EXHIBIT 10.45
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 24, 2001
BETWEEN
BANK OF AMERICA, N.A.
AS THE LENDER
AND
MEADE INSTRUMENTS CORP.
AS THE BORROWER
CREDIT AGREEMENT
This Credit Agreement, dated as of September 24, 2001 (this
"Agreement"), between Bank of America, N.A. with an office at 55 South Lake
Avenue, Suite 900, Pasadena, California 91101 (the "Lender"), and Meade
Instruments Corp., a Delaware corporation, with offices at 6001 Oak Canyon,
Irvine, California 92618 (the "Borrower").
W I T N E S S E T H:
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WHEREAS, the Borrower has requested that the Lender make available to
the Borrower a revolving line of credit for loans and letters of credit in an
amount not to exceed $30,000,000 and to make a term loan to the Borrower in the
aggregate principal amount of $2,100,000, and which extensions of credit the
Borrower will use for the purposes permitted hereunder;
WHEREAS, capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings ascribed thereto in Annex A which is
attached hereto and incorporated herein; the rules of construction contained
therein shall govern the interpretation of this Agreement, and all Annexes,
Exhibits and Schedules attached hereto are incorporated herein by reference;
WHEREAS, the Lender has agreed to make available to the Borrower a
revolving credit facility and a term loan upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Lender and the Borrower hereby
agree as follows:
ARTICLE 1
LOANS AND LETTERS OF CREDIT
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1.1 TOTAL FACILITY. Subject to all of the terms and conditions of this
Agreement, the Lender agrees to make available a total credit facility of up to
$32,100,000 (the "Total Facility") to the Borrower from time to time during the
term of this Agreement. The Total Facility shall be composed of a revolving line
of credit consisting of Revolving Loans and Letters of Credit and the Term Loan
described herein.
1.2 REVOLVING LOANS.
(a) AMOUNTS. Subject to the satisfaction of the conditions
precedent set forth in Article 8, the Lender agrees, upon the Borrower's request
from time to time on any Business Day during the period from the Closing Date to
the Termination Date, to make revolving loans (the "Revolving Loans") to the
Borrower in amounts not to exceed Availability. The Lender, however, in its
discretion, may elect to make Revolving Loans or issue or arrange to have issued
Letters of Credit in excess of the Borrowing Base on one or more occasions, but
if it does so, the Lender shall not be deemed thereby to have changed the limits
of the Borrowing Base or to be obligated to exceed such limits on any other
occasion. If any Borrowing would exceed Availability, the Lender may refuse to
make or may otherwise restrict the making of Revolving Loans as the Lender
determines until such excess has been eliminated.
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(b) PROCEDURE FOR BORROWING.
(1) Each Borrowing shall be made upon the Borrower's
irrevocable written notice delivered to the Lender in the form of a notice of
borrowing ("Notice of Borrowing") substantially in the form of EXHIBIT C, which
must be received by the Lender prior to (i) 12:00 noon (Pasadena, California
time) three Business Days prior to the requested Funding Date, in the case of
LIBOR Rate Loans and (ii) 11:00 a.m. (Pasadena, California time) on the
requested Funding Date, in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which in the case of
a LIBOR Rate Loan must equal or exceed $1,000,000 (and increments of $1,000,000
in excess of such amount);
(B) the requested Funding Date, which must be a
Business Day;
(C) whether the Revolving Loans requested are to be
Base Rate Revolving Loans or LIBOR Revolving Loans (and if not specified, it
shall be deemed a request for a Base Rate Revolving Loan); and
(D) the duration of the Interest Period for LIBOR
Revolving Loans (and if not specified, it shall be deemed a request for an
Interest Period of one month);
provided, however, that with respect to the Borrowing to be made on the Closing
Date, such Borrowings will consist of Base Rate Revolving Loans only.
(2) In lieu of delivering a Notice of Borrowing, the
Borrower may give the Lender telephonic notice of such request for advances to
the Designated Account on or before the deadline set forth above. The Lender at
all times shall be entitled to rely on such telephonic notice in making such
Revolving Loans, regardless of whether any written confirmation is received.
(3) The Borrower shall have no right to request a
LIBOR Rate Loan while a Default or Event of Default has occurred and is
continuing.
(c) RELIANCE UPON AUTHORITY. Prior to the Closing Date, the
Borrower shall deliver to the Lender, a notice setting forth the account of the
Borrower ("Designated Account") to which the Lender is authorized to transfer
the proceeds of the Revolving Loans requested hereunder. The Borrower may
designate a replacement account from time to time by written notice. All such
Designated Accounts must be reasonably satisfactory to the Lender. The Lender is
entitled to rely conclusively on any person's request for Revolving Loans on
behalf of the Borrower, so long as the proceeds thereof are to be transferred to
the Designated Account. The Lender has no duty to verify the identity of any
individual representing himself or herself as a person authorized by the
Borrower to make such requests on its behalf.
(d) NO LIABILITY. The Lender shall not incur any liability to
the Borrower as a result of acting upon any notice referred to in Sections
1.2(b) and (c), which the Lender believes in good faith to have been given by an
officer or other person duly authorized by the Borrower to request Revolving
Loans on its behalf. The crediting of Revolving Loans to the Designated Account
conclusively establishes the obligation of the Borrower to repay such Revolving
Loans as provided herein.
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(e) NOTICE IRREVOCABLE. Any Notice of Borrowing (or telephonic
notice in lieu thereof) made pursuant to Section 1.2(b) shall be irrevocable.
The Borrower shall be bound to borrow the funds requested therein in accordance
therewith.
(f) MAKING OF REVOLVING LOANS. Promptly after receipt of a
Notice of Borrowing or telephonic notice in lieu thereof, the Lender shall make
the proceeds of such Revolving Loans available to the Borrower on the applicable
Funding Date by transferring same day funds to the account designated by the
Borrower; provided, however, that the amount of Revolving Loans so made on any
date shall not exceed the Availability on such date.
1.3 TERM LOAN.
(a) AMOUNT OF TERM LOAN. The Lender agrees to make a term loan
(a "Term Loan") to the Borrower on the Closing Date, upon the satisfaction of
the conditions precedent set forth in Article 8, in an amount equal to
$2,100,000.
(b) MAKING OF TERM LOAN. Upon satisfaction of the conditions
precedent set forth in Article 8, the Lender shall make the proceeds of such
Term Loan available to the Borrower on such Funding Date by transferring same
day funds equal to the proceeds of such Term Loan to an account of the Borrower
designated in writing by the Borrower or as the Borrower shall otherwise
instruct in writing.
(c) TERM LOAN NOTE. The Borrower shall execute and deliver to
the Lender, on the Closing Date, a promissory note, substantially in the form of
EXHIBIT A attached hereto and made a part hereof (such promissory note being
hereinafter referred to as a "Term Loan Note"). The Term Loan Note shall
evidence the Lender's Term Loan, in an original principal amount equal to
$2,100,000. The Term Loan Note shall be dated the Closing Date and shall
amortize in thirty-seven (37) monthly installments. Each of the first thirty-six
(36) installments of principal shall be in an amount equal to $35,000 and shall
be payable on the first day of each month, commencing on October 1, 2001 and
ending on September 1, 2004. The final installment of principal shall be in the
amount of $840,000 or otherwise in an amount equal to the then remaining
principal balance of the Term Loan, and shall be payable on the Stated
Termination Date. Each such installment shall be payable to the Lender. The Term
Loan shall be payable in full on the Termination Date. Payments or prepayments
of the Term Loan may not be reborrowed.
1.4 LETTERS OF CREDIT.
(a) AGREEMENT TO ISSUE OR CAUSE TO ISSUE. Subject to the terms
and conditions of this Agreement, the Lender agrees (i) to cause the Letter of
Credit Issuer to issue for the account of the Borrower one or more
commercial/documentary and standby letters of credit ("Letter of Credit") and/or
(ii) to provide credit support or other enhancement to a Letter of Credit Issuer
acceptable to Lender, which issues a Letter of Credit for the account of the
Borrower (any such credit support or enhancement being herein referred to as a
"Credit Support") from time to time during the term of this Agreement. In the
event the Letter of Credit Issuer is not the Bank, the Letter of Credit Issuer
is subject to approval by the Borrower which approval shall not be unreasonably
withheld.
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(b) AMOUNTS; OUTSIDE EXPIRATION DATE. The Lender shall not
have any obligation to issue or cause to be issued any Letter of Credit or to
provide Credit Support for any Letter of Credit at any time if: (i) the maximum
face amount of the requested Letter of Credit is greater than the Unused Letter
of Credit Subfacility at such time; (ii) the maximum undrawn amount of the
requested Letter of Credit and all commissions, fees, and charges due from the
Borrower in connection with the opening thereof would exceed Availability at
such time; or (iii) such Letter of Credit has an expiration date less than 30
days prior to the Stated Termination Date or more than 12 months from the date
of issuance for standby letters of credit and 180 days for documentary letters
of credit.
(c) OTHER CONDITIONS. In addition to conditions precedent
contained in Article 8, the obligation of the Lender to issue or to cause to be
issued any Letter of Credit or to provide Credit Support for any Letter of
Credit is subject to the following conditions precedent having been satisfied in
a manner reasonably satisfactory to the Lender:
(1) The Borrower shall have delivered to the Letter
of Credit Issuer, at such times and in such manner as such Letter of Credit
Issuer may prescribe, an application in form and substance satisfactory to such
Letter of Credit Issuer and reasonably satisfactory to the Lender for the
issuance of the Letter of Credit and such other documents as may be required
pursuant to the terms thereof, and the form, terms and purpose of the proposed
Letter of Credit shall be reasonably satisfactory to the Lender and the Letter
of Credit Issuer; and
(2) As of the date of issuance, no order of any
court, arbitrator or Governmental Authority shall purport by its terms to enjoin
or restrain money center banks generally from issuing letters of credit of the
type and in the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or the issuance of such Letters of Credit.
(d) ISSUANCE OF LETTERS OF CREDIT.
(1) REQUEST FOR ISSUANCE. Borrower must notify the
Lender of a requested Letter of Credit at least three (3) Business Days prior to
the proposed issuance date. Such notice shall be irrevocable and must specify
the original face amount of the Letter of Credit requested, the Business Day of
issuance of such requested Letter of Credit, whether such Letter of Credit may
be drawn in a single or in partial draws, the Business Day on which the
requested Letter of Credit is to expire, the purpose for which such Letter of
Credit is to be issued, and the beneficiary of the requested Letter of Credit.
The Borrower shall attach to such notice the proposed form of the Letter of
Credit.
(2) RESPONSIBILITIES OF THE LENDER; ISSUANCE. As of
the Business Day immediately preceding the requested issuance date of the Letter
of Credit, the Lender shall determine the amount of the applicable Unused Letter
of Credit Subfacility and Availability. If (i) the face amount of the requested
Letter of Credit is less than the Unused Letter of Credit Subfacility and (ii)
the amount of such requested Letter of Credit and all commissions, fees, and
charges due from the Borrower in connection with the opening thereof would not
exceed Availability, the Lender shall cause the Letter of Credit Issuer to issue
the requested Letter of Credit on the requested issuance date so long as the
other conditions hereof are met.
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(3) NO EXTENSIONS OR AMENDMENT. The Lender shall not
be obligated to cause the Letter of Credit Issuer to extend or amend any Letter
of Credit issued pursuant hereto unless the extension or amendment has been
approved by the Lender.
(e) PAYMENTS PURSUANT TO LETTERS OF CREDIT. The Borrower
agrees to reimburse immediately the Letter of Credit Issuer for any draw under
any Letter of Credit and the Lender upon any payment pursuant to any Credit
Support, and to pay the Letter of Credit Issuer the amount of all other charges
and fees payable to the Letter of Credit Issuer in connection with any Letter of
Credit immediately when due, irrespective of any claim, setoff, defense or other
right which the Borrower may have at any time against the Letter of Credit
Issuer or any other Person. Each drawing under any Letter of Credit shall
constitute a request by the Borrower to the Lender for a Borrowing of a Base
Rate Revolving Loan in the amount of such drawing. The Funding Date with respect
to such borrowing shall be the date of such drawing.
(f) INDEMNIFICATION; EXONERATION; POWER OF ATTORNEY.
(1) INDEMNIFICATION. In addition to amounts payable
as elsewhere provided in this Section 1.4, the Borrower agrees to protect,
indemnify, pay and save the Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) which the Lender (other than in its capacity as
Letter of Credit Issuer) may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit or the provision of any Credit
Support or enhancement in connection therewith. The Borrower's obligations under
this Section shall survive payment of all other Obligations.
(2) ASSUMPTION OF RISK BY THE BORROWER. As between
the Borrower and the Lender (other than in its capacity as Letter of Credit
Issuer), the Borrower assumes all risks of the acts and omissions of, or misuse
of any of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the foregoing, the Lender
(other than in its capacity as Letter of Credit Issuer) shall not be responsible
for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any Person in connection with the application for
and issuance of and presentation of drafts with respect to any of the Letters of
Credit, even if it should prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to comply
duly with conditions required in order to draw upon such Letter of Credit; (D)
errors, omissions, interruptions, or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (E) errors in interpretation of technical terms; (F) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under any Letter of Credit or of the proceeds thereof; (G) the
misapplication by the beneficiary of any Letter of Credit of the proceeds of any
drawing under such Letter of Credit; (H) any consequences arising from causes
beyond the control of the Lender, including any act or omission, whether
rightful or wrongful, of any present or future DE JURE or DE FACTO Governmental
Authority or (I) the Letter of Credit Issuer's honor of a draw for which the
draw or any certificate fails to comply in any respect with the terms of the
Letter of Credit. None of the foregoing shall affect, impair or prevent the
vesting of any rights or powers of the Lender under this Section 1.4(f).
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(3) EXONERATION. Without limiting the foregoing, no
action or omission whatsoever by the Lender (excluding the Lender in its
capacity as a Letter of Credit Issuer) shall result in any liability of the
Lender to the Borrower, or relieve the Borrower of any of its obligations
hereunder to any such Person.
(4) RIGHTS AGAINST LETTER OF CREDIT ISSUER. Nothing
contained in this Agreement is intended to limit the Borrower's rights, if any,
with respect to the Letter of Credit Issuer which shall be governed by the
letter of credit application and related documents executed by and between the
Borrower and the Letter of Credit Issuer.
(5) ACCOUNT PARTY. The Borrower hereby authorizes and
directs any Letter of Credit Issuer to name the Borrower as the "Account Party"
therein and to deliver to the Lender all instruments, documents and other
writings and property received by the Letter of Credit Issuer pursuant to the
Letter of Credit, and to accept and rely upon the Lender's instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit or the application therefor.
(g) SUPPORTING LETTER OF CREDIT; CASH COLLATERAL. If,
notwithstanding the provisions of Section 1.4(b) and Section 10.1, any Letter of
Credit or Credit Support is outstanding upon the termination of this Agreement,
then upon such termination the Borrower shall deposit with the Lender, with
respect to each Letter of Credit or Credit Support then outstanding, a standby
letter of credit (a "Supporting Letter of Credit") in form and substance
satisfactory to the Lender, issued by an issuer satisfactory to the Lender in an
amount equal to the greatest amount for which such Letter of Credit or such
Credit Support may be drawn plus any fees and expenses associated with such
Letter of Credit or such Credit Support, under which Supporting Letter of Credit
the Lender is entitled to draw amounts necessary to reimburse the Lender for
payments to be made by the Lender under such Letter of Credit or Credit Support
and any fees and expenses associated with such Letter of Credit or Credit
Support. Such Supporting Letter of Credit shall be held by the Lender as
security for, and to provide for the payment of, the aggregate undrawn amount of
such Letters of Credit or such Credit Support remaining outstanding.
1.5 BANK PRODUCTS. The Borrower may request and the Lender may, in its
sole and absolute discretion, arrange for the Borrower to obtain from the Bank
or the Bank's Affiliates Bank Products although the Borrower is not required to
do so. If Bank Products are provided by an Affiliate of the Bank, the Borrower
agrees to indemnify and hold the Lender and the Bank harmless from any and all
costs and obligations now or hereafter incurred by the Bank or the Lender which
arise from any indemnity given by the Lender to its Affiliates related to such
Bank Products; PROVIDED, HOWEVER, nothing contained herein is intended to limit
the Borrower's rights, with respect to the Bank or its Affiliates, if any, which
arise as a result of the execution of documents by and between the Borrower and
the Bank which relate to Bank Products. The agreement contained in this Section
shall survive termination of this Agreement. The Borrower acknowledges and
agrees that the obtaining of Bank Products from the Bank or the Bank's
Affiliates (a) is in the sole and absolute discretion of the Bank or the Bank's
Affiliates, and (b) is subject to all rules and regulations of the Bank or the
Bank's Affiliates.
ARTICLE 2
INTEREST AND FEES
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2.1 INTEREST.
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(a) INTEREST RATES. All outstanding Obligations shall bear
interest on the unpaid principal amount thereof (including, to the extent
permitted by law, on interest thereon not paid when due) from the date made
until paid in full in cash at a rate determined by reference to the Base Rate or
the LIBOR Rate PLUS the Applicable Margins as set forth below, but not to exceed
the Maximum Rate. If at any time Loans are outstanding with respect to which the
Borrower has not delivered to the Lender a notice specifying the basis for
determining the interest rate applicable thereto in accordance herewith, those
Loans shall bear interest at a rate determined by reference to the Base Rate
until notice to the contrary has been given to the Lender in accordance with
this Agreement and such notice has become effective. Except as otherwise
provided herein, the outstanding Obligations shall bear interest as follows:
(i) For all Base Rate Revolving Loans, Base Rate Term
Loans, and other Obligations (other than LIBOR Rate Loans) at
a fluctuating per annum rate equal to the Base Rate PLUS the
Applicable Margin;
(ii) For all LIBOR Revolving Loans at a per annum
rate equal to the LIBOR Rate PLUS the Applicable Margin.
(iii) For all LIBOR Term Loans at a per annum rate
equal to the LIBOR Rate PLUS the Applicable Margin.
Each change in the Base Rate shall be reflected in the interest rate applicable
to Base Rate Loans as of the effective date of such change. All interest charges
shall be computed on the basis of a year of 360 days and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). The Borrower shall pay to the Lender interest accrued on all Base
Rate Loans and on all LIBOR Rate Loans in arrears on the first day of each month
hereafter and on the Termination Date.
(b) DEFAULT RATE. If an Event of Default occurs and is
continuing and the Lender in its discretion so elects, then, while any such
Event of Default is continuing, all of the Obligations shall bear interest at
the Default Rate applicable thereto.
2.2 CONTINUATION AND CONVERSION ELECTIONS.
(a) The Borrower may:
(i) elect, as of any Business Day, in the case of
Base Rate Loans to convert any Base Rate Loans (or any part
thereof in an amount not less than $1,000,000, or that is in
an integral multiple of $1,000,000 in excess thereof) into
LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Rate Loans having
Interest Periods expiring on such day (or any part thereof in
an amount not less than $1,000,000, or that is in an integral
multiple of $1,000,000 in excess thereof);
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PROVIDED, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such LIBOR Rate Loans shall
automatically convert into Base Rate Loans; PROVIDED FURTHER that if the notice
shall fail to specify the duration of the Interest Period, such Interest Period
shall be one month.
(b) The Borrower shall deliver a notice of
continuation/conversion ("Notice of Continuation/Conversion") substantially in
the form of Exhibit D to the Lender not later than 12:00 noon (Pasadena,
California time) at least three (3) Business Days in advance of the
Continuation/Conversion Date, if the Loans are to be converted into or continued
as LIBOR Rate Loans and specifying:
(i) the proposed Continuation/Conversion Date;
(ii) the aggregate amount of Loans to be converted or
renewed;
(iii) the type of Loans resulting from the proposed
conversion or continuation; and
(iv) the duration of the requested Interest Period,
provided, HOWEVER, the Borrower may not select an Interest
Period that ends after the Stated Termination Date.
(c) If upon the expiration of any Interest Period applicable
to LIBOR Rate Loans, the Borrower has failed to select timely a new Interest
Period to be applicable to LIBOR Rate Loans or if any Default or Event of
Default then exists, the Borrower shall be deemed to have elected to convert
such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date
of such Interest Period.
(d) There may not be more than five (5) different LIBOR Rate
Loans in effect hereunder at any time.
2.3 MAXIMUM INTEREST RATE. In no event shall any interest rate provided
for hereunder exceed the maximum rate legally chargeable by the Lender under
applicable law with respect to loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest which would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 2.3, have been paid or accrued if the interest rate otherwise set
forth in this Agreement had at all times been in effect, then the Borrower
shall, to the extent permitted by applicable law, pay the Lender an amount equal
to the excess of (a) the lesser of (i) the amount of interest which would have
been charged if the Maximum Rate had, at all times, been in effect or (ii) the
amount of interest which would have accrued had the interest rate otherwise set
forth in this Agreement, at all times, been in effect over (b) the amount of
interest actually paid or accrued under this Agreement. If a court of competent
jurisdiction determines that the Lender has received interest and other charges
hereunder in excess of the Maximum Rate, such excess shall be deemed received on
account of, and shall automatically be applied to reduce, the Obligations other
than interest, in the inverse order of maturity, and if there are no Obligations
outstanding, the Lender shall refund to the Borrower such excess.
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2.4 CLOSING FEE. The Borrower agrees to pay the Lender on the Closing
Date a closing fee (the "Closing Fee") in the amount of $401,250.
2.5 UNUSED LINE FEE. On the first day of each month after the Closing
Date and on the Termination Date the Borrower agrees to pay to the Lender an
unused line fee (the "Unused Line Fee") equal to one-half of one percent (0.5%)
per annum times the amount by which the Maximum Revolver Amount exceeded the sum
of the average daily outstanding amount of Revolving Loans and the average daily
undrawn face amount of outstanding Letters of Credit, during the immediately
preceding month or shorter period if calculated for the first month after the
Closing Date or on the Termination Date. The Unused Line Fee shall be computed
on the basis of a 360-day year for the actual number of days elapsed. All
principal payments received by the Lender shall be deemed to be credited to the
Borrower's Loan Account immediately upon receipt for purposes of calculating the
Unused Line Fee pursuant to this Section 2.5.
2.6 LETTER OF CREDIT FEE. The Borrower agrees to pay to the Lender for
each Letter of Credit a fee (the "Letter of Credit Fee") equal to three and
one-quarter of one percent (3 1/4%) per annum times the undrawn face amount of
such Letter of Credit and to the Letter of Credit Issuer all out-of-pocket
costs, fees and expenses incurred by the Letter of Credit Issuer in connection
with the application for, opening of, processing of, issuance of, or amendment
to any Letter of Credit. The Letter of Credit Fee shall be payable monthly in
arrears on the first day of each month following any month in which a Letter of
Credit is outstanding and on the Termination Date. The Letter of Credit Fee
shall be computed on the basis of a 360-day year for the actual number of days
elapsed.
ARTICLE 3
PAYMENTS AND PREPAYMENTS
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3.1 REVOLVING LOANS. The Borrower shall repay the outstanding principal
balance of the Revolving Loans, plus all accrued but unpaid interest thereon, on
the Termination Date. The Borrower may prepay Revolving Loans at any time, and
reborrow subject to the terms of this Agreement. In addition, and without
limiting the generality of the foregoing, upon demand the Borrower shall pay to
the Lender the amount, without duplication, by which the Aggregate Revolver
Outstandings exceeds the lesser of the Borrowing Base or the Maximum Revolver
Amount.
3.2 TERMINATION OF FACILITY. The Borrower may terminate this Agreement
upon at least ten (10) Business Days' notice to the Lender, upon (a) the payment
in full of all outstanding Revolving Loans, together with accrued interest
thereon, and the cancellation and return of all outstanding Letters of Credit,
(b) the prepayment in full of the Term Loan, together with accrued and unpaid
interest thereon, (c) the payment of the early termination fee set forth below,
(d) the payment in full in cash of all reimbursable expenses and other
Obligations, and (e) with respect to any LIBOR Rate Loans prepaid, payment of
the amounts due under Section 4.4, if any. In addition, the Borrower may prepay
the Term Loan in whole or in part in accordance with Section 3.4; PROVIDED each
such prepayment is accompanied by accrued and unpaid interest on the portion of
the Term Loan prepaid. If this Agreement is terminated at any time prior to the
Stated Termination Date, whether pursuant to this Section or pursuant to SECTION
9.2, the Borrower shall pay to the Lender an early termination fee determined in
accordance with the following table:
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PERIOD DURING WHICH
EARLY TERMINATION EARLY TERMINATION
OCCURS FEE
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On or prior to the first Anniversary Date 2% of the Total Facility
After the first Anniversary Date but on or 1% of the Total Facility
prior to the second Anniversary Date
Notwithstanding the foregoing, no Early Termination Fee shall be
payable in the event all Loans are paid in full and all other Obligations are
satisfied in full after the first Anniversary Date with debt or equity arranged,
or exclusively provided, by the Bank.
3.3 REPAYMENT OF THE TERM LOAN. The Borrower agrees to repay the
principal of the Term Loan to the Lender as set forth in Section 1.3.
3.4 PREPAYMENTS OF THE TERM LOAN. The Borrower may prepay the principal
of the Term Loan in whole or in part, at any time and from time to time upon at
least 5 Business Days' prior written notice to the Lender. All voluntary
prepayments of the principal of the Term Loan shall be accompanied by the
payment of all accrued but unpaid interest on the Term Loan to the date of
prepayment. Any voluntary prepayment of less than all of the outstanding
principal of the Term Loan shall be applied to the installments of principal of
the Term Loan in the inverse order of maturity. Amounts prepaid in respect of
the Term Loan may not be reborrowed.
3.5 LIBOR RATE LOAN PREPAYMENTS. In connection with any prepayment, if
any LIBOR Rate Loans are prepaid prior to the expiration date of the Interest
Period applicable thereto, the Borrower shall pay to the Lender the amounts
described in Section 4.4.
3.6 PAYMENTS BY THE BORROWER.
(a) All payments to be made by the Borrower shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Borrower shall be made to the Lender, at
the account designated by the Lender and shall be made in Dollars and in
immediately available funds, no later than 12:00 noon (Pasadena, California
time) on the date specified herein. Any payment received by the Lender after
such time shall be deemed (for purposes of calculating interest only) to have
been received on the following Business Day and any applicable interest shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period", whenever any payment is due on a day other than a Business
Day, such payment shall be due on the following Business Day, and such extension
of time shall in such case be included in the computation of interest or fees,
as the case may be.
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3.7 PAYMENTS AS REVOLVING LOANS. At the election of the Lender, all
payments of principal, interest, reimbursement obligations in connection with
Letters of Credit and Credit Support for Letters of Credit, fees, premiums,
reimbursable expenses and other sums payable hereunder, may be paid from the
proceeds of Revolving Loans made hereunder. The Borrower hereby irrevocably
authorizes the Lender to charge the Loan Account for the purpose of paying all
amounts from time to time due hereunder and agrees that all such amounts charged
shall constitute Revolving Loans.
3.8 APPORTIONMENT, APPLICATION AND REVERSAL OF PAYMENTS. Principal and
interest payments and payments of the fees shall be payable solely to the Lender
(except for fees payable to the Letter of Credit Issuer if different than the
Lender). All payments shall be remitted to the Lender and all such payments not
relating to principal or interest of specific Loans, or not constituting payment
of specific fees, and all proceeds of Accounts or other Collateral received by
the Lender, shall be applied subject to the provisions of this Agreement, FIRST,
to pay any fees, indemnities or expense reimbursements then due to the Lender
from the Borrower; SECOND, to pay interest due in respect of all Loans; THIRD,
to pay or prepay principal of the Revolving Loans and unpaid reimbursement
obligations in respect of Letters of Credit; FOURTH, to pay or prepay principal
of the Term Loan then due; FIFTH, to pay an amount to Lender equal to all
outstanding Letter of Credit Obligations then due to be held as cash collateral
for such Obligations; and SIXTH, to the payment of any other Obligation
including any amounts relating to Bank Products due to the Lender by the
Borrower. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the Borrower, or unless an Event of Default has occurred
and is continuing, the Lender shall not apply any payments which it receives to
any LIBOR Rate Loan, except (a) on the expiration date of the Interest Period
applicable to any such LIBOR Rate Loan, or (b) in the event, and only to the
extent, that there are no outstanding Base Rate Loans and, in any event, the
Borrower shall pay LIBOR breakage losses in accordance with Section 4.4. Upon
the occurrence and continuation of an Event of Default, the Lender shall have
the continuing and exclusive right to apply and reverse and reapply any and all
such proceeds and payments to any portion of the Obligations.
3.9 INDEMNITY FOR RETURNED PAYMENTS. If after receipt of any payment
which is applied to the payment of all or any part of the Obligations, the
Lender, the Bank or any Affiliate of the Bank is for any reason compelled to
surrender such payment or proceeds to any Person because such payment or
application of proceeds is invalidated, declared fraudulent, set aside,
determined to be void or voidable as a preference, impermissible setoff, or a
diversion of trust funds, or for any other reason, then the Obligations or part
thereof intended to be satisfied shall be revived and continued and this
Agreement shall continue in full force as if such payment or proceeds had not
been received by the Lender and the Borrower shall be liable to pay to the
Lender, and hereby does indemnify the Lender and hold the Lender harmless for
the amount of such payment or proceeds surrendered. The provisions of this
Section 3.9 shall be and remain effective notwithstanding any contrary action
which may have been taken by the Lender in reliance upon such payment or
application of proceeds, and any such contrary action so taken shall be without
prejudice to the Lender's rights under this Agreement and shall be deemed to
have been conditioned upon such payment or application of proceeds having become
final and irrevocable. The provisions of this Section 3.9 shall survive the
termination of this Agreement.
3.10 LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS. The Lender shall
record the principal amount of the Loans owing to the Lender, the undrawn face
amount of all outstanding Letters of Credit and the aggregate amount of unpaid
reimbursement obligations outstanding with respect to the Letters of Credit from
time to time on its books. In addition, the Lender may note the date and amount
of each payment or prepayment of principal of the Loans in its books and
records. Failure by the Lender to make such notation shall not affect the
obligations of the Borrower with respect to the Loans or the Letters of Credit.
The Borrower agrees that the Lender's books and records showing the Obligations
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and the transactions pursuant to this Agreement and the other Loan Documents
shall be admissible in any action or proceeding arising therefrom, and shall
constitute rebuttably presumptive proof thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument. The
Lender will provide to the Borrower a monthly statement of Loans, payments, and
other transactions pursuant to this Agreement. Such statement shall be deemed
correct, accurate, and binding on the Borrower and an account stated (except for
reversals and reapplications of payments made as provided in Section 3.8 and
corrections of errors discovered by the Lender), unless the Borrower notifies
the Lender in writing to the contrary within thirty (30) days after such
statement is rendered. In the event a timely written notice of objections is
given by the Borrower, only the items to which exception is expressly made will
be considered to be disputed by the Borrower.
ARTICLE 4
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.1 TAXES.
(a) Any and all payments by the Borrower to the Lender under
this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrower shall
pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless the
Lender for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section) paid by
the Lender and any liability (including penalties, interest, additions to tax
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender makes
written demand therefor.
(c) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to the Lender, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to
additional sums payable under this Section) the Lender,
receives an amount equal to the sum it would have received had
no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount deducted
or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Borrower shall also pay to the Lender, at
the time interest is paid, all additional amounts which the
Lender specifies as necessary to preserve the after-tax yield
the Lender would have received if such Taxes or Other Taxes
had not been imposed.
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(d) At the Lender's request, within 30 days after the date of
any payment by the Borrower of Taxes or Other Taxes, the Borrower shall furnish
the Lender the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to the Lender.
(e) If the Borrower is required to pay additional amounts to
the Lender pursuant to SUBSECTION (C) of this Section, then the Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to change
the jurisdiction of its lending office so as to eliminate any such additional
payment by the Borrower which may thereafter accrue, if such change in the
judgment of the Lender is not otherwise disadvantageous to the Lender.
4.2 ILLEGALITY.
(a) If the Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, in each case after the date hereof, for the Lender or its
applicable lending office to make LIBOR Rate Loans, then, on notice thereof by
the Lender to the Borrower any obligation of the Lender to make LIBOR Rate Loans
shall be suspended until the Lender notifies the Borrower that the circumstances
giving rise to such determination no longer exist.
(b) If the Lender determines that it is unlawful to maintain
any LIBOR Rate Loan, the Borrower shall, upon its receipt of notice of such fact
and demand from the Lender, prepay in full such LIBOR Rate Loans then
outstanding, together with interest accrued thereon and amounts required under
Section 4.4, either on the last day of the Interest Period thereof, if the
Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if the Lender may not lawfully continue to maintain such LIBOR Rate
Loans. If the Borrower is required to so prepay any LIBOR Rate Loans, then
concurrently with such prepayment, the Borrower shall borrow from the Lender, in
the amount of such repayment, a Base Rate Loan.
4.3 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If the Lender determines that due to either (i) the
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by the Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
in each case after the date hereof, there shall be any increase in the cost to
the Lender of agreeing to make or making, funding or maintaining any LIBOR Rate
Loans, then the Borrower shall be liable for, and shall from time to time, upon
demand, pay to the Lender additional amounts as are sufficient to compensate
such Lender for such increased costs.
(b) If the Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Lender or any corporation or other entity controlling the
Lender with any Capital Adequacy Regulation, in each case after the date hereof,
affects or would affect the amount of capital required or expected to be
maintained by the Lender or any corporation or other entity controlling the
Lender and (taking into consideration its policies with respect to capital
adequacy and the Lender's desired return on capital) determines that the amount
of such capital is increased as a consequence of its Commitments, loans, credits
or obligations under this Agreement, then, upon demand of the Lender to the
Borrower, the Borrower shall pay to the Lender, from time to time as specified
by the Lender, additional amounts reasonably sufficient to compensate the Lender
for such increase.
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4.4 FUNDING LOSSES. The Borrower shall reimburse the Lender and hold
the Lender harmless from any loss or expense which the Lender may sustain or
incur as a consequence of:
(a) the failure of the Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of the Borrower to borrow, continue or convert
a Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Continuation/Conversion; or
(c) the prepayment or other payment (including after
acceleration thereof) of any LIBOR Rate Loans on a day that is not the last day
of the relevant Interest Period;
including any such loss of anticipated profit and any loss or expense arising
from the liquidation or reemployment of funds obtained by it to maintain its
LIBOR Rate Loans or from fees payable to terminate the deposits from which such
funds were obtained. Borrower shall also pay any customary administrative fees
charged by the Lender in connection with the foregoing.
4.5 INABILITY TO DETERMINE RATES. If the Lender determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Rate Loan, or
that the LIBOR Rate for any requested Interest Period with respect to a proposed
LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lender of
funding such Loan, the Lender will promptly so notify the Borrower. Thereafter,
the obligation of the Lender to make or maintain LIBOR Rate Loans hereunder
shall be suspended until the Lender revokes such notice in writing. Upon receipt
of such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Continuation/Conversion then submitted by it. If the Borrower does not revoke
such Notice, the Lender shall make, convert or continue the Loans, as proposed
by the Borrower, in the amount specified in the applicable notice submitted by
the Borrower, but such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Rate Loans.
4.6 CERTIFICATES OF LENDER. If the Lender claims reimbursement or
compensation under this Article 4, it shall determine the amount thereof and
shall deliver to the Borrower a certificate setting forth in reasonable detail
the amount payable to the Lender, and such certificate shall be conclusive and
binding on the Borrower in the absence of manifest error.
4.7 SURVIVAL. The agreements and obligations of the Borrower in this
Article 4 shall survive the payment of all other Obligations.
ARTICLE 5
BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES
-------------------------------------------------
5.1 BOOKS AND RECORDS. The Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP applied
consistently with the audited Financial Statements required to be delivered
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pursuant to Section 5.2(a). The Borrower shall, by means of appropriate entries,
reflect in such accounts and in all Financial Statements proper liabilities and
reserves for all taxes and proper provision for depreciation and amortization of
property and bad debts, all in accordance with GAAP. The Borrower shall maintain
at all times books and records pertaining to the Collateral in such detail, form
and scope as the Lender shall reasonably require, including, but not limited to,
records of (a) all payments received and all credits and extensions granted with
respect to the Accounts; (b) the return, rejection, repossession, stoppage in
transit, loss, damage, or destruction of any Inventory; and (c) all other
dealings affecting the Collateral which are specified in writing by Lender.
5.2 FINANCIAL INFORMATION. The Borrower shall promptly furnish to the
Lender all such financial information as the Lender shall reasonably request.
Without limiting the foregoing, the Borrower will furnish to the Lender in such
detail as the Lender shall request, the following:
(a) As soon as available, but in any event not later than
ninety (90) days after the close of each Fiscal Year, consolidated audited and
consolidating unaudited balance sheets, and income statements, cash flow
statements and changes in stockholders' equity for the Borrower and its
Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous Fiscal Year, all
in reasonable detail, fairly presenting the financial position and the results
of operations of the Borrower and its consolidated Subsidiaries as at the date
thereof and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with generally accepted
auditing standards by and, in the case of such statements performed on a
consolidated basis, accompanied by a report thereon unqualified in any respect
of independent certified public accountants selected by the Borrower and
reasonably satisfactory to the Lender. The Borrower, simultaneously with
retaining such independent public accountants to conduct such annual audit,
shall send a letter to such accountants, with a copy to the Lender, notifying
such accountants that one of the primary purposes for retaining such
accountants' services and having audited financial statements prepared by them
is for use by the Lender.
(b) As soon as available, but in any event not later than
forty-five (45) days after the end of each fiscal quarter, consolidated and
consolidating unaudited balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such fiscal quarter, and consolidated and
consolidating unaudited income statements and cash flow statements for the
Borrower and its consolidated Subsidiaries for such fiscal quarter and for the
period from the beginning of the Fiscal Year to the end of such fiscal quarter,
all in reasonable detail, fairly presenting the financial position and results
of operations of the Borrower and its consolidated Subsidiaries as at the date
thereof and for such periods, and, in each case, in comparable form, figures for
the corresponding period in the prior Fiscal Year and in the Borrower's budget,
and prepared in accordance with GAAP applied consistently with the audited
Financial Statements required to be delivered pursuant to Section 5.2(a). The
Borrower shall certify by a certificate signed by a Responsible Officer that all
such statements have been prepared in accordance with GAAP and present fairly
the Borrower's financial position as at the dates thereof and its results of
operations for the periods then ended, subject to audit and normal year-end
adjustments.
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(c) As soon as available, but in any event not later than
thirty (30) days after the end of each month, other THAN after the end of each
fiscal quarter, consolidated and consolidating unaudited balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of such month, and
consolidated and consolidating unaudited income statements and cash flow
statements for the Borrower and its consolidated Subsidiaries for such month,
all in reasonable detail, fairly presenting the financial position and results
of operations of the Borrower and its consolidated Subsidiaries as at the date
thereof and prepared in accordance with GAAP (other than cash flow statements)
applied consistently with the audited Financial Statements required to be
delivered pursuant to Section 5.2(a), provided, however, the monthly cash flow
statements shall be prepared based on the Borrower's United States operations
only. The Borrower shall certify by a certificate signed by its chief financial
officer that all such statements have been prepared in accordance with GAAP
(other than cash flow statements) and present fairly the Borrower's financial
position as at the dates thereof and its results of operations for the periods
then ended, subject to audit and normal quarterly and year-end adjustments.
(d) With each of the audited Financial Statements delivered
pursuant to Section 5.2(a), a certificate of the independent certified public
accountants that examined such statement to the effect that, in connection with
their audit, nothing came to their attention that caused them to believe that
the Borrower failed to comply with terms, covenants, provisions or conditions of
Sections 7.22 through 7.25 of this Agreement, insofar as they related to
accounting matters, except for those, if any, described in reasonable detail in
such certificate.
(e) With each of the annual audited Financial Statements
delivered pursuant to Section 5.2(a), and within forty-five (45) days after the
end of each fiscal quarter, a certificate of a Responsible Officer setting forth
in reasonable detail the calculations required to establish that the Borrower
was in compliance with the covenants set forth in Sections 7.22 through 7.25
during the period covered in such Financial Statements and as at the end
thereof. Within thirty (30) days after the end of each month, a certificate of a
Responsible Officer stating that, except as explained in reasonable detail in
such certificate, (A) all of the representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents are correct and
complete in all material respects as at the date of such certificate as if made
at such time, except for those that speak as of a particular date, (B) the
Borrower is, at the date of such certificate, in compliance in all material
respects with all of its respective covenants and agreements in this Agreement
and the other Loan Documents, and (C) no Default or Event of Default then exists
or existed during the period covered by the Financial Statements for such month.
If such certificate discloses that a representation or warranty is not correct
or complete, or that a covenant has not been complied with, or that a Default or
Event of Default existed or exists, such certificate shall set forth what action
the Borrower has taken or proposes to take with respect thereto.
(f) No sooner than sixty (60) days and not less than thirty
(30) days prior to the beginning of each Fiscal Year, annual forecasts (to
include forecasted consolidated and consolidating balance sheets, income
statements and cash flow statements) for the Borrower and its Subsidiaries as at
the end of and for each month of such Fiscal Year.
(g) Promptly upon the filing thereof, copies of all reports,
if any, to or other documents filed by the Borrower or any of its Subsidiaries
with the Securities and Exchange Commission under the Exchange Act, and all
reports, notices, or statements sent by the Borrower or any of its Subsidiaries
to the holders of any equity interests of the Borrower or any such Subsidiary or
of any Debt of the Borrower or any of its Subsidiaries registered under the
Securities Act of 1933 or to or from the trustee under any indenture under which
the same is issued.
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(h) As soon as available, but in any event not later than 15
days after the Borrower's receipt thereof, a copy of all management reports and
management letters prepared for the Borrower by any independent certified public
accountants of the Borrower.
(i) Promptly after their preparation, copies of any and all
proxy statements, financial statements, and reports which the Borrower makes
available to its shareholders.
(j) If requested by the Lender, promptly after filing with the
IRS, a copy of each tax return filed by the Borrower or by any of its
Subsidiaries.
(k) A Borrowing Base Certificate supporting information in
accordance with Section 9 of the Security Agreement on a daily basis, EXCEPT
THAT (i) if Availability during a weekly period, as determined by Lender, is not
to be less than $5,000,000, the Borrowing Base Certificate may be provided
within two (2) Business Days after the end of each week for the preceding week
and (ii) if the Aggregate Revolver Outstandings are zero, the Borrowing Base
Certificate may be provided within two (2) Business Days after the end of each
month, PROVIDED however that if the Borrowing Base Certificate is delivered on a
monthly basis, no Borrowings will be permitted until a current Borrowing Base
Certificate is provided by the Borrower.
(l) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of the
Borrower or any Subsidiary.
5.3 NOTICES TO THE LENDER. The Borrower shall notify the Lender in
writing of the following matters at the following times:
(a) Immediately after becoming aware of any Default or Event
of Default;
(b) Immediately after becoming aware of the assertion by the
holder of any Debt of the Borrower or any Subsidiary in a face amount in excess
of $250,000 that a default exists with respect thereto or that the Borrower or
such Subsidiary is not in compliance with the terms thereof, or the threat or
commencement by such holder of any enforcement action because of such asserted
default or non-compliance;
(c) Immediately after becoming aware of any event or
circumstance which could reasonably be expected to have a Material Adverse
Effect;
(d) Immediately after becoming aware of any pending or
threatened action, suit, or proceeding, by any Person, or any pending or
threatened investigation by a Governmental Authority, which could reasonably be
expected to have a Material Adverse Effect;
(e) Immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or other labor
dispute affecting the Borrower or any of its Subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect;
(f) Immediately after becoming aware of any violation of any
law, statute, regulation, or ordinance of a Governmental Authority affecting the
Borrower or any Subsidiary which could reasonably be expected to have a Material
Adverse Effect;
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(g) Immediately after receipt of any notice of any violation
by the Borrower or any of its Subsidiaries of any Environmental Law which could
reasonably be expected to have a Material Adverse Effect or that any
Governmental Authority has asserted in writing that the Borrower or any
Subsidiary is not in compliance with any Environmental Law or is investigating
the Borrower's or such Subsidiary's compliance therewith which noncompliance
could reasonably be expected to have a Material Adverse Effect;
(h) Immediately after receipt of any written notice that the
Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the Release or threatened Release of any Contaminant or that the
Borrower or any Subsidiary is subject to investigation by any Governmental
Authority evaluating whether any remedial action is needed to respond to the
Release or threatened Release of any Contaminant which, in either case, is
reasonably likely to give rise to liability in excess of $250,000;
(i) Immediately after receipt of any written notice of the
imposition of any Environmental Lien against any property of the Borrower or any
of its Subsidiaries;
(j) Any change in the Borrower's name as it appears in the
state of its incorporation or other organization, state of incorporation or
organization, type of entity, organizational identification number, locations of
Collateral, or form of organization, trade names under which the Borrower will
sell Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto;
(k) Within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows that an ERISA Event or a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) (other than a prohibited
transaction for which a statutory or administrative exemption exists) has
occurred, and, when known, any action taken or threatened by the IRS, the DOL or
the PBGC with respect thereto;
(l) Upon request, or, in the event that such filing reflects a
significant change with respect to the matters covered thereby, within three (3)
Business Days after the filing thereof with the PBGC, the DOL or the IRS, as
applicable, copies of the following: (i) each annual report (form 5500 series),
including Schedule B thereto, filed with the PBGC, the DOL or the IRS with
respect to each Plan, (ii) a copy of each funding waiver request filed with the
PBGC, the DOL or the IRS with respect to any Plan and all communications
received by the Borrower or any ERISA Affiliate from the PBGC, the DOL or the
IRS with respect to such request, and (iii) a copy of each other filing or
notice filed with the PBGC, the DOL or the IRS, with respect to each Plan by
either the Borrower or any ERISA Affiliate;
(m) Upon request, copies of each actuarial report for any Plan
or Multi-employer Plan and annual report for any Multi-employer Plan; and within
three (3) Business Days after receipt thereof by the Borrower or any ERISA
Affiliate, copies of the following: (i) any notices of the PBGC's intention to
terminate a Plan or to have a trustee appointed to administer such Plan; (ii)
any favorable or unfavorable determination letter from the IRS regarding the
qualification of a Plan under Section 401(a) of the Code; or (iii) any notice
from a Multi-employer Plan regarding the imposition of withdrawal liability;
-18-
(n) Within three (3) Business Days after the occurrence
thereof: (i) any changes in the benefits of any existing Plan which increase the
Borrower's annual costs with respect thereto by an amount in excess of $250,000,
or the establishment of any new Plan or the commencement of contributions to any
Plan to which the Borrower or any ERISA Affiliate was not previously
contributing; or (ii) any failure by the Borrower or any ERISA Affiliate to make
a required installment or any other required payment under Section 412 of the
Code on or before the due date for such installment or payment; or
(o) Within three (3) Business Days after the Borrower or any
ERISA Affiliate knows that any of the following events has or will occur: (i) a
Multi-employer Plan has been or will be terminated; (ii) the administrator or
plan sponsor of a Multi-employer Plan intends to terminate a Multi-employer
Plan; or (iii) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multi-employer Plan.
Each notice given under this Section shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Borrower,
its Subsidiary, or any ERISA Affiliate, as applicable, has taken or proposes to
take with respect thereto.
ARTICLE 6
GENERAL WARRANTIES AND REPRESENTATIONS
--------------------------------------
The Borrower warrants and represents to the Lender that except as
hereafter disclosed to and accepted by the Lender in writing:
6.1 AUTHORIZATION, VALIDITY, AND ENFORCEABILITY OF THIS AGREEMENT AND
THE LOAN DOCUMENTS. Each Loan Party has the power and authority to execute,
deliver and perform this Agreement and the other Loan Documents to which it is a
party, to incur the Obligations, and to grant to the Lender Liens upon and
security interests in the Collateral. Each Loan Party has taken all necessary
action (including obtaining approval of its stockholders if necessary) to
authorize its execution, delivery, and performance of this Agreement and the
other Loan Documents to which it is a party. This Agreement and the other Loan
Documents to which it is a party have been duly executed and delivered by each
Loan Party, and constitute the legal, valid and binding obligations of each Loan
Party, enforceable against it in accordance with their respective terms, except
as enforcement may be limited by Debtor Relief Laws or equitable principles
relating to the granting of specific performance and other equitable remedies
and/or defenses as a matter of judicial discretion. Each Loan Party's execution,
delivery, and performance of this Agreement and the other Loan Documents to
which it is a party do not and will not (except to the extent it would not
breach Sections 6.17 and 6.18 of this Agreement) conflict with, or constitute a
violation or breach of, or result in the imposition of any Lien upon the
property of any Loan Party, by reason of the terms of (a) any contract,
mortgage, lease, agreement, indenture, or instrument to which a Loan Party is a
party or which is binding upon it, (b) any Requirement of Law applicable to a
Loan Party, or (c) the certificate or articles of incorporation or by-laws or
the limited liability company or limited partnership agreement of a Loan Party.
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6.2 VALIDITY AND PRIORITY OF SECURITY INTEREST. The provisions of this
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in favor of the Lender, and such Liens constitute perfected and
continuing Liens on all the Collateral, having priority over all other Liens on
the Collateral, except for those Liens identified in CLAUSES (A), (C), (D) (H),
(I) AND (J) of the definition of Permitted Liens securing all the Obligations,
and enforceable against the Borrower and all third parties, except as
enforcement may be limited by Debtor Relief Laws or equitable principles
relating to the granting of specific performance and other equitable remedies
and/or defenses as a matter of judicial discretion.
6.3 ORGANIZATION AND QUALIFICATION. The Borrower (a) is duly organized
or incorporated and validly existing in good standing under the laws of
Delaware, (b) is qualified to do business and is in good standing in the
jurisdictions set forth on SCHEDULE 6.3 which are the only jurisdictions in
which qualification is necessary in order for it to own or lease its property
and conduct its business, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect, and (c) has all
requisite power and authority to conduct its business and to own its property.
6.4 CORPORATE NAME; PRIOR TRANSACTIONS. The Borrower has not, during
the past five (5) years, been known by or used any other corporate or fictitious
name, or been a party to any merger or consolidation, or acquired all or
substantially all of the assets of any Person, or acquired any of its property
outside of the ordinary course of business.
6.5 SUBSIDIARIES. SCHEDULE 6.5 is a correct and complete list of the
name and relationship to the Borrower of each and all of the Borrower's
Subsidiaries as of the Closing Date. Each Subsidiary is (a) duly incorporated or
organized and validly existing in good standing under the laws of its state of
incorporation or organization set forth on Schedule 6.5, and (b) qualified to do
business and in good standing in each jurisdiction in which the failure to so
qualify or be in good standing could reasonably be expected to have a material
adverse effect on any such Subsidiary's business, operations, prospects,
property, or condition (financial or otherwise) and (c) has all corporate power
and authority to conduct its business and own its property.
6.6 FINANCIAL STATEMENTS AND PROJECTIONS.
(a) The Borrower has delivered to the Lender the audited
balance sheet and related statements of income, retained earnings, cash flows,
and changes in stockholders equity for the Borrower and its consolidated
Subsidiaries as of February 28, 2001, and for the Fiscal Year then ended,
accompanied by the report thereon of the Borrower's independent certified public
accountants, PricewaterhouseCoopers. The Borrower has also delivered to the
Lender the unaudited balance sheet and related statements of income and cash
flows for the Borrower and its consolidated Subsidiaries as of May 31, 2001. All
such financial statements have been prepared in accordance with GAAP and present
accurately and fairly in all material respects the financial position of the
Borrower and its consolidated Subsidiaries as at the dates thereof and their
results of operations for the periods then ended.
(b) The Latest Projections have been prepared on the basis of
good faith estimates and the assumptions set forth therein, which the Borrower
believes are fair and reasonable in light of current and reasonably foreseeable
business conditions at the time submitted to the Lender, it being recognized
that projections as to future events are not to be reviewed as facts and actual
results may differ from the Latest Projections.
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6.7 CAPITALIZATION. The Borrower's authorized capital stock consists of
50,000,000 shares of common stock, par value $.01 per share, of which 16,472,000
shares are validly issued and outstanding, fully paid and non-assessable.
6.8 SOLVENCY. The Borrower is Solvent prior to and after giving effect
to the Borrowings to be made on the Closing Date and the issuance of the Letters
of Credit to be issued on the Closing Date.
6.9 DEBT. After giving effect to the making of the Term Loan and the
Revolving Loans to be made on the Closing Date, the Loan Parties have no Debt,
except (a) the Obligations, and (b) Debt described on SCHEDULE 6.9.
6.10 DISTRIBUTIONS. Since May 31, 2001, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of the Borrower or any of its Subsidiaries, other than to the
Borrower or to a Subsidiary of the Borrower.
6.11 REAL ESTATE; LEASES. SCHEDULE 6.11 sets forth, as of the Closing
Date, a correct and complete list of all Real Estate owned by the Borrower and
all Real Estate owned by any Loan Party, all leases and subleases of real
property held by the Borrower or a Loan Party as lessee or sublessee, and all
leases and subleases of real property held by the Borrower as a Loan Party as
lessor, or sublessor. Each of such leases and subleases is valid and enforceable
in accordance with its terms and is in full force and effect. The Loan Parties
have good and marketable title in fee simple to the Real Estate identified on
SCHEDULE 6.11 as owned by the Loan Parties or valid leasehold interests in all
Real Estate designated therein as "leased" by the Loan Parties and the Loan
Parties have good title to all of its other property reflected on the Financial
Statements most recently delivered to the Lender, except as disposed of in the
ordinary course of business since the date thereof, free of all Liens except
Permitted Liens.
6.12 PROPRIETARY RIGHTS. SCHEDULE 6.12 sets forth, as of the Closing
Date, a correct and complete list of all of the Loan Parties' Proprietary
Rights. None of such Proprietary Rights is subject to any licensing agreement or
similar arrangement except as set forth on SCHEDULE 6.12. To the best of the
Borrower's knowledge, none of the Proprietary Rights infringes on or conflicts
with any other Person's proprietary rights, and no other Person's proprietary
rights infringe on or conflict with the Proprietary Rights as of the Closing
Date. The Proprietary Rights described on SCHEDULE 6.12 constitute all of the
property of such type necessary to the current and anticipated future conduct of
the Borrower's business in all material respects.
6.13 TRADE NAMES. All trade names under which the Borrower or any of
its Subsidiaries will sell Inventory or create Accounts, or to which instruments
in payment of Accounts may be made payable, are listed on SCHEDULE 6.13.
6.14 LITIGATION. Except as set forth on SCHEDULE 6.14, there is no
pending, or to the best of the Borrower's knowledge threatened, action, suit,
proceeding, or counterclaim by any Person, or to the best of the Borrower's
knowledge, investigation by any Governmental Authority, or any basis for any of
the foregoing, which could reasonably be expected to have a Material Adverse
Effect.
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6.15 LABOR DISPUTES. As of the Closing Date, except as set forth on
SCHEDULE 6.15, (a) there is no collective bargaining agreement or other labor
contract covering employees of the Borrower or any of its Subsidiaries, (b) no
such collective bargaining agreement or other labor contract is scheduled to
expire during the term of this Agreement, (c) no union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of the Borrower or any of its Subsidiaries or for
any similar purpose, and (d) there is no pending or (to the best of the
Borrower's knowledge) threatened, strike, work stoppage, material unfair labor
practice claim, or other material labor dispute against or affecting the
Borrower or its Subsidiaries or their employees.
6.16 ENVIRONMENTAL LAWS.
(a) The Borrower and its Subsidiaries have complied in all
material respects with all Environmental Laws and neither the Borrower nor any
Subsidiary nor any of its presently owned real property or presently conducted
operations, nor, to the best knowledge of Borrower, its previously owned real
property or prior operations, is subject to any enforcement order from or
liability agreement with any Governmental Authority or private Person respecting
(i) compliance with any Environmental Law or (ii) any potential liabilities and
costs or remedial action arising from the Release or threatened Release of a
Contaminant.
(b) The Borrower and its Subsidiaries have obtained all
material permits necessary for their current operations under Environmental
Laws, and all such permits are in good standing and the Borrower and its
Subsidiaries are in compliance with all material terms and conditions of such
permits.
(c) Neither the Borrower nor any of its Subsidiaries, nor, to
the best of the Borrower's knowledge, any of its predecessors in interest, has
in violation of applicable law stored, treated or disposed of any hazardous
waste in any material respects.
(d) As of the Closing Date, neither the Borrower nor any of
its Subsidiaries has received any summons, complaint, order or similar written
notice indicating that it is not currently in compliance with, or that any
Governmental Authority is investigating its compliance with, any Environmental
Laws or that it is or may be liable to any other Person as a result of a Release
or threatened Release of a Contaminant.
(e) As of the Closing Date, to the best of the Borrower's
knowledge, none of the present or past operations of the Borrower and its
Subsidiaries is the subject of any investigation by any Governmental Authority
evaluating whether any remedial action is needed to respond to a Release or
threatened Release of a Contaminant.
(f) Except as set forth on SCHEDULE 6.16, there is not now,
nor to the best of the Borrower's knowledge has there ever been on or in the
Real Estate:
(1) any underground storage tanks or surface
impoundments,
(2) any asbestos-containing material, or
(3) any polychlorinated biphenyls (PCBs) used in
hydraulic oils, electrical transformers or other equipment.
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(g) As of the Closing Date, neither the Borrower nor any of
its Subsidiaries has filed any notice under any requirement of Environmental Law
reporting a spill or accidental and unpermitted Release or discharge of a
Contaminant into the environment.
(h) Neither the Borrower nor any of its Subsidiaries has
entered into any negotiations or settlement agreements with any Person
(including the prior owner of its property) imposing material obligations or
liabilities on the Borrower or any of its Subsidiaries with respect to any
remedial action in response to the Release of a Contaminant or environmentally
related claim.
(i) None of the products manufactured, distributed or sold by
the Borrower or any of its Subsidiaries contain asbestos containing material.
(j) No Environmental Lien has attached to the Real Estate.
(k) After the Closing Date, neither the Borrower nor any of
its Subsidiaries (i) has received any summons, complaint, order, or similar
written notice indicating that it is not in compliance with, or that any
Governmental Authority is investigating its compliance with, any Environmental
Law or that it is or may be liable to any other Person as a result of a Release
or threatened Release of a Contaminant which could reasonably be expected to
cause a Material Adverse Effect, (ii) has filed a notice under any requirement
of Environmental Law reporting a spill or accidental and unpermitted Release or
discharge of a Containment into the environment which would reasonably be
expected to cause a Material Adverse Effect, or (iii) is subject to any
investment by any Governmental Authority evaluating whether any remedial action
is needed to respond to a Release, a threatened Release of a Contaminant, which
would reasonably be expected to cause a Material Adverse Effect.
6.17 NO VIOLATION OF LAW. Neither the Borrower nor any of its
Subsidiaries is in violation of any law, statute, regulation, ordinance,
judgment, order, or decree applicable to it which violation could reasonably be
expected to have a Material Adverse Effect.
6.18 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is in
default with respect to any note, indenture, loan agreement, mortgage, lease,
deed, or other agreement to which the Borrower or such Subsidiary is a party or
by which it is bound, which default could reasonably be expected to have a
Material Adverse Effect.
6.19 ERISA COMPLIANCE.
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and to the best knowledge
of the Borrower, nothing has occurred which would cause the loss of such
qualification. The Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrower, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
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(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multi-employer Plan; and (v)
neither the Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA, excepting, in each of
clauses (i) through (v) of this paragraph (c), any event or occurrence which
could not reasonably be expected to have a Material Adverse Effect.
6.20 TAXES. The Borrower and its Subsidiaries have filed all federal
and other material tax returns and reports required to be filed, and have paid
all federal and other taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable unless such unpaid taxes and assessments would constitute a
Permitted Lien.
6.21 REGULATED ENTITIES. None of the Borrower, any Person controlling
the Borrower, or any Subsidiary, is an "Investment Company" within the meaning
of the Investment Company Act of 1940. The Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code or law, or any other
federal or state statute or regulation limiting its ability to incur
indebtedness.
6.22 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the Loans are
to be used solely for general corporate purposes. Neither the Borrower nor any
Subsidiary is engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
6.23 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. As of the
Closing Date and in all material respects thereafter, the Borrower owns or is
licensed or otherwise has the right to use all of the patents, trademarks,
service marks, trade names, copyrights, contractual franchises, licenses, rights
of way, authorizations and other rights that are reasonably necessary for the
operation of its businesses, without conflict with the rights of any other
Person. As of the Closing Date and in all material respects thereafter, to the
best knowledge of the Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by the Borrower or any Subsidiary infringes upon
any rights held by any other Person. Except as set forth on SCHEDULE 6.14, no
claim or litigation regarding any of the foregoing is pending or, to the best
knowledge of the Borrower, threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Borrower, proposed, which, in any case,
could reasonably be expected to have a Material Adverse Effect.
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6.24 NO MATERIAL ADVERSE CHANGE. No Material Adverse Effect has
occurred since the latest date of the Financial Statements delivered to the
Lender.
6.25 FULL DISCLOSURE. None of the representations or warranties made by
the Borrower or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Borrower or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Borrower to the Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
6.26 BANK ACCOUNTS. SCHEDULE 6.26 contains as of the Closing Date a
complete and accurate list of all bank accounts maintained by the Borrower with
any bank or other financial institution.
6.27 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other Person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Borrower or any of its Subsidiaries of this Agreement or any other Loan
Document, except in connection with the perfection of security interests in the
Collateral and notices and other actions required under applicable law in
connection with the Lender's enforcement of remedies.
6.28 BANK AS PRINCIPAL DEPOSITORY. The Borrower shall maintain the Bank
as its principal depository bank, including for the maintenance of business,
cash management, operating and administrative deposit accounts.
6.29 MIFS. The Borrower represents and warrants that MIFS has no
assets, operates as a foreign sales corporation, and will be liquidated as soon
as reasonably possible after December 31, 2001.
ARTICLE 7
AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
The Borrower covenants to the Lender that so long as any of the
Obligations remain outstanding or this Agreement is in effect:
7.1 TAXES AND OTHER OBLIGATIONS. The Borrower shall, and shall cause
each of its Subsidiaries to, (a) file when due all tax returns and other reports
which it is required to file; (b) pay, or provide for the payment, when due, of
all taxes, fees, assessments and other governmental charges against it or upon
its property, income and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (c) pay when due all Debt owed by it and all
claims of materialmen, mechanics, carriers, warehousemen, landlords, processors
and other like Persons, and all other indebtedness owed by it and perform and
discharge in a timely manner all other obligations undertaken by it; PROVIDED,
HOWEVER, so long as the Borrower has notified the Lender in writing with respect
to taxes, fees, assessments or governmental charges in excess of $250,000,
neither the Borrower nor any of its Subsidiaries need pay any tax, fee,
assessment, or governmental charge (i) it is contesting in good faith by
appropriate proceedings diligently pursued, (ii) as to which the Borrower or its
Subsidiary, as the case may be, has established proper reserves as required
under GAAP, and (iii) the nonpayment of which does not result in the imposition
of a Lien (other than a Permitted Lien).
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7.2 LEGAL EXISTENCE AND GOOD STANDING. The Borrower shall, and shall
cause each of its Subsidiaries to, maintain its legal existence and its
qualification and good standing in all jurisdictions in which the failure to
maintain such existence and qualification or good standing could reasonably be
expected to have a Material Adverse Effect.
7.3 COMPLIANCE WITH LAW AND AGREEMENTS; MAINTENANCE OF LICENSES. The
Borrower shall comply, and shall cause each Subsidiary to comply, in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act and all Environmental Laws). The Borrower shall, and shall cause
each of its Subsidiaries to, obtain and maintain all licenses, permits,
franchises, and governmental authorizations necessary to own its property and to
conduct its business as conducted on the Closing Date. The Borrower shall not
modify, amend or alter its certificate or articles of incorporation, or its
limited liability company operating agreement or limited partnership agreement,
as applicable, other than in a manner which does not adversely affect the rights
of the Lender.
7.4 MAINTENANCE OF PROPERTY; INSPECTION OF PROPERTY.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, maintain all of its property necessary and useful in the
conduct of its business, in good operating condition and repair, ordinary wear
and tear excepted.
(b) The Borrower shall permit representatives and independent
contractors of the Lender (at the expense of the Borrower not to exceed four (4)
times per year unless an Event of Default has occurred and is continuing) to
visit and inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom and to discuss
its affairs, finances and accounts with its directors, officers and independent
public accountants (provided that the Borrower shall have the right to be
present), at such reasonable times during normal business hours and as soon as
may be reasonably desired, upon reasonable advance notice to the Borrower;
PROVIDED, HOWEVER, when an Event of Default exists, the Lender may do any of the
foregoing at the expense of the Borrower at any time during normal business
hours and without advance notice.
7.5 INSURANCE.
(a) The Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, with financially sound and reputable insurers having a
rating of at least A+ or better by Best Rating Guide, insurance against loss or
damage by fire with extended coverage; theft, burglary, pilferage and loss in
transit; public liability and third party property damage; larceny, embezzlement
or other criminal liability; business interruption; public liability and third
party property damage; and such other hazards or of such other types as is
customary for Persons engaged in the same or similar business, as the Lender, in
its discretion, shall specify, in amounts, and under policies acceptable to the
Lender. The Borrower shall maintain flood insurance for its Inventory and
Equipment which is, at any time, located in a Special Flood Hazard Area. By
signing this Agreement, the Lender acknowledges that the insurance policies
maintained by the Borrower on the Closing Date satisfies the requirement of this
Section 7.5.
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(b) The Borrower shall cause the Lender to be named as secured
party or mortgagee and sole loss payee or additional insured, in a manner
acceptable to the Lender. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days' prior
written notice to the Lender in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Borrower or any of its Subsidiaries or the owner of any Real Estate for purposes
more hazardous than are permitted by such policy. All premiums for such
insurance shall be paid by the Borrower when due, and certificates of insurance
and, if requested by the Lender, photocopies of the policies, shall be delivered
to the Lender. If the Borrower fails to procure such insurance or to pay the
premiums therefor when due, the Lender may do so from the proceeds of Revolving
Loans.
7.6 INSURANCE AND CONDEMNATION PROCEEDS. The Borrower shall promptly
notify the Lender of any loss, damage, or destruction to the Collateral, whether
or not covered by insurance. The Lender is hereby authorized to collect all
insurance and condemnation proceeds in respect of Collateral directly and to
apply or remit them as follows:
(i) With respect to insurance and condemnation proceeds
relating to Collateral other than Fixed Assets, after deducting from
such proceeds the reasonable expenses, if any, incurred by the Lender
in the collection or handling thereof, the Lender shall apply such
proceeds, ratably, to the reduction of the Obligations in the order
provided for in Section 3.8.
(ii) With respect to insurance and condemnation proceeds
relating to Collateral consisting of Fixed Assets, the Lender shall
permit or require the Borrower to use such proceeds to replace, repair,
restore or rebuild the relevant Fixed Assets in a diligent and
expeditious manner with materials and workmanship of substantially the
same quality as existed before the loss, damage or destruction so long
as (1) no Default or Event of Default has occurred and is continuing,
and (2) the Borrower first (i) provides the Lender with plans and
specifications for any such repair or restoration which shall be
reasonably satisfactory to the Lender and (ii) demonstrates to the
reasonable satisfaction of the Lender that the funds available to it
will be sufficient to complete such project in the manner provided
therein. In all other circumstances, the Lender shall apply such
insurance and condemnation proceeds, ratably, to the reduction of the
Obligations in the order provided for in Section 3.4(b).
7.7 ENVIRONMENTAL LAWS.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, conduct its business in compliance in all material respects
with all Environmental Laws applicable to it, including those relating to the
generation, handling, use, storage, and disposal of any Contaminant. The
Borrower shall, and shall cause each of its Subsidiaries to, take prompt and
appropriate action to respond to any non-compliance with Environmental Laws and
shall regularly report to the Lender on such response.
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(b) In the event the Borrower is aware of any noncompliance
with Environmental Law, the Borrower shall submit to the Lender annually,
commencing on the first Anniversary Date, and on each Anniversary Date
thereafter, an update of the status of each response to such environmental
non-compliance or liability issue. The Lender may request copies of technical
reports prepared by the Borrower and its communications with any Governmental
Authority to determine whether the Borrower or any of its Subsidiaries is
proceeding reasonably to correct, cure or contest in good faith any alleged
non-compliance or environmental liability. In the event of any alleged material
noncompliance with Environmental Law, the Borrower shall, at the Lender's
request and at the Borrower's expense, (i) retain an independent environmental
engineer acceptable to the Lender to evaluate the site, including tests if
appropriate, where the non-compliance or alleged non-compliance with
Environmental Laws has occurred and prepare and deliver to the Lender a report
setting forth the results of such evaluation, a proposed plan for responding to
any environmental problems described therein, and an estimate of the costs
thereof, and (ii) provide to the Lender a supplemental report of such engineer
whenever the scope of the environmental problems, or the response thereto or the
estimated costs thereof, shall increase in any material respect.
(c) In the event of any alleged material noncompliance with
Environmental Law, the Lender and its representatives will have the right during
regular business hours and upon reasonable advance notice to enter and visit the
Real Estate and any other place where any property of the Borrower is located
for the purposes of observing the Real Estate, taking and removing soil or
groundwater samples, and conducting tests on any part of the Real Estate. The
Lender is under no duty, however, to visit or observe the Real Estate or to
conduct tests, and any such acts by the Lender will be solely for the purposes
of protecting the Lender's Liens and preserving the Lender's rights under the
Loan Documents. No site visit, observation or testing by the Lender will result
in a waiver of any default of the Borrower or impose any liability on the
Lender. In no event will any site visit, observation or testing by the Lender be
a representation that hazardous substances are or are not present in, on or
under the Real Estate, or that there has been or will be compliance with any
Environmental Law. Neither the Borrower nor any other party is entitled to rely
on any site visit, observation or testing by the Lender. The Lender owes no duty
of care to protect the Borrower or any other party against, or to inform the
Borrower or any other party of, any hazardous substances or any other adverse
condition affecting the Real Estate. The Lender may in its discretion disclose
to the Borrower or to any other party if so required by law any report or
findings made as a result of, or in connection with, any site visit, observation
or testing by the Lender. The Borrower understands and agrees that the Lender
makes no warranty or representation to the Borrower or any other party regarding
the truth, accuracy or completeness of any such report or findings that may be
disclosed. The Borrower also understands that depending on the results of any
site visit, observation or testing by the Lender and disclosed to the Borrower,
the Borrower may have a legal obligation to notify one or more environmental
agencies of the results, that such reporting requirements are site-specific, and
are to be evaluated by the Borrower without advice or assistance from the
Lender. In each instance, the Lender will give the Borrower reasonable notice
before entering the Real Estate or any other place the Lender is permitted to
enter under this SECTION 7.7(C). The Lender will make reasonable efforts to
avoid interfering with the Borrower's use of the Real Estate or any other
property in exercising any rights provided hereunder.
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7.8 COMPLIANCE WITH ERISA. The Borrower shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) make all required contributions to any
Plan subject to Section 412 of the Code; (d) not engage in a non-exempt
prohibited transaction or a material violation of the fiduciary responsibility
rules with respect to any Plan; and (e) not engage in a transaction that could
be subject to Section 4069 or 4212(c) of ERISA.
7.9 MERGERS, CONSOLIDATIONS OR SALES. Neither the Borrower nor any of
its Subsidiaries shall enter into any transaction of merger, reorganization, or
consolidation, or transfer, sell, assign, lease, or otherwise dispose of all or
any part of its property, or wind up, liquidate or dissolve, or agree to do any
of the foregoing, except (i) mergers and consolidations of a Loan Party into
Borrower or a Loan Party (other than the Borrower) into another Loan Party;
PROVIDED that (a) no Default or Event of Default then exists or would result
therefrom, and (b) Borrower and each Loan Party execute such amendments to the
Loan Documents as the Lender may reasonably determine are appropriate as a
result of such merger, (ii) for sales of Inventory in the ordinary course of its
business (iii) for sales or other dispositions of Equipment by the Borrower or
any Loan Party in the ordinary course of business that are obsolete or no longer
useable in their business with an orderly liquidation value not to exceed
$250,000 in the aggregate for all Loan Parties in any Fiscal Year, (iv) for
sales or other dispositions of Equipment in the ordinary course of business by
any Subsidiary, other than a Loan Party, and (v) as permitted by Section 7.19.
7.10 DISTRIBUTIONS; CAPITAL CHANGE; RESTRICTED INVESTMENTS. Neither the
Borrower nor any of its Subsidiaries shall (i) directly or indirectly declare or
make, or incur any liability to make, any Distribution, except Distributions to
the Borrower by its Subsidiaries, (ii) make any change in its capital structure
which could have a Material Adverse Effect or (iii) make any Restricted
Investment; PROVIDED, however, (i) the Borrower may make ESOP contributions,
(ii) the Borrower may acquire equity interest in Persons in exchange for
services rendered by the Borrower in an amount not to exceed $250,000 during the
term of this Agreement, (iii) the Borrower may make loans or advance money or
property to, or invest in (by capital contribution or otherwise) Meade
Instruments Europe GmbH & Co., KG, in an amount not to exceed $8,500,000 during
the period from September 1 through November 30 of each year and not to exceed
$4,500,000 at any other time, except that, during the months of January and
February, such amount shall not exceed $2,500,000 at any time, (iv) the Borrower
may sell Inventory to its Subsidiaries for fair value, subject, if applicable,
to the maximum indebtedness limitations set forth in this Section 7.10(iii), (v)
the Borrower may make loans or advance money or property to, or invest in (by
capital contribution or otherwise) any Subsidiary acquired or organized after
the Closing Date in an aggregate amount to all such Subsidiaries not to exceed
$250,000 at any one time outstanding, (vi) the Borrower may make loans or
advance money or property to, or invest in (by capital contribution or
otherwise) MIM in an amount not to exceed $1,000,000 at any one time
outstanding, and (vii) the Borrower may make Permitted Account Sales.
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7.11 TRANSACTIONS AFFECTING COLLATERAL OR OBLIGATIONS. Neither the
Borrower nor any of its Subsidiaries shall enter into any transaction which
would be reasonably expected to have a Material Adverse Effect.
7.12 GUARANTIES. Neither the Borrower nor any Loan Party shall make,
issue, or become liable on any Guaranty, except (i) a Guaranty of the
Obligations in favor of the Lender, (ii) an unsecured Guaranty by the Borrower
with respect to the German Credit Facility, and (iii) an unsecured Guaranty by
MIHC of the facility lease of MIM.
7.13 DEBT. Neither the Borrower nor any Loan Party shall incur or
maintain any Debt, other than: (a) the Obligations; (b) Debt described on
SCHEDULE 6.9; (c) Debt permitted by Sections 7.10, 7.12 and 7.15; (d) Capital
Leases of Equipment and purchase money secured Debt incurred to purchase
Equipment PROVIDED that (i) Liens securing the same attach only to the Equipment
acquired by the incurrence of such Debt, and (ii) the aggregate amount of such
Debt (including Capital Leases) outstanding does not exceed $1,500,000 at any
time; and (d) Debt evidencing a refunding, renewal or extension of the Debt
described on SCHEDULE 6.9; PROVIDED that (i) the principal amount thereof is not
increased, (ii) the Liens, if any, securing such refunded, renewed or extended
Debt do not attach to any assets in addition to those assets, if any, securing
the Debt to be refunded, renewed or extended, (iii) no Person that is not an
obligor or guarantor of such Debt as of the Closing Date shall become an obligor
or guarantor thereof, and (iv) the terms of such refunding, renewal or extension
are no less favorable to the Borrower or the Lender than the original Debt.
7.14 PREPAYMENT. Neither the Borrower nor any of its Subsidiaries shall
voluntarily prepay any Debt, except the Obligations in accordance with the terms
of this Agreement.
7.15 TRANSACTIONS WITH AFFILIATES. Except as permitted by Section 7.10
and 7.12, neither the Borrower nor any of its Subsidiaries shall, sell,
transfer, distribute, or pay any money or property, including, but not limited
to, any fees or expenses of any nature (including, but not limited to, any fees
or expenses for management services), to any Affiliate, or lend or advance money
or property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any property,
of any Affiliate, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate. Notwithstanding the foregoing,
while no Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries, subject to the limitations set forth in Section 7.10, may engage
in transactions with Affiliates in the ordinary course of business, on terms and
amounts and with respect to activities consistent with past practices as have
been disclosed to the Lender.
7.16 INVESTMENT BANKING AND FINDER'S FEES. Neither the Borrower nor any
of its Subsidiaries shall pay or agree to pay, or reimburse any other party with
respect to, any investment banking or similar or related fee, underwriter's fee,
finder's fee, or broker's fee to any Person in connection with this Agreement.
The Borrower shall defend and indemnify the Lender against and hold it harmless
from all claims of any Person that the Borrower is obligated to pay for any such
fees, and all costs and expenses (including attorneys' fees) incurred by the
Lender in connection therewith.
7.17 BUSINESS CONDUCTED. The Borrower shall not and shall not permit
any of its Subsidiaries to, engage directly or indirectly, in any line of
business other than the businesses in which the Borrower is engaged on the
Closing Date or which are contemplated by the business plans submitted by the
Borrower to Lender prior to the Closing Date.
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7.18 LIENS. Neither the Borrower nor any Loan Party shall create,
incur, assume, or permit to exist any Lien on any property now owned or
hereafter acquired by any of them, except Permitted Liens, and Liens, if any, in
effect as of the Closing Date described in SCHEDULE 6.9 securing Debt described
in SCHEDULE 6.9 and Liens securing Capital Leases and purchase money Debt
permitted in Section 7.13.
7.19 SALE AND LEASEBACK TRANSACTIONS. Neither the Borrower nor any of
its Subsidiaries shall, directly or indirectly, enter into any arrangement with
any Person providing for the Borrower or such Subsidiary to lease or rent
property that the Borrower or such Subsidiary has sold or will sell or otherwise
transfer to such Person.
7.20 NEW SUBSIDIARIES. The Borrower shall notify the Lender prior to
the organization or acquisition of any Subsidiary not existing on the Closing
Date and upon the organization or acquisition of such Subsidiary requires that
such Subsidiary become a party to the Guaranty and Guarantor Security Agreement
if the Subsidiary is incorporated in one of the states of the United States of
America or if incorporated elsewhere pledge 66% of its shares to the Lender
pursuant to the Pledge Agreement.
7.21 FISCAL YEAR. The Borrower shall not change its Fiscal Year.
7.22 FIXED CHARGE COVERAGE RATIO. The Borrower will maintain a Fixed
Charge Coverage Ratio for each period of four consecutive fiscal quarters ended
on the last day of each fiscal quarter set forth below (or with respect to the
fiscal quarter ending on November 30, 2001, the period commencing on March 1,
2001 and ending on the last day of such fiscal quarter) of not less than the
ratio set forth below opposite each such fiscal quarter:
FISCAL QUARTER ENDING FIXED CHARGE COVERAGE RATIO
--------------------- ---------------------------
November 30, 2001 1.00 to 1.00
February 28, 2002 1.00 to 1.00
May 31, 2002 1.10 to 1.00
August 31, 2002 1.15 to 1.00
November 30, 2002 1.20 to 1.00
February 28, 2003 and for each
fiscal quarter ending thereafter 1.25 to 1.00
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7.23 ADJUSTED TANGIBLE NET WORTH. The Borrower will maintain Adjusted
Tangible Net Worth of not less than the following amounts measured as of the
last day of the following months:
END OF MONTH ADJUSTED TANGIBLE NET WORTH
------------ ---------------------------
August 2001 $38,000,000
September 2001 $38,988,000
October 2001 $40,180,000
November 2001 $40,985,000
December 2001 $41,182,000
January 2002 $41,182,000
February 2002 $41,182,000
March 2002 $41,236,000
April 2002 $41,236,000
May 2002 $41,236,000
June 2002 $41,236,000
July 2002 $41,766,000
August 2002 $42,114,000
September 2002 $43,052,000
October 2002 $44,400,000
November 2002 $45,450,000
December 2002 and as of the last
day of each month thereafter $45,548,000
7.24 MAXIMUM INVENTORY. The Borrower, on a non-consolidated basis, will
not permit its gross Inventory (excluding the value of the Inventory owned by
its Subsidiaries) to exceed the following amounts measured as of the last day of
the following months:
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INVENTORY AMOUNT MONTH ENDING
---------------- ------------
$46,000,000 September, 2001
$40,000,000 October, 2001
$36,000,000 November, 2001
$35,000,000 December, 2001
$35,000,000 January, 2002
$35,000,000 February 2002
7.25 US EBITDA. The Borrower will maintain US EBITDA for each period of
twelve consecutive months ending on the last day of each month set forth below
(or with respect to the month ending on February 28, 2002, the period commencing
on March 1, 2001 and ending on the last day of such month) of not less than the
US EBITDA set forth below opposite each such month:
MONTH ENDING MINIMUM US EBITDA
------------ -----------------
November 30, 2001 $8,000,000
December 31, 2001 $8,000,000
January 31, 2002 $8,000,000
February 28, 2002 $9,000,000
March 31, 2002 $9,000,000
April 30, 2002 $9,000,000
May 31, 2002 $9,000,000
June 30, 2002 $9,000,000
July 31, 2002 $9,000,000
August 31, 2002 $10,000,000
September 30, 2002 $10,000,000
October 31, 2002 $10,000,000
November 30, 2002 and for each $11,000,000
month ending thereafter
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7.26 USE OF PROCEEDS. The Borrower shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
7.27 INTEREST RATE PROTECTION. From and after the date that is thirty
(30) days after the Closing Date, the Borrower shall maintain Hedge Agreements
on terms and conditions and in amounts reasonably acceptable to the Lender with
the Bank or another financial institution reasonably acceptable to the Lender
for the purpose of limiting the maximum interest rate payable by the Borrower
with respect to the Term Loans. In addition, the Borrower shall promptly after
notice of requirement from the Lender maintain Hedge Agreements on terms and
conditions and in amounts reasonably acceptable to the Lender with the Bank or
another financial institution reasonably acceptable to the Lender for the
purpose of limiting the maximum interest rate payable by the Borrower with
respect to the Revolving Loans.
7.28 FURTHER ASSURANCES. The Borrower shall execute and deliver, or
cause to be executed and delivered, to the Lender such documents and agreements,
and shall take or cause to be taken such actions, as the Lender may, from time
to time, reasonably request to carry out the terms and conditions of this
Agreement and the other Loan Documents.
7.29 INVENTORY INFORMATION. The Borrower will implement, no later than
February 28, 2002, to the reasonable satisfaction of the Lender a system
generated Inventory information report to identify Inventory by location.
ARTICLE 8
CONDITIONS OF LENDING
---------------------
8.1 CONDITIONS PRECEDENT TO MAKING OF LOANS ON THE CLOSING DATE. The
obligation of the Lender to make the initial Revolving Loans and the Term Loan
on the Closing Date, and the obligation of the Lender to cause the Letter of
Credit Issuer to issue any Letter of Credit on the Closing Date, are subject to
the following conditions precedent having been satisfied in a manner
satisfactory to the Lender:
(a) This Agreement and the other Loan Documents shall have
been executed by each party thereto and the Borrower shall have performed and
complied with all covenants, agreements and conditions contained herein and the
other Loan Documents which are required to be performed or complied with by the
Borrower before or on such Closing Date.
(b) Upon making the Revolving Loans (including such Revolving
Loans made to finance the Closing Fee or otherwise as reimbursement for fees,
costs and expenses then payable under this Agreement) and with all accounts
payable no more than 60 days from invoice date, the Borrower shall have
Availability in an amount equal to not less than fifteen percent (15%) of the
Borrowing Base.
(c) All representations and warranties made hereunder and in
the other Loan Documents shall be true and correct as if made on such date.
(d) No Default or Event of Default shall have occurred and be
continuing after giving effect to the Loans to be made and the Letters of Credit
to be issued on the Closing Date.
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(e) The Lender shall have received all of the following, each
of which shall be originals unless otherwise specified or, where applicable, the
context otherwise requires, each property executed by a Responsible Officer of
each party thereto, each dated as of the Closing Date and each in form and
substance reasonably satisfactory to the Lender and its legal counsel:
(1) executed counterparts of this Agreement;
(2) the Security Agreement executed by Borrower;
(3) the Guarantor Security Agreement executed by each
of the Guarantors;
(4) the Trademark Security Agreement executed by all
Parties thereto;
(5) the Patent Security Agreement executed by all
Parties thereto;
(6) the Pledge Agreement executed by Borrower,
together with certificates representing 100% of the capital stock of MIEC and
MIHC and 66% of the capital stock of MIM and stock powers executed in blank with
respect thereto;
(7) the Guaranty executed by the Guarantors;
(8) with respect to Borrower and the Guarantors, such
documentation as the Lender may reasonably require to establish the due
organization, valid existence and good standing of Borrower and each Guarantor,
its qualification to engage in business in each jurisdiction in which it is
engaged in business or required to be so qualified, its authority to execute,
deliver and perform any Loan Documents to which it is a Party, and the identity,
authority and capacity of each Responsible Officer thereof authorized to act on
its behalf, INCLUDING, without limitation, certified copies of articles of
incorporation and amendments thereto, bylaws and amendments thereto,
certificates of good standing and/or qualification to engage in business,
certificates of corporate resolutions, incumbency certificates, Certificates of
Responsible Officer, and the like;
(9) evidence satisfactory to the Lender that the
Liens and security interest of the Lender in the Collateral have or will have
been perfected and are of first priority (EXCEPT for Permitted Liens);
(10) a Certificate signed by a Responsible Officer
certifying that the conditions specified in Sections 8.2(a)(i), (ii) and (iii),
have been satisfied;
(11) legal opinions from O'Melveny & Myers LLP and
the general counsel of the Borrower in form and substance satisfactory to the
Lender, together with copies of all factual certificates and legal opinions
delivered to such counsel in connection with such opinion upon which such
counsel has relied.
(f) The Lender shall have received:
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(i) acknowledgment copies of proper financing
statements, duly filed on or before the Closing Date under the
UCC of all jurisdictions that the Lender may deem necessary or
desirable in order to perfect the Lender's Liens; and
(ii) duly executed UCC-3 Termination Statements and
such other instruments, in form and substance satisfactory to
the Lender, as shall be necessary to terminate and satisfy all
Liens on the Property of the Borrower and its Subsidiaries
except Permitted Liens.
(g) The Borrower shall have paid all fees and expenses of the
Lender and the Attorney Costs incurred in connection with any of the Loan
Documents and the transactions contemplated thereby to the extent invoiced.
(h) The Lender shall have received evidence, in form, scope,
and substance, reasonably satisfactory to the Lender, of all insurance coverage
as required by this Agreement.
(i) The Lender shall have had an opportunity, if it so
chooses, to examine the books of account and other records and files of the
Borrower and to make copies thereof, and to conduct a pre-closing audit which
shall include, without limitation, verification of Inventory, Accounts, and the
Borrowing Base, and the results of such examination and audit shall have been
satisfactory to the Lender in all respects.
(j) All proceedings taken in connection with the execution of
this Agreement, the Term Loan Note, all other Loan Documents and all documents
and papers relating thereto shall be satisfactory in form, scope, and substance
to the Lender.
(k) The Lender shall have received evidence that the German
Credit Facility shall have closed and funded.
(l) Without limiting the generality of the items described
above, the Borrower and each Person guarantying or securing payment of the
Obligations shall have delivered or caused to be delivered to the Lender (in
form and substance reasonably satisfactory to the Lender), the financial
statements, instruments, resolutions, documents, agreements, certificates,
opinions and other items set forth on the "Closing Checklist" delivered by the
Lender to the Borrower prior to the Closing Date.
The acceptance by the Borrower of any Loans made or Letters of Credit
issued on the Closing Date shall be deemed to be a representation and warranty
made by the Borrower to the effect that all of the conditions precedent to the
making of such Loans or the issuance of such Letters of Credit have been
satisfied, with the same effect as delivery to the Lender of a certificate
signed by a Responsible Officer of the Borrower, dated the Closing Date, to such
effect.
8.2 CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lender to
make each Loan, including the initial Revolving Loans on the Closing Date and
the Term Loan, and the obligation of the Lender to cause the Letter of Credit
Issuer to issue any Letter of Credit shall be subject to the further conditions
precedent that on and as of the date of any such extension of credit:
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(a) The following statements shall be true, and the acceptance
by the Borrower of any extension of credit shall be deemed to be a statement to
the effect set forth in CLAUSES (I), (II) and (III) with the same effect as the
delivery to the Lender of a certificate signed by a Responsible Officer, dated
the date of such extension of credit, stating that:
(i) The representations and warranties contained in
this Agreement and the other Loan Documents are correct in all
material respects on and as of the date of such extension of
credit as though made on and as of such date, other than any
such representation or warranty which relates to a specified
prior date and except to the extent the Lender has been
notified in writing by the Borrower that any representation or
warranty is not correct and the Lender has explicitly waived
in writing compliance with such representation or warranty;
and
(ii) No event has occurred and is continuing, or
would result from such extension of credit, which constitutes
a Default or an Event of Default; and
(iii) No event has occurred and is continuing, or
would result from such extension of credit, which has had or
would have a Material Adverse Effect.
(b) No such Borrowing shall exceed Availability.
ARTICLE 9
DEFAULT; REMEDIES
-----------------
9.1 EVENTS OF DEFAULT. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:
(a) any failure by the Borrower to pay the principal of any of
the Obligations when due, whether upon demand or otherwise, or any interest on
the Obligations or fees or other amounts owing hereunder within five (5) days
after becoming due;
(b) any representation or warranty made or deemed made by the
Borrower in this Agreement or by the Borrower or any of its Subsidiaries in any
of the other Loan Documents, any Financial Statement, or any certificate
furnished by the Borrower or any of its Subsidiaries at any time to the Lender
shall prove to be untrue in any material respect as of the date on which made,
deemed made, or furnished;
(c) (i) any default shall occur in the observance or
performance of any of the covenants and agreements contained in SECTIONS 5.2(L),
7.2, 7.9-7.27, or Section 11 of the Security Agreement, (ii) any default shall
occur in the observance or performance of any of the covenants and agreements
contained in SECTIONS 5.2 (OTHER THAN 5.2(L) OR 5.3 and such default shall
continue for fifteen (15) days or more; or (iii) any default shall occur in the
observance or performance of any of the other covenants or agreements contained
in any other Section of this Agreement or any other Loan Document, any other
Loan Documents, or any other agreement entered into at any time to which the
Borrower or any Subsidiary and the Lender are party (including in respect of any
Bank Products) and such default shall continue for thirty (30) days or more;
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(d) any default shall occur with respect to any Debt (other
than the Obligations) of the Borrower or any of its Subsidiaries in an
outstanding principal amount which exceeds $250,000, or under any agreement or
instrument under or pursuant to which any such Debt may have been issued,
created, assumed, or guaranteed by the Borrower or any of its Subsidiaries, and
such default shall continue for more than the period of grace, if any, therein
specified, if the effect thereof (with or without the giving of notice or
further lapse of time or both) is to accelerate, or to permit the holders of any
such Debt to accelerate, the maturity of any such Debt; or any such Debt shall
be declared due and payable or be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
(e) the Borrower or any of its Subsidiaries shall (i) file a voluntary petition
in bankruptcy or file a voluntary petition or an answer or otherwise commence
any action or proceeding seeking reorganization, arrangement or readjustment of
its debts or for any other relief under the federal Bankruptcy Code, as amended,
or under any other bankruptcy or insolvency act or law, state or federal, now or
hereafter existing, or consent to, approve of, or acquiesce in, any such
petition, action or proceeding; (ii) apply for or acquiesce in the appointment
of a receiver, assignee, liquidator, sequestrator, custodian, monitor, trustee
or similar officer for it or for all or any part of its property; (iii) make an
assignment for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement,
consolidation or readjustment of the debts of the Borrower or any of its
Subsidiaries or for any other relief under the federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing and such petition or proceeding shall not be
dismissed within thirty (30) days after the filing or commencement thereof or an
order of relief shall be entered with respect thereto;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for the Borrower or any of its Subsidiaries
or for all or any part of its property shall be appointed or a warrant of
attachment, execution or similar process shall be issued against any part of the
property of the Borrower or any of its Subsidiaries or any action for
dissolution is commenced against the Borrower and any such event described in
this clause (g) shall continue and not have been dismissed or discharged within
thirty (30) days;
(h) the Borrower or any of its Subsidiaries shall file a
certificate of dissolution under applicable state law or shall be liquidated,
dissolved or wound-up or shall commence any action or proceeding for
dissolution, winding-up or liquidation, or shall take any corporate action in
furtherance thereof;
(i) all or any material part of the property of the Borrower
or any of its Subsidiaries shall be nationalized, expropriated or condemned,
seized or otherwise appropriated, or custody or control of such property or of
the Borrower or such Subsidiary shall be assumed by any Governmental Authority
or any court of competent jurisdiction at the instance of any Governmental
Authority, except where contested in good faith by proper proceedings diligently
pursued where a stay of enforcement is in effect;
(j) any Loan Document shall be terminated, revoked or declared
void or invalid or unenforceable or challenged by the Borrower or any other
obligor;
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(k) one or more judgments, orders, decrees or arbitration
awards is entered against the Borrower involving in the aggregate liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related or unrelated
series of transactions, incidents or conditions, of $250,000 or more, and the
same shall remain unsatisfied, unvacated and unstayed pending appeal for a
period of thirty (30) days after the entry thereof;
(l) any loss, theft, damage or destruction of any item or
items of Collateral or other property of the Borrower or any Subsidiary occurs
which could reasonably be expected to cause a Material Adverse Effect and is not
adequately covered by insurance;
(m) there is filed against the Borrower or any of its
Subsidiaries any action, suit or proceeding under any federal or state
racketeering statute (including the Racketeer Influenced and Corrupt
Organization Act of 1970), which action, suit or proceeding (i) is not dismissed
within one hundred twenty (120) days, and (ii) could reasonably be expected to
result in the confiscation or forfeiture of any material portion of the
Collateral;
(n) for any reason other than the failure of the Lender to
take any action available to it to maintain perfection of the Lender's Liens,
pursuant to the Loan Documents, any Loan Document ceases to be in full force and
effect or any Lien with respect to any material portion of the Collateral
intended to be secured thereby ceases to be, or is not, valid, perfected and
prior to all other Liens (other than Permitted Liens) or is terminated, revoked
or declared void;
(o) an ERISA Event shall occur with respect to a Pension Plan
or Multi-employer Plan which has resulted or could reasonably be expected to
result in liability of the Borrower under Title IV of ERISA to the Pension Plan,
Multi-employer Plan or the PBGC in an aggregate amount in excess of $250,000;
(ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans
at any time exceeds $250,000; or (iii) the Borrower or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multi-employer Plan in an aggregate amount in excess of
$250,000;
(p) there occurs a Change of Control; or
(q) there occurs an event having a Material Adverse Effect.
9.2 REMEDIES.
(a) If a Default or an Event of Default exists, the Lender
may, in its discretion, do one or more of the following at any time or times and
in any order, without notice to or demand on the Borrower: (i) reduce the
Maximum Revolver Amount, or the advance rates against Eligible Accounts and/or
Eligible Inventory used in computing the Borrowing Base, or reduce one or more
of the other elements used in computing the Borrowing Base; (ii) restrict the
amount of or refuse to make Revolving Loans; and (iii) restrict or refuse to
provide Letters of Credit or Credit Support. If an Event of Default exists, the
Lender may, in its discretion, do one or more of the following, in addition to
the actions described in the preceding sentence, at any time or times and in any
order, without notice to or demand on the Borrower: (A) terminate the
Commitments and this Agreement; (B) declare any or all Obligations to be
immediately due and payable; PROVIDED, HOWEVER, that upon the occurrence of any
Event of Default described in Sections 9.1(e), 9.1(f), or 9.1(h), the Agreement
shall automatically and immediately terminate and all Obligations shall
automatically become immediately due and payable without notice or demand of any
kind; (C) require the Borrower to cash collateralize all outstanding Letter of
Credit Obligations; and (D) pursue its other rights and remedies under the Loan
Documents and applicable law.
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(b) If an Event of Default has occurred and is continuing: (i)
the Lender shall have in addition to all other rights of the Lender, the rights
and remedies of a secured party under the Loan Documents and the UCC; (ii) the
Lender may, at any time, take possession of the Collateral and keep it on the
Borrower's premises, at no cost to the Lender, or remove any part of it to such
other place or places as the Lender may desire, or the Borrower shall, upon the
Lender's demand, at the Borrower's cost, assemble the Collateral and make it
available to the Lender at a place reasonably convenient to the Lender; and
(iii) the Lender may sell and deliver any Collateral at public or private sales,
for cash, upon credit or otherwise, at such prices and upon such terms as the
Lender deems advisable, in its sole discretion, and may, if the Lender deems it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Without in any way requiring notice to be given in the
following manner, the Borrower agrees that any notice by the Lender of sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
the Borrower if such notice is mailed by registered or certified mail, return
receipt requested, postage prepaid, or is delivered personally against receipt,
at least ten (10) Business Days prior to such action to the Borrower's address
specified in or pursuant to Section 12.8. If any Collateral is sold on terms
other than payment in full at the time of sale, no credit shall be given against
the Obligations until the Lender receives payment, and if the buyer defaults in
payment, the Lender may resell the Collateral without further notice to the
Borrower. In the event the Lender seeks to take possession of all or any portion
of the Collateral by judicial process, the Borrower irrevocably waives: (A) the
posting of any bond, surety or security with respect thereto which might
otherwise be required; (B) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (C) any requirement that
the Lender retain possession and not dispose of any Collateral until after trial
or final judgment. The Borrower agrees that the Lender has no obligation to
preserve rights to the Collateral or marshal any Collateral for the benefit of
any Person. The Lender is hereby granted a license or other right to use,
without charge, the Borrower's labels, patents, copyrights, name, trade secrets,
trade names, trademarks, and advertising matter, or any similar property, in
completing production of, advertising or selling any Collateral, and the
Borrower's rights under all licenses and all franchise agreements shall inure to
the Lender's benefit for such purpose. The proceeds of sale shall be applied
first to all expenses of sale, including attorneys' fees, and then to the
Obligations. The Lender will return any excess to the Borrower and the Borrower
shall remain liable for any deficiency.
(c) If an Event of Default occurs, the Borrower hereby waives
all rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
reply, attach or levy upon the Collateral without notice or hearing.
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ARTICLE 10
TERM AND TERMINATION
--------------------
10.1 TERM AND TERMINATION. The term of this Agreement shall end on the
Stated Termination Date unless sooner terminated in accordance with the terms
hereof. The Lender may terminate this Agreement without notice upon the
occurrence of an Event of Default. Upon the effective date of termination of
this Agreement for any reason whatsoever, all Obligations (including all unpaid
principal, accrued and unpaid interest and any early termination or prepayment
fees or penalties) shall become immediately due and payable and the Borrower
shall immediately arrange for the cancellation and return of Letters of Credit
then outstanding. Notwithstanding the termination of this Agreement, until all
Obligations are indefeasibly paid and performed in full in cash, the Borrower
shall remain bound by the terms of this Agreement and shall not be relieved of
any of its Obligations hereunder or under any other Loan Document, and the
Lender shall retain all its rights and remedies hereunder (including the
Lender's Liens in and all rights and remedies with respect to all then existing
and after-arising Collateral).
ARTICLE 11
AMENDMENTS; WAIVERS; PARTICIPATIONS
-----------------------------------
11.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Lender and the Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
11.2 PARTICIPATIONS.
(a) The Lender may at any time sell to one or more commercial
banks, financial institutions, or other Persons not Affiliates of the Borrower
(a "PARTICIPANT") participating interests in any Loans, the Commitment of the
Lender and the other interests of the Lender hereunder and under the other Loan
Documents; PROVIDED, HOWEVER, that (i) the Lender's obligations under this
Agreement shall remain unchanged, (ii) the Lender shall remain solely
responsible for the performance of such obligations, (iii) the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender's rights and obligations under this Agreement and the other Loan
Documents, (iv) the Lender shall not transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan Document
except with respect to (1) an increase or extension of the Commitment of Lender
or (2) postponement or delay of any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to Lender hereunder or under any other Loan Document and (v) all amounts payable
by the Borrower hereunder shall be determined as if the Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent and subject to the same limitation as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
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(b) Notwithstanding any other provision in this Agreement, the
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 NO WAIVERS; CUMULATIVE REMEDIES. No failure by the Lender to
exercise any right, remedy, or option under this Agreement or any present or
future supplement thereto, or in any other agreement between the Borrower and
the Lender, or delay by the Lender in exercising the same, will operate as a
waiver thereof. No waiver by the Lender will be effective unless it is in
writing, and then only to the extent specifically stated. No waiver by the
Lender on any occasion shall affect or diminish the Lender's rights thereafter
to require strict performance by the Borrower of any provision of this
Agreement. The Lender may proceed directly to collect the Obligations without
any prior recourse to the Collateral. The Lender's rights under this Agreement
will be cumulative and not exclusive of any other right or remedy which the
Lender may have.
12.2 SEVERABILITY. The illegality or unenforceability of any provision
of this Agreement or any Loan Document or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.
12.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS
PROVIDED THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE 9 OF
THE UCC) OF THE STATE OF CALIFORNIA; PROVIDED THAT THE LENDER SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA LOCATED IN LOS ANGELES COUNTY,
CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
BORROWER AND THE LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO
THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWER AND THE
LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. NOTWITHSTANDING THE
FOREGOING: (1) THE LENDER SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING
AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THE
LENDER DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR
OTHER SECURITY FOR THE OBLIGATIONS AND (2) EACH OF THE PARTIES HERETO
ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE
JURISDICTIONS.
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(c) THE BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWER AT ITS
ADDRESS SET FORTH IN SECTION 12.8 AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S.
MAILS POSTAGE PREPAID. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
(d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO
THE CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN THE PARTIES, ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE REQUEST OF EITHER PARTY HERETO
BE DETERMINED BY BINDING ARBITRATION. The arbitration shall be conducted in
accordance with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of law provision in this Agreement, and under the
Commercial Rules of the American Arbitration Association ("AAA"). The
arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuant to a provisional or ancillary remedy
shall not constitute a waiver of the right of either party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(e) Notwithstanding the provisions of (d) above, no
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim arises from or related to an obligation to the Lender which is secured by
real estate property collateral (exclusive of real estate space lease
assignments). If all the parties do not consent to submission of such a
controversy or claim to arbitration, the controversy or claim shall be
determined as provided in Section 12.3(f).
(f) At the request of either party a controversy or claim
which is not submitted to arbitration as provided and limited in Section 12.3(d)
and (e) shall be determined by judicial reference. If such an election is made,
the parties shall designate to the court a referee or referees selected under
the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced.
(g) No provision of Sections (d) through (g) shall limit the
right of the Lender to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or security, or
obtaining provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or other
proceeding. The exercise of a remedy does not waive the right of either party to
resort to arbitration or reference. At the Lender's option, foreclosure under a
deed of trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
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12.4 WAIVER OF JURY TRIAL. SUBJECT TO THE PROVISIONS OF SECTION
12.3(d), THE BORROWER AND THE LENDER EACH IRREVOCABLY WAIVE THEIR RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY LENDER-RELATED PERSON OR PARTICIPANT, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS, OR OTHERWISE. THE BORROWER AND THE LENDER EACH AGREE THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
12.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Lender or its agents.
12.6 OTHER SECURITY AND GUARANTIES. The Lender, may, without notice or
demand and without affecting the Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
12.7 FEES AND EXPENSES. The Borrower agrees to pay to the Lender, for
its benefit, on demand, all reasonable costs and expenses that Lender pays or
incurs in connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement or any of the
other Loan Documents, including: (a) Attorney Costs; (b) costs and expenses
(including attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches and title insurance; (d) taxes, fees and other charges
for recording the Mortgages, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Lender's Liens (including
costs and expenses paid or incurred by the Lender in connection with the
consummation of Agreement); (e) sums paid or incurred to pay any amount or take
any action required of the Borrower under the Loan Documents that the Borrower
fails to pay or take; (f) costs of appraisals, inspections, and verifications of
the Collateral, including travel, lodging, and meals for inspections of the
Collateral and the Borrower's operations by the Lender plus the Lender's then
customary charge for field examinations and audits and the preparation of
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reports thereof (such charge is currently $750 per day (or portion thereof) for
each Person retained or employed by the Lender with respect to each field
examination or audit); and (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes, and costs and expenses of preserving and
protecting the Collateral. In addition, the Borrower agrees to pay reasonable
costs and expenses incurred by the Lender (including Attorneys' Costs) to the
Lender, on demand, paid or incurred to obtain payment of the Obligations,
enforce the Lender's Liens, sell or otherwise realize upon the Collateral, and
otherwise enforce the provisions of the Loan Documents, or to defend any claims
made or threatened against the Lender arising out of the transactions
contemplated hereby (including preparations for and consultations concerning any
such matters). The foregoing shall not be construed to limit any other
provisions of the Loan Documents regarding costs and expenses to be paid by the
Borrower. All of the foregoing costs and expenses shall be charged to the
Borrower's Loan Account as Revolving Loans as described in Section 3.7.
12.8 NOTICES. Except as otherwise provided herein, all notices, demands
and requests that any party is required or elects to give to any other shall be
in writing, or by a telecommunications device capable of creating a written
record, and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service, (b) four (4) days after it shall have been mailed by United States
mail, first class, certified or registered, with postage prepaid, or (c) in the
case of notice by such a telecommunications device, when properly transmitted,
in each case addressed to the party to be notified as follows:
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If to the Lender:
Bank of America, N.A.
55 South Lake Avenue, Suite 900
Pasadena, CA 91101
Attention: Richard Burke
Senior Vice President
Telecopy No.: 626-578-6144
If to the Borrower:
Meade Instruments Corp.
6001 Oak Canyon
Irvine, CA 92618
Attention: Brent Christensen
Chief Financial Officer
Telecopy No.: 949-451-1460
With a copy to:
Meade Instruments Corp.
6001 Oak Canyon
Irvine, CA 92618
Attention: General Counsel
Telecopy No.: 949-451-1460
or to such other address as each party may designate for itself by like notice.
Failure or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated above to
receive copies shall not adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
12.9 WAIVER OF NOTICES. Unless otherwise expressly provided herein, the
Borrower waives presentment, and notice of demand or dishonor and protest as to
any instrument, notice of intent to accelerate the Obligations and notice of
acceleration of the Obligations, as well as any and all other notices to which
it might otherwise be entitled. No notice to or demand on the Borrower which the
Lender may elect to give shall entitle the Borrower to any or further notice or
demand in the same, similar or other circumstances.
12.10 BINDING EFFECT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective representatives, successors, and
assigns of the parties hereto; PROVIDED, HOWEVER, that no interest herein may be
assigned by the Borrower without prior written consent of the Lender. The rights
and benefits of the Lender hereunder shall, if such Persons so agree, inure to
any party acquiring any interest in the Obligations or any part thereof.
12.11 INDEMNITY OF THE LENDER BY THE BORROWER.
(a) The Borrower agrees to defend, indemnify and hold the
Lender-Related Persons, and the Lender and each of its respective officers,
directors, employees, counsel, representatives, agents and attorneys-in-fact
(each, an "INDEMNIFIED PERSON") harmless from and against any and all
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liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses and disbursements (including Attorney Costs) of any
kind or nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination or replacement of the Lender) be
imposed on, incurred by or asserted against any such Person in any way relating
to or arising out of this Agreement, or any Loan Document, or any document
contemplated by or referred to herein, or the transactions contemplated hereby,
or any action taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement, any other Loan Document, or the Loans or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES");
PROVIDED, that the Borrower shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting from the
gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
(b) The Borrower agrees to indemnify, defend and hold harmless
the Lender from any loss or liability directly or indirectly arising out of the
use, generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a hazardous substance relating to the
Borrower's operations, business or property. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to Attorneys Costs. The indemnity extends to the Lender, its parents,
affiliates, subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys and assigns. "Hazardous substances" means any
substance, material or waste that is or becomes designated or regulated as
"toxic," "hazardous," "pollutant," or "contaminant" or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including petroleum or natural gas. This indemnity will survive
repayment of all other Obligations.
12.12 LIMITATION OF LIABILITY. NO CLAIM MAY BE MADE BY THE BORROWER OR
OTHER PERSON AGAINST THE LENDER, OR ITS AFFILIATES, DIRECTORS, OFFICERS,
EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS OR ATTORNEYS-IN-FACT FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM FOR
BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, AND THE BORROWER
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES,
WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS
FAVOR.
12.13 FINAL AGREEMENT. This Agreement and the other Loan Documents are
intended by the Borrower and the Lender to be the final, complete, and exclusive
expression of the agreement between them. This Agreement supersedes any and all
prior oral or written agreements relating to the subject matter hereof. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement or any other Loan Document shall be made, except by a written
agreement signed by the Borrower and a duly authorized officer of the Lender.
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12.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by the Lender and the Borrower in separate counterparts, each
of which shall be an original, but all of which shall together constitute one
and the same agreement; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
12.15 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
12.16 RIGHT OF SETOFF. In addition to any rights and remedies of the
Lender provided by law, if an Event of Default exists or the Loans have been
accelerated, the Lender is authorized at any time and from time to time, without
prior notice to the Borrower, any such notice being waived by the Borrower to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, the Lender or any Affiliate of the
Lender to or for the credit or the account of the Borrower against any and all
Obligations owing to such Lender, now or hereafter existing, irrespective of
whether or not the Lender shall have made demand under this Agreement or any
Loan Document and although such Obligations may be contingent or unmatured. The
Lender agrees promptly to notify the Borrower after any such set-off and
application made by the Lender; PROVIDED, HOWEVER, that the failure to give such
notice shall not affect the validity of such set-off and application.
12.17 CONFIDENTIALITY. The Lender severally agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all information identified as "confidential" or "secret" by the Borrower and
provided to the Lender by or on behalf of the Borrower, under this Agreement or
any other Loan Document, except to the extent that such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Lender, or (ii) was or becomes available on a nonconfidential basis from
a source other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Lender; PROVIDED,
HOWEVER, that the Lender may disclose such information (1) at the request or
pursuant to any requirement of any Governmental Authority to which the Lender is
subject or in connection with an examination of the Lender by any such
Governmental Authority; (2) pursuant to subpoena or other court process; (3)
when required to do so in accordance with the provisions of any applicable
Requirement of Law; (4) to the extent reasonably required in connection with any
litigation or proceeding (including, but not limited to, any bankruptcy
proceeding) to which the Lender or its respective Affiliates may be party; (5)
to the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (6) to the Lender's independent
auditors, accountants, attorneys and other professional advisors on a
confidential basis; (7) to any prospective Participant, actual or potential,
provided that such prospective Participant agrees to keep such information
confidential to the same extent required of the Lender hereunder; (8) as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower is party or is deemed party with the
Lender, and (9) to its Affiliates on a confidential basis.
12.18 CONFLICTS WITH OTHER LOAN DOCUMENTS. Unless otherwise expressly
provided in this Agreement (or in another Loan Document by specific reference to
the applicable provision contained in this Agreement), if any provision
contained in this Agreement conflicts with any provision of any other Loan
Document, the provision contained in this Agreement shall govern and control.
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IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
"BORROWER"
MEADE INSTRUMENTS CORP.
By:
---------------------------------------
Title:
------------------------------------
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"LENDER"
BANK OF AMERICA, N.A.
By:
-------------------------------------------
-----------------------------,
Senior Vice President
-50-
ANNEX A
TO
CREDIT AGREEMENT
----------------
DEFINITIONS
-----------
Capitalized terms used in the Loan Documents shall have the following
respective meanings (unless otherwise defined therein), and all section
references in the following definitions shall refer to sections of the
Agreement:
"ACCOUNTS" means all of the Borrower's now owned or hereafter acquired
or arising accounts, as defined in the UCC, including any rights to payment for
the sale or lease of goods or rendition of services, whether or not they have
been earned by performance.
"ACCOUNT DEBTOR" means each Person obligated in any way on or in
connection with an Account, Chattel Paper or General Intangibles (including a
payment intangible).
"ACH TRANSACTIONS" means any cash management or related services
including the automatic clearing house transfer of funds by the Bank for the
account of the Borrower pursuant to agreement or overdrafts.
"ADJUSTED DILUTION PERCENTAGE" means the percentage determined by
subtracting 7 1/2% from the Dilution Percentage and multiplying the remainder by
2. [For example, if the Dilution Percentage were 16%, the Adjusted Dilution
Percentage would be 17% (16% - 7 1/2% = 8 1/2 x 2 = 17%)]
"ADJUSTED NET EARNINGS FROM OPERATIONS" means, with respect to any
fiscal period of the Borrower, the Borrower's net income on a consolidated basis
after provision for income taxes for such fiscal period, as determined in
accordance with GAAP and reported on the Financial Statements for such period,
excluding any and all of the following included in such net income: (a) gain or
loss arising from the sale of any capital assets; (b) gain arising from any
write-up in the book value of any asset; (c) earnings of any Person,
substantially all the assets of which have been acquired by the Borrower in any
manner, to the extent realized by such other Person prior to the date of
acquisition; (d) earnings of any Person (other than a Subsidiary) in which the
Borrower has a joint ownership interest unless (and only to the extent) such
earnings shall actually have been received by the Borrower in the form of cash
distributions; (e) gain arising from the acquisition of debt or equity
securities of the Borrower or from cancellation or forgiveness of Debt; and (f)
gain arising from extraordinary items, as determined in accordance with GAAP, or
from any other non-recurring transaction.
"ADJUSTED NET EARNINGS FROM US OPERATIONS" means, with respect to any
fiscal period of the Borrower, the Borrower's net income on a non-consolidated
basis after provision for income taxes for such fiscal period, as determined in
accordance with GAAP and reported on the Financial Statements for such period,
excluding any and all of the following included in such net income: (a) gain or
loss arising from the sale of any capital assets; (b) gain arising from any
write-up in the book value of any asset; (c) earnings of any Person,
substantially all the assets of which have been acquired by the Borrower in any
manner, to the extent realized by such other Person prior to the date of
acquisition; (d) earnings of any Person in which the Borrower has a joint
ownership interest unless (and only to the extent) such earnings shall actually
have been received by the Borrower in the form of cash distributions; (e) gain
arising from the acquisition of debt or equity securities of the Borrower or
from cancellation or forgiveness of Debt; and (f) gain arising from
extraordinary items, as determined in accordance with GAAP, or from any other
non-recurring transaction.
A-1
"ADJUSTED TANGIBLE ASSETS" means the consolidated assets of the
Borrower and its Subsidiaries, except: (a) deferred assets, other than prepaid
insurance and prepaid taxes; (b) patents, copyrights, trademarks, trade names,
franchises, goodwill, and other similar intangibles; (c) unamortized debt
discount and expense; (d) fixed assets to the extent of any write-up in the book
value thereof resulting from a revaluation effective after the Closing Date.
"ADJUSTED TANGIBLE NET WORTH" means, at any date: (a) the book value at
which the Adjusted Tangible Assets would be shown on a consolidated balance
sheet of the Borrower at such date prepared in accordance with GAAP; LESS (b)
the amount at which the consolidated liabilities of the Borrower and its
Subsidiaries would be shown on such balance sheet.
"AFFILIATE" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person or which owns, directly or indirectly. A Person shall be
deemed to control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting
securities, by contract, or otherwise.
"AGGREGATE REVOLVER OUTSTANDINGS" means, at any date of determination:
the sum of (a) the unpaid balance of Revolving Loans, (b) the aggregate amount
of Pending Revolving Loans, (c) one hundred percent (100%) of the aggregate
undrawn face amount of all outstanding Letters of Credit, and (d) the aggregate
amount of any unpaid reimbursement obligations in respect of Letters of Credit.
"AGREEMENT" means the Credit Agreement to which this Annex A is
attached, as from time to time amended, modified or restated.
"ANNIVERSARY DATE" means each anniversary of the Closing Date.
"APPLICABLE MARGIN" means
(i) with respect to Base Rate Revolving Loans, Base Rate Term
Loans, and all other Obligations (other than LIBOR Loans), 1%;
and
(ii) with respect to LIBOR Revolving Loans, 3 1/4%.
(iii) with respect to LIBOR Term Loans, 3 1/2%.
The Applicable Margins shall be adjusted (up or down) prospectively on
a quarterly basis as determined by the Borrower's consolidated financial
performance, commencing with the first day of the first calendar month that
occurs more than 5 days after delivery to Lender of the Borrower's draft audited
Financial Statements to Lender for the Fiscal Year ending February 28, 2002. In
the event the draft audited Financial Statements are subsequently determined to
be in error, then any resulting change in the Applicable Margin shall be made
retroactively to the date when the incorrect Applicable Margin was utilized.
Adjustments in Applicable Margins shall be determined by reference to the
following grids:
A-2
IF FIXED CHARGE
COVERAGE RATIO PRICING LEVEL
-------------- -------------
Greater than 1.50 to 1.00 Level I
Greater than 1.25 to 1.00 Level II
but equal to or less than
1.50 to 1.00
Greater than 1.00 to 1.00 Level III
but equal to or less than
1.25 to 1.00
Equal to or less than Level IV
1.00 to 1.00
APPLICABLE MARGINS
------------------
LEVEL I LEVEL II LEVEL III LEVEL IV
------- -------- --------- --------
Base Rate Loans 0.25% 0.50% 0.75% 1.25%
LIBOR Revolving Loans 2.50% 2.75% 3.00% 3.50%
LIBOR Term Loans 3.50% 3.50% 3.50% 3.50%
All adjustments in the Applicable Margins after February 28, 2002,
shall be implemented quarterly on a prospective basis, commencing with the first
day of the first calendar month that occurs more than 5 days after the date of
delivery to the Lender of quarterly unaudited or annual draft audited (as
applicable) Financial Statements evidencing the need for an adjustment. In the
event the draft audited Financial Statements are subsequently determined to be
in error, then any resulting change in the Applicable Margin shall be made
retroactively to the date when the incorrect Applicable Margin was utilized.
Concurrently with the delivery of those Financial Statements, the Borrower shall
deliver to the Lender a certificate, signed by its chief financial officer,
setting forth in reasonable detail the basis for the continuance of, or any
change in, the Applicable Margins. Failure to timely deliver such Financial
Statements shall, in addition to any other remedy provided for in this
Agreement, result in an increase in the Applicable Margins to the highest level
set forth in the foregoing grid, until the first day of the first calendar month
following the delivery of those Financial Statements demonstrating that such an
increase is not required. If a Default or Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be
implemented, no reduction may occur until the first day of the first calendar
month following the date on which such Default or Event of Default is waived or
cured.
"ATTORNEY COSTS" means and includes all reasonable fees, expenses and
disbursements of any law firm or other counsel engaged by the Lender, including
the reasonably allocated costs and expenses of internal legal services of the
Lender.
A-3
"AVAILABILITY" means, at any time (a) the lesser of (i) the Maximum
Revolver Amount or (ii) the Borrowing Base, MINUS (b) Reserves other than
Reserves deducted in the calculation of the Borrowing Base, MINUS (c) in each
case, the Aggregate Revolver Outstandings.
"BANK" means Bank of America, N.A., a national banking association, or
any successor entity thereto.
"BANK PRODUCTS" means any one or more of the following types of
services or facilities extended to the Borrower by the Bank or any affiliate of
the Bank in reliance on the Bank's agreement to indemnify such affiliate: (i)
credit cards; (ii) ACH Transactions; (iii) cash management, including controlled
disbursement services; and (iv) Hedge Agreements.
"BANK PRODUCT RESERVES" means all reserves which the Lender from time
to time establishes in its reasonable discretion for the Bank Products then
provided or outstanding.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11
U.S.C.ss.101 ET SEQ.).
"BASE RATE" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank in Charlotte, North
Carolina as its "prime rate" (the "prime rate" being a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate). Any change in the prime rate announced by the Bank shall take effect at
the opening of business on the day specified in the public announcement of such
change. Each Interest Rate based upon the Base Rate shall be adjusted
simultaneously with any change in the Base Rate.
"BASE RATE LOANS" means, collectively, the Base Rate Revolving Loans
and the Base Rate Term Loans.
"BASE RATE REVOLVING LOAN" means a Revolving Loan during any period in
which it bears interest based on the Base Rate.
"BASE RATE TERM LOAN" means any portion of a Term Loan during any
period in which such portion bears interest based on the Base Rate.
"BLOCKED ACCOUNT AGREEMENT" means an agreement among the Borrower, the
Lender and a Clearing Bank, in form and substance reasonably satisfactory to the
Lender, concerning the collection of payments which represent the proceeds of
Accounts or of any other Collateral.
"BORROWING" means a borrowing hereunder consisting of Revolving Loans
or the Term Loan made on the same day by the Lender to the Borrower or the
issuance of Letters of Credit hereunder.
"BORROWING BASE" means, at any time, an amount equal to (a) the sum of
(A) eighty-five percent (85%) of the Net Amount of Eligible Accounts, PLUS (B)
the amount determined by multiplying the Inventory Advance Rate by the Net Value
of Eligible Inventory that consists of finished goods, MINUS (b) Reserves from
time to time established by the Lender in its reasonable credit judgment;
PROVIDED that the aggregate Revolving Loans advanced against Eligible Inventory
shall not exceed the Maximum Inventory Loan Amount, and, PROVIDED, FURTHER, that
the aggregate Revolving Loans advanced against Approved Foreign Accounts shall
not exceed $2,000,000.
A-4
"BORROWING BASE CERTIFICATE" means a certificate by a Responsible
Officer of the Borrower, substantially in the form of EXHIBIT B (or another form
acceptable to the Lender) setting forth the calculation of the Borrowing Base,
including a calculation of each component thereof, all in such detail as shall
be reasonably satisfactory to the Lender. All calculations of the Borrowing Base
in connection with the preparation of any Borrowing Base Certificate shall
originally be made by the Borrower and certified to the Lender; provided, that
the Lender shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation (1) to reflect its reasonable
estimate of declines in value of any of the Collateral described therein, and
(2) to the extent that such calculation is not in accordance with this
Agreement.
"BUSINESS DAY" means (a) any day that is not a Saturday, Sunday, or a
day on which banks in Pasadena, California or Charlotte, North Carolina are
required or permitted to be closed, and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBOR Rate or LIBOR
Rate Loans, any day that is a Business Day pursuant to CLAUSE (A) above and that
is also a day on which trading in Dollars is carried on by and between banks in
the London interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"CAPITAL EXPENDITURES" means all payments due (whether or not paid
during any fiscal period) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those costs
arising in connection with the direct or indirect acquisition of such asset by
way of increased product or service charges or in connection with a Capital
Lease.
"CAPITAL LEASE" means any lease of property by the Borrower which, in
accordance with GAAP, should be reflected as a capital lease on the balance
sheet of the Borrower.
"CHANGE OF CONTROL" means (a) any transaction or series of related
transactions in which any Unrelated Person or two or more Unrelated Persons
acting in concert acquire beneficial ownership (within the meaning of Rule
13d-3(a) under the Securities Exchange Act of 1934, as amended), directly or
indirectly, of 30% or more of the outstanding Common Stock (other than
transitory holdings by the underwriter in an underwritten public offering
transaction), (b) Borrower or any of its Subsidiaries consolidates with or
merges into another Person or conveys, transfers or leases its properties and
assets substantially as an entirety to any Person or any Person consolidates
with or merges into Borrower or its Subsidiaries, in either event pursuant to a
transaction in which the outstanding Common Stock is changed into or exchanged
for cash, securities or other property, with the effect that any Unrelated
Person becomes the beneficial owner, directly or indirectly, of 30% or more of
the Common Stock or that the Persons who were the holders of Common Stock
immediately prior to the transaction hold less than 51% of the common stock of
the surviving corporation after the transaction, (c) during any period of 24
consecutive months, individuals who at the beginning of such period constituted
the board of directors of Borrower or any of its Subsidiaries (together with any
new or replacement directors whose election by the board of directors, or whose
nomination for election, was approved by a vote of at least a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for re-election was previously so
approved) cease for any reason to constitute a majority of the directors then in
office or (d) a "change in control" as defined in any document governing
Indebtedness of Borrower or any of its Subsidiaries in excess of $1,000,000
which gives the holders of such Indebtedness the right to accelerate or
otherwise require payment of such Indebtedness prior to the maturity date
thereof.
A-5
"CHATTEL PAPER" means all of the Borrower's now owned or hereafter
acquired chattel paper, as defined in the UCC, including electronic chattel
paper.
"CLEARING BANK" means the Bank or any other banking institution with
whom a Payment Account has been established pursuant to a Blocked Account
Agreement.
"CLOSING DATE" means the date of this Agreement.
"CLOSING FEE" has the meaning specified in SECTION 2.4.
"CODE" means the Internal Revenue Code of 1986.
"COLLATERAL" means all of the Borrower's real and personal property and
all other assets of any Person from time to time subject to Lender's Liens
securing payment or performance of the Obligations.
"COMMON STOCK" means the common stock of Borrower.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or any constituent of any such substance or waste.
"CONTINUATION/CONVERSION DATE" means the date on which a Loan is
converted into or continued as a LIBOR Rate Loan.
"CREDIT SUPPORT" has the meaning specified in SECTION 1.4(A).
"DATED ACCOUNTS" means Accounts which are otherwise Eligible Accounts,
except that the sale of goods by the Borrower giving rise to such Accounts were
made between July and November, with the latest possible payment due date for
such goods being January 15 of the following year.
"DEBT" means, without duplication, all liabilities, obligations and
indebtedness of the Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise, consisting of indebtedness for borrowed money or the
deferred purchase price of property, excluding trade payables, but including (a)
all Obligations; (b) all obligations and liabilities of any Person secured by
any Lien on the Borrower's property, even though the Borrower shall not have
assumed or become liable for the payment thereof; PROVIDED, HOWEVER, that all
such obligations and liabilities which are limited in recourse to such property
shall be included in Debt only to the extent of the book value of such property
as would be shown on a balance sheet of the Borrower prepared in accordance with
GAAP; (c) all obligations or liabilities created or arising under any Capital
Lease or conditional sale or other title retention agreement with respect to
property used or acquired by the Borrower, even if the rights and remedies of
the lessor, seller or lender thereunder are limited to repossession of such
property; PROVIDED, HOWEVER, that all such obligations and liabilities which are
limited in recourse to such property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance sheet
of the Borrower prepared in accordance with GAAP; and (d) all obligations and
liabilities under Guaranties.
A-6
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, or similar debtor relief Laws from time to time in
effect affecting the rights of creditors generally.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.
"DEFAULT RATE" means a fluctuating per annum interest rate at all times
equal to the sum of (a) the otherwise applicable Interest Rate plus (b) two
percent (2%) per annum. Each Default Rate shall be adjusted simultaneously with
any change in the applicable Interest Rate. In addition, the Default Rate shall
result in an increase in the Letter of Credit Fee by two (2%) percentage points
per annum.
"DEPOSIT ACCOUNTS" means all "deposit accounts" as such term is defined
in the UCC, now or hereafter held in the name of Borrower.
"DESIGNATED ACCOUNT" has the meaning specified in Section 1.2(c).
"DILUTION ADJUSTMENT RESERVE" means, calculated as of the first day of
each month, the greater of eighty-five percent (85%) of the Dilution Reserve or
eighty-five percent (85%) of the Retail Clearing Reserve.
"DILUTION PERCENTAGE" means the percent calculated as of the first day
of each month and rounded up to the next whole percent and obtained by dividing
(i) the sum of all adjustments during the immediately preceding twelve months
made to the Accounts to reflect correcting adjustments which consist of short
pays or other disputed amounts, uncollectible items being transferred to the bad
debt allowance account, reclassifications, other non-cash credits, allowances,
discounts, write-offs or other offsets to the Accounts which the Lender, in its
reasonable commercial discretion, deems appropriate to reduce the value of
Accounts, by (ii) the total reductions to the Accounts in the immediately
preceding twelve months (cash collections plus non-cash reductions).
"DILUTION RESERVE" means, calculated as of the first day of each month,
the amount determined by multiplying the Adjusted Dilution Percentage BY the Net
Amount of Eligible Accounts then outstanding.
"DISTRIBUTION" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of property in respect of capital
stock (or any options or warrants for, or other rights with respect to, such
stock) of such corporation, other than distributions in capital stock (or any
options or warrants for such stock) of the same class; or (b) the redemption or
other acquisition by such corporation of any capital stock (or any options or
warrants for such stock) of such corporation.
A-7
"DOCUMENTS" means all documents as such term is defined in the UCC,
including bills of lading, warehouse receipts or other documents of title, now
owned or hereafter acquired by the Borrower.
"DOL" means the United States Department of Labor or any successor
department or agency.
"DOLLAR" and "$" means dollars in the lawful currency of the United
States. Unless otherwise specified, all payments under the Agreements shall be
made in Dollars.
"EBITDA" means, with respect to any fiscal period of the Borrower,
Adjusted Net Earnings from Operations, PLUS, to the extent deducted in the
determination of Adjusted Net Earnings from Operations for that fiscal period,
interest expenses, provision for Federal, state, local and foreign income taxes,
depreciation, amortization, and ESOP contributions.
"ELIGIBLE ACCOUNTS" means the Accounts which the Lender in the exercise
of its reasonable commercial discretion determines to be Eligible Accounts.
Without limiting the discretion of the Lender to establish other criteria of
ineligibility, Eligible Accounts shall not, unless the Lender in its sole
discretion elects, include any Account:
(a) which is more than 60 days past due if the invoice is due within 30
days of the invoice date;
(b) which is more than 30 days past due if the invoice is due within 60
days of the invoice date;
(c) which has a due date that is more than 60 days from invoice date;
(d) with respect to which any of the representations, warranties,
covenants, and agreements contained in the Security Agreement are incorrect or
have been breached;
(e) with respect to which Account (or any other Account due from such
Account Debtor), in whole or in part, a check, promissory note, draft, trade
acceptance or other instrument for the payment of money has been received,
presented for payment and returned uncollected for any reason;
(f) which represents a progress billing (as hereinafter defined) or as
to which the Borrower has extended the time for payment without the consent of
the Lender; for the purposes hereof, "progress billing" means any invoice for
goods sold or leased or services rendered under a contract or agreement pursuant
to which the Account Debtor's obligation to pay such invoice is conditioned upon
the Borrower's completion of any further performance under the contract or
agreement;
A-8
(g) with respect to which any one or more of the following events has
occurred to the Account Debtor on such Account: death or judicial declaration of
incompetency of an Account Debtor who is an individual; the filing by or against
the Account Debtor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of the United
States, any state or territory thereof, or any foreign jurisdiction, now or
hereafter in effect; the making of any general assignment by the Account Debtor
for the benefit of creditors; the appointment of a receiver or trustee for the
Account Debtor or for any of the assets of the Account Debtor, including,
without limitation, the appointment of or taking possession by a "custodian," as
defined in the Federal Bankruptcy Code; the institution by or against the
Account Debtor of any other type of insolvency proceeding (under the bankruptcy
laws of the United States or otherwise) or of any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against, or winding
up of affairs of, the Account Debtor; the sale, assignment, or transfer of all
or any material part of the assets of the Account Debtor; the nonpayment
generally by the Account Debtor of its debts as they become due; or the
cessation of the business of the Account Debtor as a going concern;
(h) if fifty percent (50%) or more of the aggregate Dollar amount of
outstanding Accounts owed at such time by the Account Debtor thereon is
classified as ineligible under CLAUSE (A) or CLAUSE (B) above;
(i) owed by an Account Debtor which: (i) does not maintain its chief
executive office in the United States of America or Canada (other than the
Province of Newfoundland); or (ii) is not organized under the laws of the United
States of America or Canada or any state or province thereof; or (iii) is the
government of any foreign country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or of any department,
agency, public corporation, or other instrumentality thereof; except to the
extent that such Account is secured or payable by a letter of credit
satisfactory to the Lender in its discretion or otherwise specifically approved
by Lender ("Approved Foreign Accounts");
(j) owed by an Account Debtor which is an Affiliate or employee of the
Borrower;
(k) except as provided in CLAUSE (M) below, with respect to which
either the perfection, enforceability, or validity of the Lender's Liens in such
Account, or the Lender's right or ability to obtain direct payment to the Lender
of the proceeds of such Account, is governed by any federal, state, or local
statutory requirements other than those of the UCC;
(l) owed by an Account Debtor to which the Borrower or any of its
Subsidiaries, is indebted in any way, or which is subject to any right of setoff
or recoupment by the Account Debtor, unless the Account Debtor has entered into
an agreement acceptable to the Lender to waive setoff rights; or if the Account
Debtor thereon has disputed liability or made any claim with respect to any
other Account due from such Account Debtor; but in each such case only to the
extent of such indebtedness, setoff, recoupment, dispute, or claim;
(m) owed by the government of the United States of America, or any
department, agency, public corporation, or other instrumentality thereof, unless
the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. ss. 3727 ET
SEQ.), and any other steps necessary to perfect the Lender's Liens therein, have
been complied with to the Lender's satisfaction with respect to such Account;
A-9
(n) owed by any state, municipality, or other political subdivision of
the United States of America, or any department, agency, public corporation, or
other instrumentality thereof and as to which the Lender determines that its
Lien therein is not or cannot be perfected;
(o) which represents a sale on a bill-and-hold, guaranteed sale, sale
on approval, consignment, or other type sale for which the Borrower has the
legal obligation to accept the return of the Goods in satisfaction of the
obligation;
(p) which is evidenced by a promissory note or other instrument or by
chattel paper;
(q) if the Lender believes, in the exercise of its reasonable credit
judgment, that the prospect of collection of such Account is impaired or that
the Account may not be paid by reason of the Account Debtor's financial
inability to pay;
(r) with respect to which the Account Debtor is located in any state
requiring the filing of a Notice of Business Activities Report or similar report
in order to permit the Borrower to seek judicial enforcement in such State of
payment of such Account, unless the Borrower has qualified to do business in
such state or has filed a Notice of Business Activities Report or equivalent
report for the then current year;
(s) which arises out of a sale not made in the ordinary course of the
Borrower's business;
(t) with respect to which the goods giving rise to such Account have
not been shipped and delivered to and accepted by the Account Debtor or the
services giving rise to such Account have not been performed by the Borrower,
and, if applicable, accepted by the Account Debtor, or the Account Debtor
revokes its acceptance of such goods or services;
(u) owed by an Account Debtor which is obligated to the Borrower
respecting Accounts the aggregate unpaid balance of which exceeds ten percent
(10%) ("Concentration Percentage") of the aggregate unpaid balance of all
Accounts owed to the Borrower at such time by all of the Borrower's Account
Debtors, but only to the extent of such excess; PROVIDED, HOWEVER, the
Concentration Percentage shall be twenty-five percent (25%) with respect to the
following Account Debtors: Discovery Channel Stores, Wal-Mart, Sam's Club, and
Costco and PROVIDED, FURTHER, HOWEVER, that the Concentration Percentage for
Wal-Mart and Sam's Club on a combined basis shall not exceed forty (40%)
percent;
(v) which is not subject to a first priority and perfected security
interest in favor of the Lender.
If any Account at any time ceases to be an Eligible Account, then such
Account shall promptly be excluded from the calculation of Eligible Accounts.
"ELIGIBLE DATED ACCOUNTS" means Dated Accounts in an amount not greater
than $10,000,000, provided that any Dated Account unpaid seven (7) days after
its due date shall not be an Eligible Dated Account.
A-10
"ELIGIBLE IN-TRANSIT INVENTORY" means In-Transit Inventory, in an
amount not greater than $1,500,000, with respect to which the Lender is named as
consignee on all bills of lading and other Documents.
"ELIGIBLE INVENTORY" means Inventory which the Lender, in its
reasonable discretion, determines to be Eligible Inventory. Without limiting the
discretion of the Lender to establish other criteria of ineligibility, Eligible
Inventory shall not, unless the Lender in its sole discretion elects, include
any Inventory:
(a) that is not owned by the Borrower;
(b) that is not subject to the Lender's Liens, which are perfected as
to such Inventory, or that are subject to any other Lien whatsoever (other than
the Liens described in CLAUSE (D) of the definition of Permitted Liens provided
that such Permitted Liens (i) are junior in priority to the Lender's Liens or
subject to Reserves and (ii) do not impair directly or indirectly the ability of
the Lender to realize on or obtain the full benefit of the Collateral;
(c) that does not consist of finished goods;
(d) that consists of work-in-process, chemicals, samples, prototypes,
supplies, or packing and shipping materials;
(e) that is not in good condition, is unmerchantable, or does not meet
all standards imposed by any Governmental Authority, having regulatory authority
over such goods, their use or sale;
(f) that is not currently either usable or salable, at prices
approximating at least cost, in the normal course of the Borrower's business;
(g) that is Slow Moving Inventory;
(h) that is obsolete or returned or repossessed or used goods taken in
trade;
(i) that is located outside the United States of America;
(j) that is located in a public warehouse or in possession of a bailee
or in a facility leased by the Borrower, if the warehouseman, or the bailee, or
the lessor has not delivered to the Lender, if requested by the Lender, a
subordination agreement in form and substance satisfactory to the Lender or if a
Reserve for rents or storage charges has not been established for Inventory at
that location;
(k) that contains or bears any Proprietary Rights licensed to the
Borrower by any Person, if the Lender is not satisfied that it may sell or
otherwise dispose of such Inventory in accordance with the terms of the Security
Agreement and Section 9.2 without infringing the rights of the licensor of such
Proprietary Rights or violating any contract with such licensor (and without
payment of any royalties other than any royalties due with respect to the sale
or disposition of such Inventory pursuant to the existing license agreement),
and, as to which the Borrower has not delivered to the Lender a consent or
sublicense agreement from such licensor in form and substance acceptable to the
Lender if requested;
A-11
(l) that is Inventory placed on consignment.
If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Eligible Inventory.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for a Release or
injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, licenses, authorizations and permits of,
and agreements with, any Governmental Authority, in each case relating to
environmental, health, safety and land use matters.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment.
"EQUIPMENT" means all of the Borrower's now owned and hereafter
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including embedded software,
motor vehicles with respect to which a certificate of title has been issued,
aircraft, dies, tools, jigs, molds and office equipment, as well as all of such
types of property leased by the Borrower and all of the Borrower's rights and
interests with respect thereto under such leases (including, without limitation,
options to purchase); together with all present and future additions and
accessions thereto, replacements therefor, component and auxiliary parts and
supplies used or to be used in connection therewith, and all substitutes for any
of the foregoing, and all manuals, drawings, instructions, warranties and rights
with respect thereto, wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a Pension
Plan, (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA, (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multi-employer Plan or notification that a Multi-employer Plan
is in reorganization, (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multi-employer Plan, (e) the occurrence of an event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multi-employer Plan, or (f) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
A-12
"ESOP" means the Meade Instruments Corp. - Employee Stock Ownership
Plan.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day applicable to member banks under
regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as "Eurocurrency liabilities"). The Offshore Rate
for each outstanding LIBOR Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT" has the meaning specified in Section 9.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; PROVIDED that (a) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate charged to the Bank on such
day on such transactions as determined by the Lender.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"FINANCIAL STATEMENTS" means, according to the context in which it is
used, the financial statements referred to in Sections 5.2 and 6.6 or any other
financial statements required to be given to the Lender pursuant to this
Agreement.
"FINISHED GOODS BOOK RESERVE" means the reserve established on the
books of the Borrower pertaining to slow moving finished goods Inventory.
"FISCAL YEAR" means the Borrower's fiscal year for financial accounting
purposes. The current Fiscal Year of the Borrower will end on February 28, 2002.
"FIXED ASSETS" means the Equipment and Real Estate of the Borrower.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any fiscal period
of Borrower, the ratio of EBITDA to Fixed Charges.
A-13
"FIXED CHARGES" means, with respect to any fiscal period of the
Borrower on a consolidated basis, without duplication, interest expense, Capital
Expenditures (excluding Capital Expenditures funded with Debt other than
Revolving Loans, but including, without duplication, principal payments with
respect to such Debt), scheduled principal payments of Debt, and Federal, state,
local and foreign income taxes, excluding deferred taxes.
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles and practices set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
Closing Date.
"GENERAL INTANGIBLES" means all of the Borrower's now owned or
hereafter acquired general intangibles, choses in action and causes of action
and all other intangible personal property of the Borrower of every kind and
nature (other than Accounts), including, without limitation, all contract
rights, payment intangibles, Proprietary Rights, corporate or other business
records, inventions, designs, blueprints, plans, specifications, patents, patent
applications, trademarks, service marks, trade names, trade secrets, goodwill,
copyrights, computer software, customer lists, registrations, licenses,
franchises, tax refund claims, any funds which may become due to the Borrower in
connection with the termination of any Plan or other employee benefit plan or
any rights thereto and any other amounts payable to the Borrower from any Plan
or other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds thereof,
property, casualty or any similar type of insurance and any proceeds thereof,
proceeds of insurance covering the lives of key employees on which the Borrower
is beneficiary, rights to receive dividends, distributions, cash, Instruments
and other property in respect of or in exchange for pledged equity interests or
Investment Property and any letter of credit, guarantee, claim, security
interest or other security held by or granted to the Borrower.
"GERMAN CREDIT FACILITY" means a credit facility in the amount of DM
10,000,000 to Meade Instruments Europe GmbH & Co., KG, a subsidiary of MIEC,
provided by Borkener Volksbank eG.
"GOODS" means all "goods" as defined in the UCC, now owned or hereafter
acquired by Borrower, wherever located, including embedded software to the
extent included in "goods" as defined in the UCC, manufactured homes, standing
timber that is cut and removed for sale and unborn young of animals.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"GUARANTOR SECURITY AGREEMENT" means the security agreement to be
executed and delivered on the Closing Date by each of the Guarantors, as amended
from time to time.
A-14
"GUARANTORS" means, collectively, MIEC and MIHC and any other Person
which is or hereafter becomes a wholly-owned Subsidiary of Borrower and is
incorporated in one of the States of the United States.
"GUARANTY" means the continuing guaranty of the Obligations to be
executed and delivered on the Closing Date by each of the Guarantors, as amended
from time to time.
"HEDGE AGREEMENT" means any and all transactions, agreements or
documents now existing or hereafter entered into, which provides for an interest
rate, credit, commodity or equity swap, cap, floor, collar, forward foreign
exchange transaction, currency swap, cross currency rate swap, currency option,
or any combination of, or option with respect to, these or similar transactions,
for the purpose of hedging the Borrower's exposure to fluctuations in interest
or exchange rates, loan, credit exchange, security or currency valuations or
commodity prices.
"INSTRUMENTS" means all instruments as such term is defined in the UCC,
now owned or hereafter acquired by the Borrower.
"INTEREST PERIOD" means, as to any LIBOR Rate Loan, the period
commencing on the Funding Date of such Loan or on the Continuation/Conversion
Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and
ending on the date one, two, three months thereafter as selected by the Borrower
in its Notice of Borrowing, in the form attached hereto as EXHIBIT C, or Notice
of Continuation/Conversion, in the form attached hereto as EXHIBIT D, provided
that:
(a) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Stated
Termination Date.
"INTEREST RATE" means each or any of the interest rates, including the
Default Rate, set forth in Section 2.1.
"IN-TRANSIT INVENTORY" means finished goods that would qualify as
Eligible Inventory, EXCEPT that such finished goods are in the process of being
shipped from Asia to the United States of America and are thus not in the United
States of America.
"INVENTORY" means all of the Borrower's now owned and hereafter
acquired inventory, goods and merchandise, wherever located, to be furnished
under any contract of service or held for sale or lease, all returned goods, raw
materials, work-in-process, finished goods (including embedded software), other
materials and supplies of any kind, nature or description which are used or
consumed in the Borrower's business or used in connection with the packing,
shipping, advertising, selling or finishing of such goods, merchandise, and all
documents of title or other Documents representing them.
A-15
"INVENTORY ADVANCE RATE" means fifty-five percent (55%); PROVIDED,
HOWEVER, during the period from June 1 through September 30 of each year, the
Advance Rate means sixty percent (60%) and PROVIDED further, during the month of
September 2001, the Advance Rate means sixty-five percent (65%).
"INVESTMENT PROPERTY" means all of the Borrower's right title and
interest in and to any and all: (a) securities whether certificated or
uncertificated; (b) securities entitlements; (c) securities accounts; (d)
commodity contracts; or (e) commodity accounts.
"IRS" means the Internal Revenue Service and any Governmental Authority
succeeding to any of its principal functions under the Code.
"LAWS" means, collectively, all international, foreign, Federal, state
and local statutes, treaties, rules, guidelines, regulations, ordinances, codes
and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.
"LATEST PROJECTIONS" means: (a) on the Closing Date and thereafter
until the Lender receives new projections pursuant to Section 5.2(f), the
projections of the Borrower's financial condition, results of operations, and
cash flows, for the period commencing on June 1, 2001 and ending on February 28,
2003 and delivered to the Lender prior to the Closing Date; and (b) thereafter,
the projections most recently received by the Lender pursuant to Section 5.2(f).
"LENDER" means the Bank, solely in its capacity as a lender.
"LENDER'S LIENS" means the Liens in the Collateral granted to the
Lender, for the benefit of the Lender and Bank pursuant to this Agreement and
the other Loan Documents.
"LENDER-RELATED PERSONS" means the Lender, together with its
Affiliates, and the officers, directors, employees, counsel, representatives,
agents and attorneys-in-fact of the Lender and such Affiliates.
"LETTER OF CREDIT" has the meaning specified in SECTION 1.4(A).
"LETTER OF CREDIT FEE" has the meaning specified in SECTION 2.6.
"LETTER OF CREDIT ISSUER" means the Bank, any affiliate of the Bank or
any other financial institution that issues any Letter of Credit pursuant to
this Agreement.
"LETTER-OF-CREDIT RIGHTS" means "letter-of-credit rights" as such term
is defined in the UCC, now owned or hereafter acquired by Borrower, including
rights to payment or performance under a letter of credit, whether or not
Borrower, as beneficiary, has demanded or is entitled to demand payment or
performance.
"LETTER OF CREDIT SUBFACILITY" means $5,000,000.
"LIBOR RATE" means, for any Interest Period, with respect to LIBOR Rate
Loans, the rate of interest per annum determined pursuant to the following
formula:
A-16
LIBOR Rate = OFFSHORE BASE RATE
-----------------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR RATE LOANS" means, collectively, the LIBOR Revolving Loans and
the LIBOR Term Loans.
"LIBOR REVOLVING LOAN" means a Revolving Loan during any period in
which it bears interest based on the LIBOR Rate.
"LIBOR TERM LOAN" means any portion of a Term Loan during any period in
which it bears interest based on the LIBOR Rate.
"LIEN" means: (a) any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (b) any other right of or
arrangement with any creditor to have such creditor's claim satisfied out of the
assets, or the proceeds therefrom, prior to the general creditors of such
Person; and (c) any contingent or other agreement to provide any of the
foregoing.
"LOAN ACCOUNT" means the loan account of the Borrower, which account
shall be maintained by the Lender.
"LOAN DOCUMENTS" means this Agreement, the Term Loan Note, the
Trademark Security Agreements, the Pledge Agreement, the Security Agreement, the
Guaranty, the Guarantor Security Agreement, the Patent Security Agreement, and
any other agreements, instruments, and documents heretofore, now or hereafter
evidencing, securing, guaranteeing or otherwise relating to the Obligations, the
Collateral, or any other aspect of the transactions contemplated by this
Agreement.
"LOAN PARTIES" means the Borrower and each Guarantor.
"LOANS" means, collectively, all loans and advances provided for in
Article 1.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and Guarantors, taken on a
whole, or the Collateral; (b) a material impairment of the ability of the
Borrower or any Loan Party to perform under any Loan Document to which it is a
party; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Borrower of any Loan Document to which it
is a party.
"MAXIMUM INVENTORY LOAN AMOUNT" means $12,000,000.
"MAXIMUM REVOLVER AMOUNT" means $30,000,000.
"MIEC" means Meade Instruments Europe Corp., a California corporation.
A-17
"MIFS" means Meade Instruments Foreign Sales Corporation Limited, a
Jamaican corporation.
"MIHC" means Meade Instruments Holding Corp., a California corporation.
"MIM" means Meade Instruments Mexico, S. de R.L. de C.V., a Mexican
limited liability company.
"MULTI-EMPLOYER PLAN" means a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by the Borrower or any
ERISA Affiliate.
"NET AMOUNT OF ELIGIBLE ACCOUNTS" means, at any time, the gross amount,
without duplication, of Eligible Accounts and Eligible Dated Accounts, LESS
sales, excise or similar taxes, and less returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed.
"NET VALUE OF ELIGIBLE INVENTORY" means, without duplication, Eligible
Inventory and Eligible In Transit Inventory valued at the lower of cost (on a
first-in, first-out basis) or market LESS the Unallocated Cost Reduction Amount.
"NOTICE OF BORROWING" has the meaning specified in SECTION 1.2(b).
"NOTICE OF CONTINUATION/CONVERSION" has the meaning specified in
SECTION 2.2(b).
"OBLIGATIONS" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Borrower to
the Lender, arising under or pursuant to this Agreement or any of the other Loan
Documents, whether or not evidenced by any note, or other instrument or
document, whether arising from an extension of credit, opening of a letter of
credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct
or indirect, absolute or contingent, due or to become due, primary or secondary,
as principal or guarantor, and including all principal, interest, charges,
expenses, fees, attorneys' fees, filing fees and any other sums chargeable to
the Borrower hereunder or under any of the other Loan Documents. "Obligations"
includes, without limitation, (a) all debts, liabilities, and obligations now or
hereafter arising from or in connection with the Letters of Credit and (b) all
debts, liabilities and obligations now or hereafter arising from or in
connection with Bank Products.
"OFFSHORE BASE RATE" means the rate per annum appearing on Telerate
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period. If for any reason such rate is not available, the Offshore Base
Rate shall be, for any Interest Period, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; PROVIDED,
HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates. If for any
reason none of the foregoing rates is available, the Offshore Base Rate shall
be, for any Interest Period, the rate per annum determined by the Lender as the
rate of interest at which dollar deposits in the approximate amount of the LIBOR
Rate Loan comprising part of such Borrowing would be offered by the Bank's
London Branch to major banks in the offshore dollar market at their request at
or about 11:00 a.m. (London time) two Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period.
A-18
"OTHER TAXES" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which arise from
any payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents.
"PARTICIPANT" means any Person who shall have been granted the right by
the Lender to participate in the financing provided by the Lender under this
Agreement, and who shall have entered into a participation agreement in form and
substance satisfactory to the Lender.
"PATENT SECURITY AGREEMENT" means the Patent Security Agreement of even
date herewith executed on the Closing Date by Borrower in favor of Lender, as
amended from time to time.
"PAYMENT ACCOUNT" means each bank account established pursuant to the
Security Agreement, to which the proceeds of Accounts and other Collateral are
deposited or credited, and which is maintained in the name of the Lender or the
Borrower, as the Lender may determine, on terms acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to the functions thereof.
"PENDING REVOLVING LOANS" means, at any time, the aggregate principal
amount of all Revolving Loans requested in any Notice of Borrowing received by
the Lender which have not yet been advanced.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower sponsors, maintains, or
to which it makes, is making, or is obligated to make contributions, or in the
case of a Multi-employer Plan has made contributions at any time during the
immediately preceding five (5) plan years.
"PERMITTED ACCOUNT SALES" means a sale of Accounts by Borrower to
factors following a request by Borrower to Lender to make such a sale and the
consent by Lender, in its sole discretion, to such sale.
"PERMITTED LIENS" means:
(a) Liens for taxes not delinquent or statutory Liens for taxes in an
amount not to exceed $250,000 provided that the payment of such taxes which are
due and payable is being contested in good faith and by appropriate proceedings
diligently pursued and as to which adequate financial reserves have been
established on Borrower's books and records and a stay of enforcement of any
such Lien is in effect;
(b) the Lender's Liens;
A-19
(c) Liens consisting of deposits made in the ordinary course of
business in connection with, or to secure payment of, obligations under worker's
compensation, unemployment insurance, social security and other similar laws, or
to secure the performance of bids, tenders or contracts (other than for the
repayment of Debt) or to secure indemnity, performance or other similar bonds
for the performance of bids, tenders or contracts (other than for the repayment
of Debt) or to secure statutory obligations (other than liens arising under
ERISA or Environmental Liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds;
(d) Liens securing the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, PROVIDED that if any
such Lien arises from the nonpayment of such claims or demand when due, such
claims or demands do not exceed $250,000 in the aggregate;
(e) Liens constituting encumbrances in the nature of reservations,
exceptions, encroachments, easements, rights of way, covenants running with the
land, and other similar title exceptions or encumbrances affecting any Real
Estate; PROVIDED that they do not in the aggregate materially detract from the
value of the Real Estate or materially interfere with its use in the ordinary
conduct of the Borrower's business;
(f) any attachment or judgment Lien not constituting an Event of
Default under Section 9.1(k);
(g) leases, subleases or licenses granted to third parties and not
interfering in any material respect with the ordinary conduct of the business of
Borrower or any of its Subsidiaries or resulting in a material diminution in the
value of any Collateral as security for the Obligations;
(h) Liens arising from filing UCC financing statements relating solely
to property which is the subject of leases or purchase money Debt permitted by
this Agreement;
(i) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; and
(j) Liens arising from any zoning or similar law or right reserved to
or vested in any governmental office or agency to control or regulate the use of
any real property.
"PERMITTED UNALLOCATED COSTS" means the amount determined by
multiplying three percent (3%) by the gross value of the Borrower's Inventory
based on the books of the Borrower.
"PERSON" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, Governmental Authority, or any other entity.
"PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower sponsors or maintains or to which the Borrower makes,
is making, or is obligated to make contributions and includes any Pension Plan.
"PLEDGE AGREEMENT" means a Pledge Agreement of even date herewith in
favor of the Lender executed by Borrower on the Closing Date, as amended from
time to time.
A-20
"PROPRIETARY RIGHTS" means all of the Borrower's now owned and
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, service marks, trade names, trade styles, patent, trademark and
service mark applications, and all licenses and rights related to any of the
foregoing, including those patents, trademarks, service marks, trade names and
copyrights set forth on SCHEDULE 6.12 hereto, and all other rights under any of
the foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for past,
present and future infringement of any of the foregoing.
"REAL ESTATE" means all of the Borrower's now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrower's now or
hereafter owned or leased interests in the improvements thereon, the fixtures
attached thereto and the easements appurtenant thereto.
"RELEASE" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any Real
Estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or Real Estate or other property.
"REPORTABLE EVENT" means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"RESERVES" means reserves that limit the availability of credit
hereunder, consisting of reserves against Availability, Eligible Accounts or
Eligible Inventory, established by Lender from time to time in Lender's
reasonable credit judgment. Without limiting the generality of the foregoing,
the following reserves shall be deemed to be a reasonable exercise of Lender's
credit judgment: (a) Bank Product Reserves, (b) a reserve for accrued, unpaid
interest on the Obligations, (c) reserves for rent at leased locations subject
to statutory or contractual landlord liens, (d) the Slow Moving Reserve, (e) the
Dilution Adjustment Reserve, and (f) warehousemen's or bailees' charges.
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of the Borrower, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants and the preparation of the Borrowing Base Certificate, the chief
financial officer or the treasurer of the Borrower, or any other officer having
substantially the same authority and responsibility.
"RESTRICTED INVESTMENT" means, as to the Borrower, any acquisition of
property by the Borrower in exchange for cash or other property, whether in the
form of an acquisition of stock, debt, or other indebtedness or obligation, or
the purchase or acquisition of any other property, or a loan, advance, capital
contribution, or subscription, except the following: (a) acquisitions of
Equipment to be used in the business of the Borrower; (b) acquisitions of
Inventory in the ordinary course of business of the Borrower; (c) acquisitions
of current assets acquired in the ordinary course of business of the Borrower;
(d) direct obligations of the United States of America, or any agency thereof,
or obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (e)
acquisitions of certificates of deposit maturing within one year from the date
A-21
of acquisition, bankers' acceptances, Eurodollar bank deposits, or overnight
bank deposits, in each case issued by, created by, or with a bank or trust
company organized under the laws of the United States of America or any state
thereof having capital and surplus aggregating at least $100,000,000; (f)
acquisitions of commercial paper given a rating of "A2" or better by Standard &
Poor's Corporation or "P2" or better by Moody's Investors Service, Inc. and
maturing not more than 90 days from the date of creation thereof; and (g) Hedge
Agreements.
"RETAIL CLEARING RESERVE" means the reserve, calculated as of the end
of each month, established on the books of the Borrower which represents the
Borrower's estimate of future returns.
"REVOLVING LOANS" has the meaning specified in SECTION 1.2.
"SECURITY AGREEMENT" means a security agreement of even date herewith
in favor of the Lender executed by Borrower on the Closing Date, as amended from
time to time.
"SLOW MOVING INVENTORY" means Inventory which is estimated to represent
more than a one-year supply.
"SLOW MOVING RESERVE" means, calculated as of the first day of each
month, the amount, if any, by which the Finished Goods Book Reserve exceeds the
amount of Slow Moving Inventory.
"SOFTWARE" means all "software" as such term is defined in the UCC, now
owned or hereafter acquired by the Borrower, other than software embedded in any
category of Goods, including all computer programs and all supporting
information provided in connection with a transaction related to any program.
"SOLVENT" means, when used with respect to any Person, that at the time
of determination:
(a) the assets of such Person, at a fair valuation, are in excess of
the total amount of its debts (including contingent liabilities); and
(b) the present fair saleable value of its assets is greater than its
probable liability on its existing debts as such debts become absolute and
matured; and
(c) it is then able and expects to be able to pay its debts (including
contingent debts and other commitments) as they mature; and
(d) it has capital sufficient to carry on its business as conducted and
as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of
any contingent liability shall be computed as the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"STATED TERMINATION DATE" means September 24, 2004.
A-22
"SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which more than fifty percent (50%) of the voting stock or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of the Borrower.
"SUPPORTING OBLIGATIONS" means all supporting obligations as such term
is defined in the UCC, including letters of credit and guaranties issued in
support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments,
or Investment Property.
"TAXES" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of Lender such taxes (including income taxes or franchise
taxes) as are imposed on or measured by the Lender's or each Lender's net income
in any the jurisdiction (whether federal, state or local and including any
political subdivision thereof) under the laws of which the Lender is organized
or maintains a lending office.
"TERM LOAN" has the meaning specified in SECTION 1.3(A).
"TERM LOAN NOTE" has the meaning specified in SECTION 1.3(C).
"TERMINATION DATE" means the earliest to occur of (i) the Stated
Termination Date, (ii) the date the Total Facility is terminated either by the
Borrower pursuant to SECTION 3.2 or by the Lender pursuant to SECTION 9.2, and
(iii) the date this Agreement is otherwise terminated for any reason whatsoever
pursuant to the terms of this Agreement.
"TOTAL FACILITY" has the meaning specified in SECTION 1.1.
"TRADEMARK SECURITY AGREEMENT" means the Trademark Security Agreement
of even date herewith executed on the Closing Date by Borrower in favor of the
Lender, as amended from time to time.
"UCC" means the Uniform Commercial Code, as in effect from time to
time, of the State of California or of any other state the laws of which are
required as a result thereof to be applied in connection with the issue of
perfection of security interests; provided, that to the extent that the UCC is
used to define any term herein or in any other documents and such term is
defined differently in different Articles or Divisions of the UCC, the
definition of such term contained in Article or Division 9 shall govern.
"UNALLOCATED COSTS" means the amount established by the Borrower on its
books as unallocated overhead costs and which amount is not included in the
Borrower's cost of Inventory.
"UNALLOCATED COST REDUCTION AMOUNT" means the difference between (a)
the Unallocated Costs, if greater, and (b) the Permitted Unallocated Costs, but
in no event greater than $2,000,000.
A-23
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"UNRELATED PERSON" means any Person OTHER THAN (A) those Persons
holding equity ownership of 5% or more of the Borrower as of the Closing Date,
(B) Borrower or any of its Subsidiaries or (C) the ESOP or any other employee
stock ownership plan or other tangible benefit plan covering the employees of
Borrower and its Subsidiaries.
"UNUSED LETTER OF CREDIT SUBFACILITY" means an amount equal to
$5,000,000 MINUS the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit PLUS, without duplication, (b) the aggregate unpaid
reimbursement obligations with respect to all Letters of Credit.
"UNUSED LINE FEE" has the meaning specified in Section 2.5.
"US EBITDA" means, with respect to any fiscal period of the Borrower,
Adjusted Net Earnings from US Operations, PLUS, to the extent deducted in the
determination of Adjusted Net Earnings from US Operations for that fiscal
period, interest expenses, provision for federal, state, local and foreign
income taxes, depreciation, amortization, and ESOP contributions.
ACCOUNTING TERMS. Any accounting term used in the Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations in the Agreement shall be
computed, unless otherwise specifically provided therein, in accordance with
GAAP as consistently applied and using the same method for inventory valuation
as used in the preparation of the Financial Statements.
INTERPRETIVE PROVISIONS. (a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words refer
to the Agreement as a whole and not to any particular provision of the
Agreement; and Subsection, Section, Schedule and Exhibit references are to the
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including," the words "to" and "until" each mean "to but excluding"
and the word "through" means "to and including."
(iv) The word "or" is not exclusive.
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including the Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
A-24
(e) The captions and headings of the Agreement and other Loan Documents
are for convenience of reference only and shall not affect the interpretation of
the Agreement.
(f) The Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g) For purposes of Section 9.1, a breach of a financial covenant
contained in Article 7 shall be deemed to have occurred as of any date of
determination thereof by the Lender or as of the last day of any specified
measuring period, regardless of when the Financial Statements reflecting such
breach are delivered to the Lender.
(h) The Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lender merely because of the Lender's
involvement in their preparation.
A-25
LIST OF EXHIBITS AND SCHEDULES
------------------------------
Exhibit A: Form of Term Loan Note
Exhibit B: Form of Borrowing Base Certificate
Exhibit C: Notice of Borrowing
Exhibit D: Notice of Continuation/Conversion
Schedule 6.3: Qualification as Foreign Corporation
Schedule 6.5: Borrower's Subsidiaries
Schedule 6.9: Obligations and Debts
Schedule 6.11: Real Estate Leases
Schedule 6.12: Proprietary Rights
Schedule 6.13: Tradenames
Schedule 6.14: Pending Claims
Schedule 6.15: Labor Disputes
Schedule 6.16: Environmental Disclosures
Schedule 6.26: Bank Accounts
A-1
EXHIBIT A
FORM OF TERM LOAN NOTE
----------------------
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
EXHIBIT C
NOTICE OF BORROWING
-------------------
Date: ______________, 200_
To: Bank of America, N.A. as the Lender ("Lender") who is party to the
Credit Agreement dated as of September 24, 2001 (as extended, renewed,
amended or restated from time to time, the "Credit Agreement") between
Meade Instruments Corp. and Bank of America, N.A., as Lender.
Ladies and Gentlemen:
The undersigned, Meade Instruments Corp. (the "Borrower"),
refers to the Credit Agreement, the terms defined therein being used herein as
therein defined, and hereby gives you notice irrevocably of the Borrowing
specified below:
1. The Business Day of the proposed Borrowing is _________,
200__.
2. The aggregate amount of the proposed Borrowing is
$___________.
3. The Borrowing is to be comprised of $__________of Base Rate
and $______________ of LIBOR Rate Loans.
4. The duration of the Interest Period for the LIBOR Rate
Loans, if any, included in the Borrowing shall be _____ months.
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the proposed
Borrowing, before and after giving effect thereto and to the application of the
proceeds therefrom:
(a) The representations and warranties of the Borrower
contained in the Credit Agreement are true and correct as though made on and as
of such date;
(b) No Default or Event of Default has occurred and is
continuing, or would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate
principal amount of all outstanding Revolving Loans [plus the aggregate amount
available for drawing under all outstanding Letters of Credit], to exceed the
Borrowing Base or the Revolving Loan Commitment of the Lender.
MEADE INSTRUMENTS CORP.
By:
-------------------------------
Title:
----------------------------
C-1
EXHIBIT D
NOTICE OF CONTINUATION/CONVERSION
---------------------------------
Date: _______________, 200_
To: Bank of America, N.A. as the Lender ("Lender") to the Credit Agreement
dated as of September 24, 2001 (as extended, renewed, amended or
restated from time to time, the "Credit Agreement") between Meade
Instruments Corp. and Bank of America, N.A., as Lender.
Ladies and Gentlemen:
The undersigned, Meade Instruments Corp. (the "Borrower"),
refers to the Credit Agreement, the terms defined therein being used herein as
therein defined, and hereby gives you notice irrevocably of the [conversion]
[continuation] of the Loans specified herein, that:
1. The Continuation/Conversion Date is _________________,
200__.
2. The aggregate amount of the Loans to be [converted]
[continued] is $___________.
3. The Loans are to be [converted into] [continued as] [LIBOR
Rate] [Base Rate] Loans.
4. The duration of the Interest Period for the LIBOR Rate
Loans included in the [conversion] [continuation] shall be _______ months.
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the proposed
Continuation/Conversion Date, before and after giving effect thereto and to the
application of the proceeds therefrom:
(a) The representations and warranties of the Borrower
contained in the Credit Agreement are true and correct as though made
on and as of such date;
(b) Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation]; and
(c) The proposed conversion-continuation will not cause the
aggregate principal amount of all outstanding Revolving Loans [plus the
aggregate amount available for drawing under all outstanding Letters of
Credit] to exceed the Borrowing Base or the Revolving Loan Commitment
of the Lender.
MEADE INSTRUMENTS CORP.
By:
-------------------------------
Title:
----------------------------
D-1
SCHEDULE 6.3
QUALIFICATION AS FOREIGN CORPORATION
------------------------------------
SCHEDULE 6.5
BORROWER'S SUBSIDIARIES
-----------------------
SCHEDULE 6.9
OBLIGATIONS AND DEBTS
---------------------
SCHEDULE 6.11
REAL ESTATE LEASES
------------------
SCHEDULE 6.12
PROPRIETARY RIGHTS
------------------
SCHEDULE 6.13
TRADENAMES
----------
SCHEDULE 6.14
PENDING CLAIMS
--------------
SCHEDULE 6.15
LABOR DISPUTES
--------------
SCHEDULE 6.16
ENVIRONMENTAL DISCLOSURES
-------------------------
SCHEDULE 6.26
BANK ACCOUNTS
-------------