrower owed to any Person other
than the Lender, or under any indenture or other instrument under which
any such evidence of indebtedness has been issued or by which it is
governed, or a "default" or "event of default" as defined therein,
which gives the applicable lessor the right to terminate such lease,
occurs under any lease of any of the Premises;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
thirty (30) days after written notice to such effect shall have been
given to the Borrower by the Lender; or a trustee shall have been
appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Borrower shall have filed for a distress
termination of any Plan under Title IV of ERISA; or the Borrower shall
have failed to make any quarterly contribution required with respect to
any, Plan under Section 412(m) of the Internal Revenue Code of 1986, as
amended, which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
the Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of the Borrower hereunder or under any note;
(k) The Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
(1) The Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(m) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
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(n) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's
guaranty in favor of the Lender, or shall die;
(o) Any event or circumstance with respect to the Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by the Borrower under the Loan Documents is impaired or any
material adverse change in the business or financial condition of the
Borrower shall occur;
(p) The Borrower shall take or participate in any action which
would be prohibited under the provisions of the Subordination Agreement
or make any payment on the Subordinated Indebtedness (as defined in the
Subordination Agreement) that any Person was not entitled to receive
under the provisions of the Subordination Agreement; or
(q) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender.
Section 8.2. Rights and Remedies. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the
Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
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(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3. Certain Notices. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten (10) calendar days
before the date of intended disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1. No Waiver: Cumulative Remedies. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
Section 9.2. Amendments, Etc. No amendment, modification or waiver of
any provision of any Loan Document shall be effective unless the same shall be
in writing and signed by the Lender and the Borrower and no consent to any
departure by the Borrower from any provisions of any Loan Document or any
release of a Security Interest shall be effective unless the same shall be in
writing and signed by the Lender. Any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.
Section 9.3. Addresses for Notices, Etc. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States of America mail, and
in the case of notices and demands, registered or certified, return receipt
requested, (c) sent by overnight courier of national reputation, or (d)
transmitted by facsimile, in each case addressed or facsimiled to the party to
whom notice is being given at its address or facsimile number as set forth
below:
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If to the Borrower:
Fundex Games, Ltd.
2237 Directors Row
Indianapolis, Indiana 46241
Facsimile: 317/248-1086
Attention: Carl E. Voigt, IV
With a copy of notices or demands only to:
Much, Shelist, Freed, Denenberg, Ament & Rubenstein, P.C.
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601-1095
Facsimile: 312/621-1750
Attention: Mitchell S. Roth, Esquire
If to the Lender:
Norwest Business Credit, Inc.
100 East Wisconsin Avenue
Suite 1400
Milwaukee, Wisconsin 53202
Facsimile: 414/224-7442
Attention: Dennis D. Schlesner, Jr.
or, as to each party, at such other address or facsimile number as may hereafter
be designated by such party in a written notice to the other party complying as
to delivery with the terms of this Section; provided, however, that failure of
the Lender to give copies of notices of default or demand to the Borrower's
attorney shall not impair the Lender's right to pursue its rights and remedies.
All such notices, requests, demands and other communications shall be deemed to
have been given on (a) the date received if personally delivered, (b) three (3)
days after when deposited in the mail if delivered by mail, (c) the date
received if sent by overnight courier, or (d) the date of transmission if
delivered by facsimile, except that notices or requests to the Lender pursuant
to any of the provisions of Article II shall not be effective until received by
the Lender.
Section 9.4. Further Documents. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of
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whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).
Section 9.5. Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.6. Costs and Expenses. The Borrower agrees to pay on demand
all costs and expenses, including, without limitation, reasonable attorney's
fees, periodic UCC, tax and judgment lien searches, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents and any
other agreement related hereto or thereto, and the transactions contemplated
hereby, including, without limitation, all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 9.7. Indemnity. In addition to the payment of expenses pursuant
to Section 9.6, the Borrower agrees to indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the
Advances;
(ii) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12
proves to be incorrect in any respect or as a result of any violation
of the covenant contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including, without limitation, the reasonable fees
and disbursements of
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counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee
shall be designated a party thereto, which may be imposed on, incurred
by or asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the making of the Advances and the
Loan Documents or the use or intended use of the proceeds of the
Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 9.8. Participants. The Lender and its participants, if any, are
not partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
Section 9.9. Execution in Counterparts. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Section 9.10. Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrower and its Affiliates, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.
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Section 9.11. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12. Headings. Article and Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 9.13. Lender's Actions. The Lender agrees that at any time
which Lender may, in accordance with this Agreement, act within its "discretion"
or its "sole discretion" or in exercising its right to "consent," Lender shall
exercise good faith and act in a commercially reasonable manner.
Section 9.14. Governing Law; Jurisdiction, Venue; Waiver of Jury Trial.
The Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Wisconsin. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Wisconsin. The parties hereto
hereby (i) consents to the personal jurisdiction of the state and federal courts
located in the State of Wisconsin in connection with any, controversy related to
this Agreement; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Lender or the
Borrower in connection with this Agreement or the other Loan Documents shall be
venued in either the Circuit Court of Milwaukee County, Wisconsin, or the United
States District Court, Eastern District of Wisconsin; and (iv) agrees that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
NORWEST BUSINESS CREDIT, INC. FUNDEX GAMES, LTD.
By: /s/ Terrance O. McKinney By: /s/ Carl E. Voigt, IV
----------------------------- -----------------------------
Terrance O. McKinney Carl E. Voigt, IV
Assistant Vice President President
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TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and Locations
of Collateral
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties