AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
among
ALLIED HEALTHCARE PRODUCTS, INC.,
B&F MEDICAL PRODUCTS, INC.,
HOSPITAL SYSTEMS, INC.,
and
LIFE SUPPORT PRODUCTS, INC.,
as Borrowers, on the one hand,
and
FOOTHILL CAPITAL CORPORATION,
on the other hand
Dated as of September 10, 1998
TABLE OF CONTENTS
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Page(s)
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1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 17
1.3 Code 17
1.4 Construction 17
1.5 Schedules and Exhibits 17
2. LOAN AND TERMS OF PAYMENT 18
2.1 Revolving Advances 18
2.2 Letters of Credit 18
2.3 [Intentionally Omitted] 21
2.4 [Intentionally Omitted 21
2.5 Overadvances 21
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations 21
2.7 Collection of Accounts 22
2.8 Crediting Payments; Application of Collections 23
2.9 Designated Account 23
2.10 Maintenance of Loan Account; Statements of Obligations 24
2.11 Fees 24
2.12 Eurodollar Rate Loans 25
2.13 Illegality 26
2.14 Requirements of Law 27
2.15 Indemnity 28
3. CONDITIONS; TERM OF AGREEMENT 29
3.1 Conditions Precedent to the Initial Advance 29
3.2 Conditions Precedent to all Advances and all Letters of Credit 29
3.3 Condition Subsequent 30
3.4 Term 30
3.5 Effect of Termination 30
3.6 Early Termination by Borrowers 30
3.7 Termination Upon Event of Default 31
4. CREATION OF SECURITY INTEREST 31
4.1 Grant of Security Interest 31
4.2 Negotiable Collateral 31
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral 31
4.4 Delivery of Additional Documentation Required 31
4.5 Power of Attorney 32
4.6 Right to Inspect 32
5. REPRESENTATIONS AND WARRANTIES 32
5.1 No Encumbrances 33
5.2 Eligible Accounts 33
5.3 Eligible Inventory 33
5.4 Equipment 33
5.5 Location of Inventory and Equipment 33
5.6 Inventory Records 33
5.7 Location of Chief Executive Office; FEIN 33
5.8 Due Organization and Qualification; Subsidiaries 34
5.9 Due Authorization; No Conflict 34
5.10 Litigation 35
5.11 No Material Adverse Change 35
5.12 Solvency 35
5.13 Employee Benefits 35
5.14 Environmental Condition 36
6. AFFIRMATIVE COVENANTS 36
6.1 Accounting System 36
6.2 Collateral Reporting 36
6.3 Financial Statements, Reports, Certificates 37
6.4 Tax Returns 38
6.5 [Intentionally Omitted] 38
6.6 Returns 38
6.7 Title to Equipment 38
6.8 Maintenance of Equipment 39
6.9 Taxes 39
6.10 Insurance 39
6.11 No Setoffs or Counterclaims 41
6.12 Location of Inventory and Equipment 41
6.13 Compliance with Laws 41
6.14 Employee Benefits 41
6.15 Leases 42
7. NEGATIVE COVENANTS 42
7.1 Indebtedness 42
7.2 Liens 43
7.3 Restrictions on Fundamental Changes 43
7.4 Disposal of Assets 43
7.5 Change Name 43
7.6 Guarantee 43
7.7 Nature of Business 43
7.8 Prepayments and Amendments 44
7.9 Change of Control. 44
7.10 Consignments 44
7.11 Distributions 44
7.12 Accounting Methods 44
7.13 Investments 44
7.14 Transactions with Affiliates 44
7.15 Suspension 45
7.16 [Intentionally 45
7.17 Use of Proceeds 45
7.18 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees 45
7.19 No Prohibited Transactions Under ERISA 45
7.20 Financial Covenants 46
7.21 Capital Expenditures 46
8. EVENTS OF DEFAULT 46
9. FOOTHILL'S RIGHTS AND REMEDIES 48
9.1 Rights and Remedies 48
9.2 Remedies Cumulative 50
10. TAXES AND EXPENSES 50
11. WAIVERS; INDEMNIFICATION 51
11.1 Demand; Protest; etc 51
11.2 Foothill's Liability for Collateral 51
11.3 Indemnification 51
11.4 Joint Borrowers 52
12. NOTICES 57
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 58
14. DESTRUCTION OF BORROWERS' DOCUMENTS 59
15. GENERAL PROVISIONS 59
15.1 Effectiveness 59
15.2 Successors and Assigns 59
15.3 Section Headings 60
15.4 Interpretation 60
15.5 Severability of Provisions 60
15.6 Amendments in Writing 60
15.7 Counterparts; Telefacsimile Execution 60
15.8 Revival and Reinstatement of Obligations 60
15.9 Integration 61
SCHEDULES AND EXHIBITS,
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Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Exhibit C-1 Form of Compliance Certificate
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement"),
is entered into as of September 10, 1998, among FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with a place of business located at 00000
Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, on the
one hand, and ALLIED HEALTHCARE PRODUCTS, INC., a Delaware corporation
("Parent"), B&F MEDICAL PRODUCTS, INC., a Delaware corporation CB&F"), HOSPITAL
SYSTEMS, INC., a California corporation ("Hospital Systems"), and LIFE SUPPORT
PRODUCTS, INC., a California corporation ("Life Support"), each with its chief
executive office located at 0000 Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000, on
the other hand.
A. WHEREAS, Foothill, on the one hand, and Parent, B&F, Hospital Systems,
and Life Support (together with certain other affiliates of Parent) entered into
that certain Loan and Security Agreement, dated as of August 7, 1997 (as amended
by Amendment Number One thereto dated as of March 3, 1998 and Amendment Number
Two dated as of July 24, 1998, the "Original Loan Agreement").
B. WHEREAS, Parent, B&F, Hospital Systems and Life Support have requested
and Foothill has agreed, that the Original Loan Agreement be amended and
restated as provided herein.
C. NOW, THEREFORE, each of the parties hereto agrees that the Original Loan
Agreement is hereby amended and restated as follows:
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor"means any Person who is or who may become obligated under,
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with respect to, or on account of, an Account.
"Accounts"means all currently existing and hereafter arising accounts,
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contract rights, and all other forms of obligations owing to a Person arising
out of the sale or lease of goods or the rendition of services by such Person,
irrespective of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Adjusted Eurodollar Rate"means, with respect to each Interest Period for
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any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to
the next whole multiple of 1/16 of 1% per annum) determined by dividing (a) the
Eurodollar
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Rate for such Interest Period by (b) a percentage equal to (i) 100% minus (ii)
the Reserve Percentage. The Adjusted Eurodollar Rate shall be adjusted on and as
of the effective day of any change in the Reserve Percentage.
"Advances"has the meaning set forth in Section 2. l(a).
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"Affiliate"means, as applied to any Person, any other Person who directly
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or indirectly controls, is controlled by, is under common control with or is a
director or officer of such Person. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to vote 5 % or more
of the securities having ordinary voting power for the election of directors or
the direct or indirect power to direct the management and policies of a Person.
"Agreement"has the meaning set forth in the preamble hereto.
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"Applicable Margin."means: (a) with respect to Eurodollar Rate Loans,
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2.50%, and (b) with respect to all other Obligations (other than outstanding
L/Cs), 0.25%, in each case subject to adjustment as provided herein. In the
event that (i) Parent's audited financial statements delivered pursuant to
Section 6.3 (b)for its fiscal year ending in 1999 or for its fiscal year ending
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in 2000 indicate that Parent's consolidated net profit (as defined by GAAP)
after taxes for such fiscal year of Parent is at least $1.00, and (ii) no
Default or Event of Default is then existing, then the then existing Applicable
Margin shall be reduced by 0.25 % on Foothill's receipt of such statements
evidencing such profit (such date of receipt in either such year the "Adjustment
Date"), but effective retroactively to the August 15 immediately preceding such
Adjustment Date. An appropriate credit shall be given promptly (but no sooner
than the first day of the month following the Adjustment Date) to Borrower in
the event of, and to give effect to, any such retroactive adjustments to the
Applicable Margin. The maximum aggregate reduction of the Applicable Margin (if
Borrower has consolidated net profits in each such fiscal year) would be 0.50%,
resulting in an adjusted Applicable Margin of 2.00% for Eurodollar Rate Loans
and -0.25% for all other Obligations (other than outstanding L/Cs) effective as
of August 15, 2000. Notwithstanding anything to the contrary in this definition:
(y) any adjustment to the Applicable Margin with respect to Eurodollar Rate
Loans will only affect Eurodollar Rate Loans with Interest Periods commencing
after the relevant Adjustment Date; and (z) at any time during the term of this
Agreement that an Event of Default exists, interest will be calculated on the
basis of Section 2.6 (c).
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"Authorized Person"means any officer or other employee of
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Borrower.
"Average Unused Portion of Maximum Revolving Amount"means, as of any date
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of determination, (a) $15,000,000, less(b) the sum of (i) the average Daily
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Balance of Advances that were outstanding during the immediately preceding
month, plus(ii) the average Daily Balance of the undrawn Letters of Credit that
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were outstanding during the immediately preceding month.
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"B&F"has the meaning set forth in the preamble to this Agreement.
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"Bankruptcy Code"means the United States Bankruptcy Code (11 U.S.C. 101
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et seq.), as amended, and any successor statute.
"Benefit Plan"means a "defined benefit plan" (as defined in Section 3(35)
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of ERISA) for which any Borrower, any Subsidiary of any Borrower, or any ERISA
Affiliate has been an "employer" (as defined in Section 3(5) of ERISA) within
the past six years.
"Borrower"means any one of Parent, B&F, Hospital Systems, or Life
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Support.
"Borrowers' Books"means all of Borrowers' books and records including:
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ledgers; records indicating, summarizing, or evidencing Borrowers' properties or
assets (including the Collateral) or liabilities; all information relating to
Borrowers' business operations or financial condition; and all computer
programs, disk or tape files, printouts, runs, or other computer prepared
information.
"Borrowing Base"has the meaning set forth in Section 2. l(a).
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"Business Day"means any day that is not a Saturday, Sunday, or other day on
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which national banks are authorized or required to close.
"Change of Control"shall be deemed to have occurred at such time as a
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"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 20% of the total voting power of all classes of stock then
outstanding of any Borrower entitled to vote in the election of directors.
"Closing Date"means the date of the making of the initial Advance
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hereunder.
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"Code"means the California Uniform Commercial Code.
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"Collateral"means each Borrower's right, title, and interest in each of the
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following:
(a) Accounts,
(b) Borrowers' Books,
(c) Equipment,
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(d) General Intangibles,:
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
(h) Real Property Collateral,
(i) any money, or other assets of Borrowers that now or hereafter come into
the possession, custody, or control of Foothill, and
(j) the proceeds and products, whether tangible or intangible, of any of
the foregoing, including proceeds of insurance covering any or all of the
Collateral of Borrowers, and any and all Accounts, Borrowers' Books, Equipment,
General Intangibles, Inventory, Investment Property, Negotiable Collateral, Real
Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement"means a landlord waiver, mortgagee waiver,
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bailee letter, or acknowledgement agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory of any Borrower, in
each case, in form and substance satisfactory to Foothill.
"Collections"means all cash, checks, notes, instruments, and other items of
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payment (including, insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds).
"Compliance Certificate"means a certificate substantially in the form of
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Exhibit C-1and delivered by the chief accounting officer of a Borrower to
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Foothill.
"Consolidated Current Assets"means, for any Person, as of any date of
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determination, the aggregate amount of all current assets of such Person that
would, in accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities"means, for any Person, as of any date of
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determination, the aggregate amount of all current liabilities of such Person
that would, in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all Obligations outstanding under
this Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
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"Daily Balance"means, with respect to each day during the term of this
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Agreement, the amount of an Obligation owed at the end of such day.
"deems itself insecure"means that the Person deems itself insecure in
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accordance with the provisions of Section 1208 of the Code.
"Default"means an event, condition, or default that, with the giving of
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notice, the passage of time, or both, would be an Event of Default.
"Designated Account"means account number 00-0000-000000 of Borrowers
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maintained with Borrowers' Designated Account Bank, or such other deposit
account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by Borrowers to Foothill.
"Designated Account Bank"means NationsBank, N.A., whose office is located
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at St. Louis, Missouri, and whose ABA number is 000000000.
"Dilution"means, in each case based upon the experience of the immediately
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prior three months, the result of dividing the Dollar amount of (a) bad debt
write-downs, discounts, advertising, returns, promotions, credits, or other
dilution with respect to the Accounts of Borrowers, by (b) Borrowers'
Collections (excluding extraordinary items) plus the Dollar amount of clause
(a).
"Dilution Reserve"means, as of any date of determination, an amount
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sufficient to reduce Foothill's advance rate against Eligible Accounts by one
percentage point for each percentage point by which Dilution is in excess of
5.00%.
"Disbursement Letter"means an instructional letter executed and delivered
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by Borrowers to Foothill regarding the extensions of credit to be made on the
Closing Date, the form and substance of which shall be satisfactory to Foothill.
"Dollars or $"means United States dollars.
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"Domestic Eligible Accountsmmeans Eligible Accounts that are payable in
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Dollars with respect to Account Debtors that maintain their chief executive
offices in the United States; however, Domestic Eligible Accounts shall not
include: (a) Accounts with selling terms of more than 60 days, (b) Accounts that
the Account Debtor has failed to pay within 120 days of invoice date (but in no
event shall more than $1,000,000 of domestic Accounts more than 90 days from
invoice date be deemed eligible), and (c) Accounts owed by an Account Debtor or
its Affiliates where 50% or more of all Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (b) above.
"Early Termination Premium"has the meaning set forth in
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Section 3.6.
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"Eligible Accounts"means those Accounts created by a Borrower in the
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ordinary course of business, that arise out of such Borrower's sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by such Borrower to
Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in all respects; provided, however,that standards of
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eligibility may be fixed and revised from time to time by Foothill in Foothill's
reasonable credit judgment. Eligible Accounts shall not include the following:
(a) Accounts with respect to which the Account Debtor is an employee,
Affiliate, or agent of a Borrower;
(b) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;
(c) [Intentionally Omitted];
(d) Accounts with respect to which the Account Debtor is either (i) the
United States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which the relevant Borrower has
complied, to the satisfaction of Foothill, with the Assignment of Claims Act, 31
U.S.C. 3727), or (ii) any State of the United States (exclusive, however, of
Accounts owed by any State that does not have a statutory counterpart to the
Assignment of Claims Act);
(e) Accounts with respect to which the Account Debtor is a creditor of any
Borrower, has or has asserted a right of setoff, has disputed its liability, or
has made any claim with respect to the Account;
(f) Accounts with respect to an Account Debtor whose total obligations
owing to the Borrowers exceed 10% of all Eligible Accounts of the Borrowers, to
the extent of the obligations owing by such Account Debtor in excess of such
percentage;
(g) Accounts with respect to which the Account Debtor is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(h) Accounts the collection of which Foothill, in its reasonable credit
judgment, believes to be doubtful by reason of the Account Debtor's financial
condition;
(i) Accounts with respect to which the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, the services giving rise
to such Account have not been performed and accepted by the Account Debtor, or
the Account otherwise does not represent a final sale;
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(j) Accounts with respect,to which the Account Debtor is located in the
states of New Jersey, Minnesota, or West Virginia (or any other state that
requires a creditor to file a Business Activity Report or similar document in
order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless the
relevant Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement; and
(k) Accounts that represent progress payments or other advance xxxxxxxx
that are due prior to the completion of performance by a Borrower of the subject
contract for goods or services.
"Eligible Inventory"means Inventory (net of cost price adjustments)
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consisting of first quality finished goods held for sale in the ordinary course
--
of a Borrower's business and raw materials for such finished goods, including
component parts, that are located at or in-transit between such Borrower's
premises identified on Schedule E-l,that strictly comply with each and all of
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the representations and warranties respecting Inventory made by such Borrower to
Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in all respects as reasonably determined by Foothill
pursuant to its standard credit policy; provided, however,that standards of
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eligibility may be fixed and revised from time to time by Foothill in Foothill's
reasonable credit judgment. In determining the amount to be so included,
Inventory shall be valued on a first in xxxxx out basis at the lower of cost or
market on a basis consistent with such Borrower's current and historical
accounting practices. An item of Inventory shall not be included in Eligible
Inventory if:
(a) it is not owned solely by such Borrower or such Borrower does not have
good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1;
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(c) it is not located on property owned or leased by a Borrower or in a
contract warehouse, in each case, subject to a Collateral Access Agreement
executed by the mortgagee, lessor, the warehouseman, or other third party, as
the case may be, and segregated or otherwise separately identifiable from goods
of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first priority security
interest in favor of Foothill;
(e) it consists of goods returned or rejected by such Borrower's customers,
goods held for return to vendor or goods in transit; and
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(f) it is obsolete or slow moving, a restrictive or custom item,
work-in-process, or constitutes spare parts, samples, field service inventory,
floor reject inventory, packaging and shipping materials, supplies used or
consumed in such Borrower's business, Inventory subject to a Lien in favor of
any third Person, xxxx and hold goods, defective goods, "seconds," or Inventory
acquired on consignment.
"Equipment"means all of a Person's present and hereafter acquired
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machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located, including
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"ERISA"means the Employee Retirement Income Security Act of 1974, 29 U.S.C.
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1000 et seq., amendments thereto, successor statutes, and regulations or
guidance promulgated thereunder.
"ERISA Affiliate"means (a) any corporation subject to ERISA whose employees
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are treated as employed by the same employer as the employees of a Borrower
under IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of a
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which a Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with a Borrower and whose employees are aggregated with the employees of such
Borrower under IRC Section 414(o).
"ERISA Event"means (a) a Reportable Event with respect to any Benefit Plan
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or Multiemployer Plan, (b)the withdrawal of a Borrower, any of its Subsidiaries
or ERISA Affiliates from a Benefit Plan during a plan year in which it was a
"substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c) the
providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of a Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by a Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Eurodollar Rate"means, with respect to the Interest Period for a
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Eurodollar Rate Loan, the interest rate per annum (rounded upwards, if
8
next whole multiple of 1/16 of 1% per annum) at which United States dollar
deposits are offered to Norwest Bank Minnesota, National Association (or its
Affiliates) by major banks in the London interbank market (or other Eurodollar
Rate market selected by Foothill) on or about 11:00 a.m. (California time) two
Business Days prior to the commencement of such Interest Period in amounts
comparable to the amount of the Eurodollar Rate Loans requested by and available
to Borrowers in accordance with this Agreement and for a period of three months
from the date of such offer.
"Eurodollar Rate Loans"means any Advance (or any portion thereof) made or
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outstanding hereunder during any period when interest on such Advance (or
portion thereof) is payable based on the Adjusted Eurodollar Rate.
"Event of Default"has the meaning set forth in Section 8.
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"Existing Lender"means NationsBank, N.A. as agent for a syndicated lending
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group, pursuant to a Loan Agreement dated October 13, 1995.
"FEIN"means Federal Employer Identification Number.
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"Financing or Sale Event"means any of the following which is approved by
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Foothill in its reasonable discretion: (a) a sale of all or substantially all of
the issued and outstanding stock of any Subsidiary of Parent in one or a series
of related transactions or all or substantially all of the assets of any
Subsidiary or division of Parent in one or a series of related transactions, (b)
a private placement of debt or equity by Parent, (c) a public offering of debt
or equity by Parent, or (d) a capital infusion in Parent or any Subsidiary.
"Foothill"has the meaning set forth in the preamble to this
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Agreement.
"Foothill Account"has the meaning set forth in Section 2.7.
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"Foothill Expenses"means all: costs or expenses (including taxes, and
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insurance premiums) required to be paid by a Borrower under any of the Loan
Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill's transactions with Borrowers,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral or Real Property Collateral appraisals), real estate surveys, real
estate title policies and endorsements, and environmental audits; costs and
expenses incurred by Foothill in the disbursement of funds to Borrowers (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from the
dishonor of checks; costs and expenses paid or incurred by Foothill to correct
any default or enforce any provision of the Loan Documents,
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or in gaining possession of, maintaining, handling', preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Personal
Property Collateral or the Real Property Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by Foothill in examining Borrowers' Books; costs and expenses of third
party claims or any other suit paid or incurred by Foothill in enforcing or
defending the Loan Documents or in connection with the transactions contemplated
by the Loan Documents or Foothill's relationship with Borrowers or any
guarantor; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or concerning the Loan Documents, (including
attorneys fees and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning Borrowers or any
guarantor of the Obligations) irrespective of whether suit is brought.
"Foreign Eligible Accounts"means Eligible Accounts with respect to which
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the Account Debtor does not maintain its chief executive office in the United
States where the Accounts are either (i) supported by an irrevocable letter of
credit satisfactory to Foothill (as to form, substance, and issuer or United
States confuming bank) that has been delivered to Foothill and is directly
drawable by Foothill, or (ii) covered by credit insurance in form and amount,
and by an insurer, satisfactory to Foothill; however,Foreign Eligible Accounts
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shall not include: (a) Accounts with selling terms of more than 90 days from
invoice date, (b) Accounts more than 60 days from due date, not to exceed 150
days from invoice date, and (c) Accounts owed by an Account Debtor or its
Affiliates where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (b) above.
"GAAP"means generally accepted accounting principles as in effect from time
------
to time in the United States, consistently applied.
"General Intangibles"means all of any Person's present and future general
----------------------
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, literature, reports, catalogs,
deposit accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents"means the certificate or articles of incorporation,
----------------------
by-laws, or other organizational or governing documents of any Person.
"Governmental Authority'means any nation or government, any state or other
-------------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
10
"Hazardous Materials"means (a) substances that are defined or listed in, or
---------------------
otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b)oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hospital Systems"has the meaning set forth in the preamble to this
-------------------
Agreement.
"Indebtedness"means: (a) all obligations of a Person for borrowed money,
--------------
(b) all obligations of a Person evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations of a Person in
respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations of a Person under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any property or
asset of a Person, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of a Person guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to such Person) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding"means any proceeding commenced by or against any
------------------------
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Intangible Assets"means, with respect to any Person, that portion of the
--------------------
book value of all of such Person's assets that would be treated as intangibles
under GAAP.
"Intellectual Property Security Agreements"means those certain Intellectual
-------------------------------------------
Property Security Agreements between Foothill and each of Parent, B&F, Hospital
Systems and Life Support, all dated as of August 7, 1997 as amended from time to
time.
"Interest Period"means, for any Eurodollar Rate Loan, the period commencing
-----------------
on the Business Day such Eurodollar Rate Loan is disbursed or continued, or on
the Business Day on which a Reference Rate Loan is converted to such Eurodollar
Rate Loan, and ending on the date that is one, two, three or six months
thereafter, as selected by Borrowers and notified to Foothill as provided in
Section 2.12(a) and (b).
------------------------
11
"Inventory"means all present and future inventory in which a Person has any
-----------
interest, including goods held for sale or lease or to be furnished under a
contract of service and all of such Person's present and future raw materials,
work in process, finished goods, and packing and shipping materials, wherever
located.
"Investment Property"has the meaning set forth in Section 9115 of
----------------------
the Code.
"IRC"means the Internal Revenue Code of 1986, as amended, and the
-----
regulations thereunder.
"Junior Notes"means those certain subordinated notes in the aggregate
---------------
principal amount of $5,000,000, in favor of Xxx Xxx, Xxxxxx Xxxxxxxxx, Xxxxxx
Xxxxxxx, and Woodbourne Partners, L.P., a Missouri limited partnership.
"L/C"has the meaning set forth in Section 2.2(a).
----- ----------------
"L/C Guaranty"has the meaning set forth in Section 2.2(a).
--------------- ----------------
"Letter of Credit"means an L/C or an L/C Guaranty, as the context requires.
--------------------
"Lien"means any interest in property securing an obligation owed to, or a
------
claim by, any Person other than the owner of the property, whether such interest
shall be based on the common law, statute, or contract, whether such interest
shall be recorded or perfected, and whether such interest shall be contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security interest
arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation,
assignment, deposit arrangement, security agreement, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment, or bailment for
security purposes and also including reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"Life Support"has the meaning set forth in the preamble to this
---------------
Agreement.
"Loan Account"has the meaning set forth in Section 2.10.
--------------- --------------
"Loan Documents"means this Agreement, the Intellectual Property Security
-----------------
Agreements, the Disbursement Letter, the Letters of Credit, the Lockbox
Agreements, the Mortgages, any note or notes executed by any Borrower and
payable to Foothill, and any other agreement entered into, now or in the future,
in connection with this Agreement.
12
"Lockbox Account"shall mean a depositary account established pursuant
------------------
to one of the Lockbox Agreements.
"Lockbox Agreements"means those certain Lockbox Operating Procedural
---------------------
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among a Borrower or
Borrowers, Foothill, and one of the Lockbox Banks.
"Lockbox Banks"means NationsBank, N.A., or such other banks as may be
----------------
agreed to by Foothill and Borrower from time to time.
"Lockboxes"has the meaning set forth in Section 2.7.
----------- -------------
"Material Adverse Change"means (a) a material adverse change in the
---------------------------
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of a Borrower, (b) the material impairment of
a Borrower's ability to perform its obligations under the Loan Documents to
which it is a party or of Foothill to enforce the Obligations or realize upon
the Collateral, (c) a material adverse effect on the value of the Collateral or
the amount that Foothill would be likely to receive (after giving consideration
to delays in payment and costs of enforcement) in the liquidation of such
Collateral, or (d) a material impairment of the priority of Foothill's Liens
with respect to the Collateral.
"Maximum Revolving Amount"means $25,000,000.
----------------------------
"Mortgages"means one or more mortgages, deeds of trust, or deeds to secure
-----------
debt, executed by a Borrower in favor of Foothill, the form and substance of
which shall be satisfactory to Foothill, that encumber the Real Property
Collateral and the related improvements thereto.
"Multiemployer Plan"means a "multiemployer plan" (as defined in Section
---------------------
4001(a)(3) of ERISA) to which a Borrower, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"Negotiable Collateral"means all of a Person's present and future letters
------------------------
of credit, notes, drafts, instruments, Investment Property, securities
(including the shares of stock of Subsidiaries of such Person), documents,
personal property leases (wherein such Person is the lessor), and chattel paper.
"Obligations"means all loans, Advances, debts, principal, interest
-------------
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations under any outstanding
Letters of Credit, premiums (including Early Termination Premiums), liabilities
(including all amounts charged to Borrowers' Loan Account pursuant hereto),
obligations, fees, charges, costs, or Foothill Expenses (including any fees or
expenses that, but for the provisions of the
13
Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, and
duties owing by a Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between Foothill and any Borrower, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from a Borrower to others that Foothill may have
obtained by assignment or otherwise, and further including all interest not paid
when due and all Foothill Expenses that a Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"Overadvance"has the meaning set forth in Section 2.5.
------------- -------------
"Parent"has the meaning set forth in the preamble to this Agreement.
--------
"Pay-Off Letter"means a letter, in form and substance reasonably
-----------------
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Borrowers owing to Existing Lender
and obtain a termination or release of all of the Liens existing in favor of
Existing Lender in and to the properties or assets of Borrowers.
"PBGC"means the Pension Benefit Guaranty Corporation as defined in Title IV
------
of ERISA, or any successor thereto.
"Permitted Liens"means (a)Liens held by Foothill, (b)Liens for unpaid taxes
-----------------
that either (i) are not yet due and payable or (ii) are the subject of Permitted
Protests, (c) Liens set forth on ScheduleP-l, (d) the interests of lessors under
--------
operating leases and purchase money security interests and Liens of lessors
under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21and so long as the Lien only
------------
attaches to the asset purchased or acquired and only secures the purchase price
of the asset, (e)Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business of a Borrower and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet due and
payable, (ii) are the subject of Permitted Protests, or (iii) removed by payment
or bonded within 20 Business Days of any Borrower's obtaining notice thereof,
(f) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of a Borrower and not in
connection with the borrowing of money, (h) Liens arising by reason of security
for surety or appeal bonds in the ordinary course of business of a Borrower, (i)
Liens of or resulting from any judgment or award that would not cause a Material
Adverse Change and as to which the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which a Borrower is in good faith
prosecuting an appeal or proceeding for a review, and in respect of which a stay
of execution pending such appeal or proceeding for review has been secured, O)
Liens with respect to the Real Property Collateral that are
14
exceptions to the commitments for title insurance issued in connection with the
Mortgages, as accepted by Foothill, and (k) with respect to any Real Property
that is not part of the Real Property Collateral, easements, rights of way,
zoning and similar covenants and restrictions, and similar encumbrances that
customarily exist on properties of Persons engaged in similar activities and
similarly situated and that in any event do not materially interfere with or
impair the use or operation of the Collateral by any Borrower or the value of
Foothill's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of a Borrower.
"Permitted Protest"means the right of a Borrower to protest any Lien (other
-------------------
than any such Lien that secures the Obligations), tax (other than payroll taxes
or taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the books of such Borrower in an amount that is reasonably
satisfactory to Foothill, (b) any such protest is instituted and diligently
prosecuted by such Borrower in good faith, and (c) Foothill is satisfied that,
while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Foothill in and to
the Collateral.
"Person"means and includes natural persons, corporations, limited liability
--------
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Personal Property Collateral"means all Collateral other than the Real
--------------------------------
Property Collateral.
"Plan"means any employee benefit plan, program, or arrangement maintained
------
or contributed to by a Borrower or with respect to which it may incur liability.
"Real Property"means any estates or interests in real property now owned or
---------------
hereafter acquired by a Borrower.
"Real Property Collateral"means the parcel or parcels of real property and
---------------------------
the related improvements thereto identified on Schedule R-I,and any Real
--------------
Property hereafter acquired by a Borrower.
"Reference Rate"means the variable rate of interest, per annum, most
-----------------
recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reference Rate Loan"means any Advance (or portion thereof) made or
-----------------------
outstanding hereunder during any period when interest on such Advance (or
portion thereof) is payable based on the Reference Rate.
15
"Renewal Date"has the meaning set forth in Section 3.4.
--------------- -------------
"Reportable Event"means any of the events described in Section 4043(c) of
-------------------
ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Requirement of Law"means, as to any Person: (a) (i) all statutes and
----------------------
regulations and (ii) court orders and injunctions, arbitrators' decisions,
and/or similar rulings, in each instance by any Governmental Authority or
arbitrator applicable to or binding upon such Person or any of such Person's
property or to which such Person or any of such Person's property is subject;
and (b) that Person's organizational documents, by-laws and/or other instruments
which deal with corporate or similar governance, as applicable.
"Reserve Percentage"for any Interest Period means, as of the date of
---------------------
determination thereof, the maximum percentage (rounded upward, if necessary to
the nearest 1/lOOth of 1%), as determined by Foothill (or its Affiliates) in
accordance with its (or their) usual procedures (which determination shall be
conclusive in the absence of manifest error), that is in effect on such date as
prescribed by the Board of Governors of the Federal Reserve System for
determining the reserve requirements (including supplemental, marginal, and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "eurocurrency liabilities") having a term equal to such Interest
Period by Foothill or its Affiliates.
"Retiree Health Plan"means an "employee welfare benefit plan" within the
-----------------------
meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"Solvent"means, with respect to any Person on a particular date, that on
---------
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
16
"Subsidiary"of a Person means a corporation, partnership, limited liability
------------
company, or other entity in which that Person directly or indirectly owns or
controls the shares of stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other
entity.
"Tangible Net Worth"means, as of any date of determination, the difference
---------------------
of (a)a Person's total stockholder's equity, minus(b)the sum of: (i) all
-----
Intangible Assets of such Person, and (ii) all amounts due to such Person from
Affiliates.
"Voidable Transfer"has the meaning set forth in Section 15.8.
-------------------- --------------
"Warrant"means that certain Warrant, dated as of the Closing Date, for the
---------
purchase by Foothill of 50,000 shares of Parent's Common Stock.
"Working Capital"means the result of subtracting Consolidated Current
------------------
Liabilities from Consolidated Current Assets.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrowers on a consolidated basis
unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by
Foothill. Section, subsection, clause, schedule, and exhibit references are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
the Loan Documents to this Agreement or any of the Loan Documents shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
17
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make advances ("Advances") to Borrowers in an amount outstanding not to
exceed at any one time the lesser of (i) the Maximum Revolving Amount lessthe
----
outstanding balance of all undrawn or unreimbursed Letters of Credit, or (ii)
the Borrowing Base lessthe aggregate amount of all undrawn or unreimbursed
----
Letters of Credit. For purposes of this Agreement, "Borrowing Base," as of any
date of determination, shall mean the result of:
(w) the lesser of (i) 85 % of Domestic Eligible Accounts, lessthe amount,
----
if any, of the Dilution Reserve; provided, however,that Advances based upon
------------------
Domestic Eligible Accounts and Foreign Eligible Accounts, in the aggregate,
shall not exceed an amount equal to Borrower's Collections with respect to
Accounts for the immediately preceding 60 day period, plus
(x) the lesser of (i) (a) 85 % of Foreign Eligible Accounts supported by
letters of credit, plus (b) 85 % of Foreign Eligible Accounts supported by
credit insurance (net of the aggregate amount of all applicable deductibles),
and (ii) $8,000,000, plus
(y) the lesser of (i) $10,000,000, and (ii) 45 % of the value of Eligible
Inventory, minus
(z) the aggregate amount of reserves, if any, established by Foothill under
Sections 2. l(b), 6.15 and 10.
-----------------------------------
(b) Anything to the contrary in Section 2.1(a)above notwith-standing,
--------------
Foothill may create reserves against the Borrowing Base or reduce its advance
rates based upon Eligible Accounts or Eligible Inventory without declaring an
Event of Default if it reasonably determines that there has occurred a Material
Adverse Change.
(c) Amounts borrowed pursuant to this Section 2.1may be repaid and, subject
-----------
to the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to issue letters of credit for the account of a Borrower (each, an "L/C") or to
issue guarantees of payment (each such guaranty, an "L/C Guaranty") with respect
to letters of
18
credit issued by an issuing bank for the account of a Borrower. Foothill shall
have no obligation to issue a Letter of Credit if any of the following would
result:
(i) 100% of the aggregate amount of all other types of undrawn and
unreimbursed Letters of Credit, would exceed the Borrowing Base lessthe amount
----
of outstanding Advances lessthe reserves established under Section 2.1 (b);or
---- ----------------
(ii) the aggregate amount of all undrawn or unreimbursed Letters of Credit
(including Inventory Letters of Credit) would exceed the lower of: (x) the
Maximum Revolving Amount lessthe amount of outstanding Advances lessreserves
---- ----
established under Section 2.1(b);or (y) $3,000,000.
----------------
Each Borrower expressly understands and agrees that Foothill shall have no
obligation to arrange for the issuance by issuing banks of the letters of credit
that are to be the subject of L/C Guarantees. Each Borrower and Foothill
acknowledge and agree that certain of the letters of credit that are to be the
subject of L/C Guarantees may be outstanding on the Closing Date. Each Letter of
Credit shall have an expiry date no later than 60 days prior to the date on
which this Agreement is scheduled to terminate under Section 3.4(without regard
-----------
to any potential renewal term) and all such Letters of Credit shall be in form
and substance acceptable to Foothill in its sole discretion. If Foothill is
obligated to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such amount to Foothill and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to Advances under Section 2.6.
-------------
(b) Each Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless from any loss, cost, expense, or liability, including payments
made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill
arising out of or in connection with any Letter of Credit. Each Borrower agrees
to be bound by the issuing bank's regulations and interpretations of any letters
of credit guarantied by Foothill and opened to or for such Borrower's account or
by Foothill's interpretations of any Letter of Credit issued by Foothill to or
for such Borrower's account, even though this interpretation may be different
from such Borrower's own, and Borrowers understand and agree that Foothill shall
not be liable for any error, negligence, or mistake, whether of omission or
commission, in following any Borrower's instructions or those contained in the
Letter of Credit or any modifications, amendments, or supplements thereto. Each
Borrower understands that the L/C Guarantees may require Foothill to indemnify
the issuing bank for certain costs or liabilities arising out of claims by a
Borrower against such issuing bank. Each Borrower hereby agrees to indemnify,
save, defend, and hold Foothill harmless with respect to any loss, cost, expense
(including reasonable attorneys fees), or liability incurred by Foothill under
any L/C Guaranty as a result of Foothill's indemnification of any such issuing
bank.
19
(c) Each Borrower hereby authorizes and directs any bank that issues a
letter of credit guaranteed by Foothill to deliver to Foothill all instruments,
documents, and other writings and property received by the issuing bank pursuant
to such letter of credit, and to accept and rely upon Foothill's instructions
and agreements with respect to all matters arising in connection with such
letter of credit and the related application. A Borrower may or may not be the
"applicant" or "account party" with respect to such letter of credit.
(d) Any and all charges, commissions, fees, and costs incurred by Foothill
relating to the letters of credit guaranteed by Foothill shall be considered
Foothill Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Foothill.
(e) Immediately upon the termination of this Agreement, Borrowers agree to
either (i) provide cash collateral to be held by Foothill in an amount equal to
102% of the maximum amount of Foothill's obligations under outstanding Letters
of Credit, or (ii) cause to be delivered to Foothill releases of all of
Foothill's obligations under outstanding Letters of Credit. At Foothill's
discretion, any proceeds of Collateral received by Foothill after the occurrence
and during the continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
----------------
(f) If by reason of (i) any change in any applicable law, treaty, rule, or
regulation or any change in the interpretation or application by any
governmental authority of any such applicable law, treaty, rule, or regulation,
or (ii) compliance by the issuing bank or Foothill with any direction, request,
or requirement (irrespective of whether having the force of law) of any
governmental authority or monetary authority including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or shall be
imposed or modified in respect of any Letters of Credit
issued hereunder, or
(B) there shall be imposed on the issuing bank or Foothill any
other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrowers,
and Borrowers shall pay on demand such amounts as the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate set forth in
Section 2.6(a)(i) or (c)(i),
------------------------------
20
as applicable. The determination by the issuing bank or Foothill, as the case
may be, of any amount due pursuant to this Section 2.2(f),as set forth in a
---------------
certificate setting forth the calculation thereof in reasonable detail, shall,
in the absence of manifest or demonstrable error, be final and conclusive and
binding on all of the parties hereto.
2.3 [Intentionally Omitted]
2.4 [Intentionally Omitted]
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrowers to Foothill pursuant to Sections 2.1 or 2.2is
-------------------
greater than either the Dollar or percentage limitations set forth in Sections
--------
2.1 or 2.2(an "Overadvance"), Borrowers immediately shall pay to Foothill, in
-----------
cash, the amount of such excess to be used by Foothill first, to repay Advances
-
outstanding under Section 2.1and, thereafter, to be held by Foothill as cash
------------
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to Letters of Credit; provided, however,that with respect to any
------------------
Overadvance caused by Foothill's charging fees, costs, expenses, or interest to
the Loan Account, the Borrowers shall have two Business Days to make such
payments.
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in Section 2.6(c),all Obligations
---------------
(except for undrawn Letters of Credit) shall bear interest on the Daily Balance
as follows:
(i) each Eurodollar Rate Loan shall bear interest at a per annum rate equal
to the Applicable Margin plusthe Adjusted Eurodollar Rate; and
----
(ii) all other Obligations shall bear interest at a per annum [rate equal
to the Applicable Margin plusthe Reference Rate.
----
(b) Letter of Credit Fee. Borrowers shall pay Foothill a fee (in addition
to the charges, commissions, fees, and costs set forth in Section 2.2(d))equal
---------------
to 0.75 % per annum times the aggregate undrawn amount of all Letters of Credit
outstanding at the end of each day.
(c) Default Rate. Upon the occurrence and during the continuation of an
Event of Default, (i) all Obligations (except for undrawn Letters of Credi0
shall bear interest on the Daily Balance as follows: (1) subject to the optional
conversion provisions of Section 2.12(c),each Eurodollar Rate Loan shall bear
--------
interest at a per annum rate of 6.50 percentage points above the Adjusted
Eurodollar Rate; and (2) all other Obligations shall bear interest at a per
annum rate equal to 4.25 percentage points above the Reference Rate; and (ii)
the Letter of Credit fee provided in Section 2.6Co)shall be increased to 4.75%
--------------
per
21
annum times the aggregate undrawn amount of all,Letters of Credit outstanding at
the end of each day.
(d) Minimum Interest. In no event shall the rate of interest chargeable
hereunder for any day for Advances be less than 7.00% per annum. To the extent
that interest accrued hereunder at the rate set forth herein would be less than
the foregoing minimum daily rate, the interest rate chargeable hereunder for
such day automatically shall be deemed increased to the minimum rate.
(e) Payments. Interest in respect of Reference Rate Loans and Letter of
Credit fees payable hereunder shall be due and payable, in arrears, on the first
day of each month during the term hereof. Interest in respect of each Eurodollar
Rate Loan shall be due and payable, in arrears, on (i) the last day of the
applicable Interest Period, and (ii) the first day of each month occurring
during the term thereof. Each Borrower hereby authorizes Foothill, at its
option, without prior notice to such Borrower, to charge such interest and
Letter of Credit fees, all Foothill Expenses (as and when incurred), the
charges, commissions, fees, and costs provided for in Section 2.2(d)(as and when
--------------
accrued or incurred), the fees and charges provided for in Section 2.11(as and
------------
when accrued or incurred), and all installments or other payments due under any
Loan Document to Borrowers' Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this Agreement is
8.50% per annum. In the event the Reference Rate is changed from time to time
hereafter, the applicable rate of interest hereunder automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Reference Rate. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a 360 day year for the actual number of days
elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and Foothill, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner of payment
stated within it; provided, however,that, anything contained herein to the
-------------------
contrary notwithstanding, if said rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso factoas of the
----------
date of this Agreement, Borrowers are and shall be liable only for the payment
of such maximum as allowed by law, and payment received from Borrowers in excess
of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 Collection of Accounts. Borrowers shall at all times maintain lockboxes
(the "Lockboxes") and, immediately after the Closing Date, shall instruct all
22
Account Debtors with respect to the Accounts,,' General Intangibles, and
Negotiable Collateral of Borrowers to remit all Collections in respect thereof
to such Lockboxes. Borrowers, Foothill, and the Lockbox Banks shall enter into
the Lockbox Agreements, which among other things shall provide for the opening
of a Lockbox Account for the deposit of Collections at a Lockbox Bank. Each
Borrower agrees that all Collections and other amounts received by such Borrower
from any Account Debtor or any other source immediately upon receipt shall be
deposited into a Lockbox Account. No Lockbox Agreement or arrangement
contemplated thereby shall be modified by a Borrower without the prior written
consent of Foothill. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all amounts received in each Lockbox Account shall be
wired each Business Day into an account (the "Foothill Account") maintained by
Foothill at a depositary selected by Foothill.
2.8 Crediting Payments; Application of Collections. The receipt of any
Collections by Foothill (whether from transfers to Foothill by the Lockbox Banks
pursuant to the Lockbox Agreements or otherwise) immediately shall be applied
provisionally to reduce the Obligations outstanding under Section 2.1,but shall
------------
not be considered a payment on account unless such Collection item is a wire
transfer of immediately available federal funds and is made to the Foothill
Account or unless and until such Collection item is honored when presented for
payment. From and after the Closing Date, Foothill shall be entitled to charge
Borrowers for one Business Day of 'clearance' or 'float' at the rate set forth
in Section 2.6(a)(i)or Section 2.6(c)(i),as applicable, on all Collections that
----------------- ------------------
are received by Foothill (regardless of whether forwarded by the Lockbox Banks
to Foothill, whether provisionally applied to reduce the Obligations under
Section 2.1,or otherwise). This across-the-board one Business Day clearance or
--------
float charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrowers, and shall
apply irrespective of the characterization of whether receipts are owned by a
Borrower or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging one
Business Day of interest on such Collections. Should any Collection item not be
honored when presented for payment, then Borrowers shall be deemed not to have
made such payment, and interest shall be recalculated accordingly. Anything to
the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Foothill only if it is received into the Foothill Account on
a Business Day on or before 11:00 a.m. California time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 11:00 a.m.
California time on a Business Day, it shall be deemed to have been received by
Foothill as of the opening of business on the immediately following Business
Day.
2.9 Designated Account. Foothill is authorized to make the Advances, the
Letters of Credit under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person, or
without instructions if pursuant to Section 2.6(e).Borrowers agree to establish
---------------
and maintain a single Designated Account with the Designated Account Bank for
the purpose of receiving the proceeds of the Advances requested by Borrowers and
made by Foothill hereunder. Unless otherwise
23
agreed by Foothill and Borrowers, any Advance requested by Borrowers and made by
Foothill hereunder shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. At the request
of Borrowers, to facilitate and expedite the administration and accounting
processes and procedures of their borrowings under this Agreement, Foothill has
agreed, in lieu of maintaining separate loan accounts on Foothill's books in the
name of each of the Borrowers, that Foothill shall maintain a single account on
its books in the names of all of the Borrowers (the "Loan Account"). All
Advances made by Foothill to Borrowers or for Borrower's account, including
accrued interest, Foothill Expenses, and any other payment Obligations of
Borrowers shall be made jointly and severally to the Borrowers and shall be
charged to the Loan Account. In accordance with Section 2.8,the Loan Account
------------
will be credited with all payments received by Foothill from any Borrower or for
any Borrowers' account, including all amounts received in the Foothill Account
from any Lockbox Bank. Foothill shall render one statement regarding the Loan
Account to Parent on behalf of Borrowers, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Foothill
Expenses owing, and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and Foothill
unless, within 90 days after receipt thereof by Borrowers, Borrowers shall
deliver to Foothill written objection thereto describing the error or errors
contained in any such statements. Each Borrower hereby expressly agrees and
acknowledges that Foothill shall have no obligation to account separately to
such Borrower.
2.11 Fees. Borrowers shall pay to Foothill the following fees:
(a) [Intentionally Omitted];
(b) Anniversary Fee. On each August 7 during the term of this
Agreement, an anniversary fee in an amount equal to $35,000, which fee is fully
earned on each anniversary.
(c) [Intentionally Omitted]
(d) Unused Line Fee. On the first day of each month during the term of
this Agreement, an unused line fee in an amount equal to 0.25% per annum times
the Average Unused Portion of Maximum Revolving Amount;
(e) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of $650 per day per examiner, plus out-of-pocket
Expenses for each financial analysis and examination (i.e., audits) of
Borrowers performed by personnel employed by Foothill; Foothill's customary
appraisal fee of $1,500 per day per appraiser, plus out-of-pocket expenses
for each appraisal of the Collateral performed by personnel employed by
Foothill; and, the actual charges paid or incurred by Foothill if it elects to
employ the services of one or more third Persons to perform such financial
analyses and examinations (i.e., audits) of Borrowers or to appraise the
Collateral; provided, however,
-------------------
24
that prior to the occurrence and continuation of. an Event of Default or
Foothill deeming itself insecure, Borrowers shall not be obligated to pay for
more than two audits in any 12 month period; and
(f) Servicing Fee. On the first day of each month during the term of this
Agreement, and thereafter so long as any Obligations are outstanding, a
servicing fee in an amount equal to $2,000.
2.12 Eurodollar Rate Loans. Any other provisions herein to the contrary
notwithstanding, the following provisions shall govern with respect to
Eurodollar Rate Loans as to the matters covered:
(a) Borrowing; Conversion; Continuation.Borrowers may from time to time, on
------------------------------------
or after the Closing Date (and subject to the satisfaction of the requirements
of Sections 3.1 and 3.2),request in a written or telephonic communication with
-----------------------
Foothill: (i) Advances to constitute Eurodollar Rate Loans; (ii)that Reference
Rate Loans be converted into Eurodollar Rate Loans; or (iii) that existing
Eurodollar Rate Loans continue for an additional Interest Period. Any such
request shall specify the aggregate amount of the requested Eurodollar Rate
Loans, the proposed funding date therefor (which shall be a Business Day, and
with respect to continued Eurodollar Rate Loans shall be the last day of the
Interest Period of the existing Eurodollar Rate Loans being continued), and the
proposed Interest Period (in each case subject to the limitations set forth
below). Eurodollar Rate Loans may only be made, continued, or extended if, as of
the proposed funding date therefor, each of the following conditions is
satisfied:
(v) no Event of Default exists;
(W) no more than five Interest Periods may be in effect at
any one time;
(x) the amount of each Eurodollar Rate Loan borrowed, converted, or
continued must be in an amount not less than $500,000 and integral multiples of
$100,000 in excess thereof;
(y) Foothill shall have determined that the Interest Period or Adjusted
Eurodollar Rate is available to it and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by Borrowers; and
(z) Foothill shall have received such request at least two Business Days
prior to the proposed funding date therefor.
Any request by Borrowers to borrow Eurodollar Rate Loans, to convert
Reference Rate Loans to Eurodollar Rate Loans, or to continue any existing
Eurodollar Rate Loans shall be irrevocable, except to the extent that Foothill
shall determine
25
under Sections 2.12(a), 2.13 or 2.14that such Eurodollar Rate Loans cannot be
--------------------------------
made or continued.
(b) Determination of Interest Xxxxxx.Xx giving notice as set forth in
------------------------------------
Section 2.12(a),Borrowers shall select an Interest Period for such Eurodollar
------------
Rate Loan. The determination of the Interest Period shall be subject to the
following provisions:
(A) in the case of immediately successive Interest Periods, each successive
Interest Period shall commence on the day on which the next preceding Interest
Period expires;
(B) if any Interest Period would otherwise expire on a day which is not a
Business Day, the Interest Period shall be extended to expire on the next
succeeding Business Day; provided, however,that if the next succeeding Business
------------------
Day occurs in the following calendar month, then such Interest Period shall
expire on the immediately preceding Business Day;
(C) if any Interest Period begins on the last Business Day of a month, or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, then the Interest Period shall end on
the last Business Day of the calendar month at the end of such Interest Period;
and
(D) Borrowers may not select an Interest Period which expires later than
the Renewal Date.
(c) Automatic Conversion: Optional Conversion by Foothill.Any Eurodollar
--------------------------------------------------------
Rate Loan shall automatically convert to a Reference Rate Loan upon the last day
of the applicable Interest Period, unless Foothill has received a request to
continue such Eurodollar Rate Loan at least two Business Days prior to the end
of such Interest Period in accordance with the terms of Section 2.12(a).Any
--------
Eurodollar Rate Loan shall, at Foothill's option, upon notice to Borrowers,
immediately convert to a Reference Rate Loan in the event that (i) an Event of
Default shall have occurred and be continuing or (ii) this Agreement shall
terminate, and Borrowers shall pay to Foothill any amounts required by Section
-------
2.15 as a result thereof.
----
2.13 Illegality. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date shall make it unlawful for Foothill to make or
maintain Eurodollar Rate Loans as contemplated by this Agreement, (a) the
obligation of Foothill hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such, and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be suspended and (b) Foothill's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier
26
period as required by law; provided, however,that before making any such demand,
------------------
Foothill agrees to use reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different lending office if the making of such
a designation would allow Foothill or its lending office to continue to perform
its obligations to make Eurodollar Rate Loans. If any such conversion of a
Eurodollar Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, Borrowers shall pay to Foothill
such amounts, if any, as may be required pursuant to Section 2.14.If
--------------
circumstances subsequently change so that Foothill shall determine that it is no
longer so affected, Foothill will promptly notify, and upon receipt of such
notice, the obligations of Foothill to make or continue Eurodollar Rate Loans or
to convert Reference Rate Loans into Eurodollar Rate Loans shall be reinstated.
2.14 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date or compliance by Foothill with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority made subsequent to the Closing Date
(A) shall subject Foothill to any tax, levy, charge, fee, reduction, or
withholding of any kind whatsoever with respect to Eurodollar Rate Loans, or
change the basis of taxation of payments to Foothill in respect thereof (except
for the establishment of a tax based on the net income of Foothill or changes in
the rate of tax on the net income of Foothill);
(B) shall in respect of Eurodollar Rate Loans impose, modify or hold
applicable any reserve, special deposit, compulsory loan, or similar requirement
against assets held by, deposits or other liabilities in or for the account of,
Advances or other extensions of credit by, or any other acquisition of funds by,
any office of Foothill; or
(C) shall impose on Foothill any other condition with respect to Eurodollar
Rate Loans;
and the result of any of the foregoing is to increase the cost to Foothill, by
an amount which Foothill deems to be material, of making, converting into,
continuing, or maintaining Eurodollar Rate Loans or to increase the cost to
Foothill in respect of Eurodollar Rate Loans, by an amount which Foothill deems
to be material, or to reduce any amount receivable hereunder in respect of
Eurodollar Rate Loans, or to forego any other sum payable thereunder or make any
payment on account thereof in respect of Eurodollar Rate Loans, then, in any
such case, Borrowers shall promptly pay Foothill, upon its demand, any
additional amounts necessary to compensate Foothill for such increased cost or
reduced
27
amount receivable; provided, however,that beforee making any such demand,
-------------------
Foothill agrees to use reasonable efforts (consistent with its internal policy
and legal and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic, or
regulatory manner) to designate a different Eurodollar lending office if the
making of such designation would allow Foothill or its Eurodollar lending office
to continue to perform its obligations to make Eurodollar Rate Loans or to
continue to fund or maintain Eurodollar Rate Loans and avoid the need for, or
materially reduce the amount of, such increased cost. If Foothill becomes
entitled to claim any additional amounts pursuant to this Section 2.14,Foothill
-------------
shall promptly notify Borrowers of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
Section 2.14 submitted in reasonable detail by Foothill to Borrowers shall be
------------
conclusive in the absence of manifest error. Within five Business Days after
Foothill notifies Borrowers of any increased cost pursuant to the foregoing
provisions of this Section 2.14,Borrowers may convert all Eurodollar Rate Loans
then outstanding into Reference Rate Loans in accordance with Section 2.12and,
------------
additionally, reimburse Foothill for any cost in accordance with Section
-------
2.15.This covenant shall survive the termination of this Agreement and the
-----
payment of the Advances and all other amounts payable hereunder for nine months
following such termination and repayment.
(b) If Foothill shall have determined that the adoption of or any change in
any Requirement of Law regarding capital adequacy or in the interpretation or
application thereof by a Governmental Authority made subsequent to the Closing
Date or compliance by Foothill or any Person controlling Foothill with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the Closing Date does
or shall have the effect of increasing the amount of capital required to be
maintained or reducing the rate of return on Foothill's or such Person's capital
as a consequence of its obligations hereunder to a level below that which
Foothill or such Person could have achieved but for such change or compliance
(taking into consideration Foothill's or such Person's policies with respect to
capital adequacy) by an amount deemed by Foothill to be material, then from time
to time, after submission by Foothill to Borrowers of a prompt written request
therefor, Borrowers shall pay to Foothill such additional amount or amounts as
will compensate Foothill or such Person for such reduction. This covenant shall
survive the termination of this Agreement and the payment of the Advances and
all other amounts payable hereunder for nine months following such termination
and repayment.
2.15 Indemnity. Borrowers agree to indemnify Foothill and to hold Foothill
harmless from any loss or expense which Foothill may sustain or incur as a
consequence of (a) default by Borrowers in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b) default by Borrowers in
making a Borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrowers have given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrowers in making any prepayment
of a Eurodollar Rate Loan after Borrowers have given a notice thereof in
accordance with the provisions of this Agreement, or (d) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
28
Interest Period with respect thereto (whether due to the termination of this
Agreement, upon an Event of Default, or otherwise), including, in each case, any
such loss or expense (but excluding loss of margin or anticipated profits)
arising from the reemployment of funds obtained by it or from fees payable to
terminate the deposits from which such funds were obtained; provided,
---------
however,that Foothill, if requesting indemnification, shall have delivered to
the Borrowers a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error. Calculation of
all amounts payable to Foothill under this Section 2.15shall be made as though
------------
Foothill had actually funded the relevant Eurodollar Rate Loan through the
purchase of a deposit bearing interest at the Eurodollar Rate in an amount equal
to the amount of such Eurodollar Rate Loan and having a maturity comparable to
the relevant Interest Period; provided, however,that Foothill may fund each of
------------------
the Eurodollar Rate Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section 2.15.This covenant shall survive the termination of this Agreement
-------------
and the payment of the Loans and all other amounts payable hereunder for a
period of nine months thereafter.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO the Initial Advance. The obligation of Foothill
to make the initial Advance hereunder, is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) Foothill shall have received a fully executed counterpart of this
Agreement;
(b) the outstanding principal balance, and any accrued and unpaid interest
or fees in respect of, the Term Loans (as defined in the Original Loan
Agreement) have been paid in full; and
(c) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Foothill and its
counsel.
3.2 Conditions Precedent to all Advances and all Letters of Credit. The
following shall be conditions precedent to all Advances and all Letters of
Credit hereunder:
(a) the representations and warranties contained in this Agreement and the
other Loan Documents shall be true and 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 (except to the extent that such representations and warranties relate
solely to an earlier date);
29
(b) no Default or Event Of Default shall have occurred and be continuing on
the date of such extension of credit, nor shall either result from the making
thereof; and
(c) no injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any governmental authority against any
Borrower, Foothill, or any of their Affiliates.
3.3 Condition Subsequent. As a condition subsequent to initial closing
hereunder, Borrowers shall perform or cause to be performed the following (the
failure by Borrowers to so perform or cause to be performed constituting an
Event of Default):
(a) within 30 days of the Closing Date, deliver to Foothill the certified
copies of the policies of insurance, together with the endorsements thereto, as
are required by Section 6.10,the form and substance of which shall be
--------------
satisfactory to Foothill and its counsel.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrowers and Foothill and shall continue in full force and
effect for a term ending on August 6, 2001 (the "Maturity Date"), unless sooner
terminated pursuant to the terms hereof. The foregoing notwithstanding, Foothill
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations (including contingent reimbursement obligations of Borrowers
with respect to any outstanding Letters of Credit) immediately shall become due
and payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrowers of Borrowers' duties, Obligations, or
covenants hereunder, and Foothill's continuing security interests in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Foothill's obligation to provide additional credit
hereunder is terminated.
3.6 Early Termination by Borrowers. The provisions of Section 3.4that allow
---
termination of this Agreement by Borrowers only on the Maturity Date
notwithstanding, Borrowers have the option, at any time upon 90 days prior
written notice to Foothill, to terminate this Agreement by paying to Foothill,
in cash, the Obligations (including an amount equal to 102% of the undrawn
amount of the Letters of Credit), in full, together with a premium (the "Early
Termination Premium") equal to the following amounts: (a) $300,000 if such
prepayment occurs on or before August 15, 1999; (b) $200,000 if such prepayment
occurs on or after August 16, 1999 but on or before August 15, 2000, and (c)
$100,000 if such prepayment occurs on or after August 16, 2000.
30
3.7 Termination Upon Event Of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrowers shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7shall be
-----------
deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower hereby grants to Foothill a
continuing security interest in all of such Borrower's currently existing and
hereafter acquired or arising Personal Property Collateral in order to secure
prompt repayment of any and all Obligations and in order to secure prompt
performance by such Borrower of each of its covenants and duties under the Loan
Documents. Foothill's security interests in the Personal Property Collateral
shall attach to all Personal Property Collateral without further act on the part
of Foothill or Borrowers. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, no Borrower has any authority,
express or implied, to dispose of any item or portion of the Personal Property
Collateral or the Real Property Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrowers,
immediately upon the request of Foothill, shall endorse and deliver physical
possession of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.
At any time, Foothill or Foothill's designee may (a)notify customers or Account
Debtors of any Borrower that the Accounts, General Intangibles, or Negotiable
Collateral of such Borrower have been assigned to Foothill or that Foothill has
a security interest therein, and (b) after an Event of Default, collect the
Accounts, General Intangibles, and Negotiable Collateral of such Borrower
directly and charge the collection costs and expenses to the Loan Account. Each
Borrower agrees that it will hold in trust for Foothill, as Foothill's trustee,
any Collections that it receives and immediately will deliver said Collections
to Foothill in their original form as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Foothill, Borrowers shall execute and deliver to Foothill all
financing statements, continuation financing statements, continuation filings,
security agreements, pledges, assignments, control agreements, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other
31
documents that Foothill reasonably may request, in "form satisfactory to
Foothill, to perfect and continue perfected Foothill's security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 Power of Attorney. Each Borrower hereby irrevocably makes, constitutes,
and appoints Foothill (and any of Foothill's officers, employees, or agents
designated by Foothill) as such Borrower's true and lawful attorney, with power
to (a) if such Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4,sign the name of such Borrower on any
------------
of the documents described in Section 4.4,(b) at any time that an Event of
-------------
Default has occurred and is continuing or Foothill deems itself insecure, sign
such Borrower's name on any invoice or xxxx of lading relating to any Account of
such Borrower, drafts against Account Debtors, schedules and assignments of
Accounts of such Borrower, verifications of Accounts of such Borrower, and
notices to Account Debtors, (c) send requests for verification of Accounts of
such Borrower, (d) endorse such Borrower's name on any Collection item that may
come into Foothill's possession, (e) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, notify the post
office authorities to change the address for delivery of such Borrower's mail to
an address designated by Foothill, to receive and open all mail addressed to
such Borrower, and to retain all mail relating to the Collateral of such
Borrower and forward all other mail to such Borrower, (f) at any time that an
Event of Default has occurred and is continuing or Foothill deems itself
insecure, make, settle, and adjust all claims under such Borrower's policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (g) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, settle and adjust disputes
and claims respecting the Accounts of such Borrower directly with Account
Debtors, for amounts and upon terms that Foothill determines to be reasonable,
and Foothill may cause to be executed and delivered any documents and releases
that Foothill determines to be necessary. The appointment of Foothill as such
Borrower's attorney, and each and every one of Foothill's rights and powers,
being coupled with an interest, is irrevocable until all of the Obligations have
been fully and finally repaid and performed and Foothill's obligation to extend
credit hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its officers, employees, or
agents) shall have the right, from time to time hereafter to inspect Borrowers'
Books and to check, test, and appraise the Collateral in order to verify
Borrowers' financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance and each Letter of Credit as though made on and as
of the date of such Advance or Letter of Credit
32
(except to the extent that such representations and Warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
5.1 No Encumbrances. Each Borrower has good and indefeasible title to its
Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts of each Borrower are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of such
Borrower's business, unconditionally owed to such Borrower without (to the best
of such Borrower's knowledge) defenses, disputes, offsets, counterclaims, or
rights of return or cancellation. The property giving rise to such Eligible
Accounts has been delivered to the Account Debtor, or to the Account Debtor's
agent for immediate shipment to and unconditional acceptance by the Account
Debtor. Borrowers have not received notice of actual or imminent bankruptcy,
insolvency, or material impairment of the financial condition of any Account
Debtor regarding any Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory of Borrowers is of good and
merchantable quality, free from known defects.
5.4 Equipment. All of the Equipment of Borrowers is used or held for use in
Borrowers' business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and Equipment of
Borrowers are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and are located only at the locations
identified on Schedule 6.12or otherwise permitted by Section 6.12.
-------------- --------------
5.6 Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of its Inventory,
and such Borrower's cost therefor.
5.7 Location of Chief Executive Office; FEIN. The chief executive office of
each Borrower is located at 0000 Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000, and
each Borrower's FEIN is set forth below:
Borrower FEIN
-------- ----
Parent 00-0000000
B&F 00-0000000
Hospital Systems 00-0000000
Life Support 00-0000000
33
5.8 DUE Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in good standing under
the laws of the jurisdiction of its incorporation and qualified and licensed to
do business in, and in good standing in, any state where the failure to be so
licensed or qualified reasonably could be expected to cause a Material Adverse
Change.
(b) Set forth on Schedule 5.8,is a complete and accurate list of each
--------------
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by such Borrower. All of the outstanding capital stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.
(c) Except as set forth on Schedule 5.8,no capital stock (or any
--------------
securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of any
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation (including
Regulations T, U, and X of the Federal Reserve Board) applicable to such
Borrower, the Governing Documents of such Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Borrower,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation or
material lease of such Borrower, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Borrower, other than Permitted Liens, or (iv)require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing statements, fixture
filings, and mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which such Borrower is a
party do not and
34
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any federal, state, foreign, or other Governmental
Authority or other Person.
(d) This Agreement and the Loan Documents to which any Borrower is a party,
and all other documents contemplated hereby and thereby, when executed and
delivered by such Borrower will be the legally valid and binding obligations of
such Borrower, enforceable against such Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by each Borrower to Foothill in and to its properties
and assets pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or against
any Borrower before any court or administrative agency and no Borrower has any
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving any Borrower or any guarantor of the Obligations, except for: (a)
ongoing collection matters in which a Borrower is the plaintiff; (b) matters
disclosed on Schedule 5.10;and (c) matters arising after the date hereof that,
--------------
if decided adversely to a Borrower, would not have a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to any
Borrower or any guarantor of the Obligations that have been delivered by any
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present such Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
such Borrower's results of operations for the period then ended. There has not
been a Material Adverse Change with respect to any Borrower (or such guarantor,
as applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 Solvency. Each Borrower is Solvent. No transfer of property is being
made by any Borrower and no obligation is being incurred by any Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Borrower.
5.13 Employee Benefits. None of Borrowers, any of their Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13.Each Borrower, each of its Subsidiaries
--------------
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred
35
nor has any other event occurred that may result in' an ERISA Event that
reasonably could be expected to result in a Material Adverse Change. None of
Borrowers or their Subsidiaries, any ERISA Affiliate, or any fiduciary of any
Plan is subject to any direct or indirect liability with respect to any Plan
under any applicable law, treaty, rule, regulation, or agreement. None of
Borrowers or their Subsidiaries or any ERISA Affiliate is required to provide
security to any Plan under Section 401(a)(29) of the IRC.
5.14 Environmental Condition. None of Borrowers' properties or assets has
ever been used by any Borrower or, to the best of each Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials. None of Borrowers'
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned or
operated by any Borrower. No Borrower has received a summons, citation, notice,
or directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by any Borrower
resulting in the releasing or disposing of Hazardous Materials into the
environment.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, such Borrower shall do all
of the following:
6.1 Accounting System. Maintain a standard and modern system of accounting
that enables such Borrower to produce financial statements in accordance with
GAAP, and maintain records pertaining to its Collateral that contain information
as from time to time may be requested by Foothill. Such Borrower also shall keep
a modern inventory reporting system that shows all additions, sales, claims,
returns, and allowances with respect to its Inventory.
6.2 Collateral Reporting. Provide Foothill with the following documents at
the following times in form satisfactory to Foothill: (a) on a weekly basis, the
summary page of each such Borrower's Accounts aging report, (b) on a monthly
basis, a sales journal, collection journal, and credit register since the last
such schedule and a calculation of the Borrowing Base as of such date using the
amount of ineligible Accounts as determined based upon the prior month's aging
of Accounts, (c) on a monthly basis and, in any event, by no later than the 10th
Business Day of each month during the term of this Agreement, (i) a detailed
calculation of the Borrowing Base, and (ii) a detailed aging, by total, of such
Borrower's Accounts, together with a reconciliation to the detailed calculation
of the Borrowing Base previously provided to Foothill, (d) on a monthly basis
and, in any event, by no later than the 10th Business Day of each month during
the term of this Agreement, a summary aging, by vendor, of such Borrower's
accounts payable and any
36
book overdraft, (e) on a monthly basis, Inventory reports specifying such
Borrower's cost, (f) upon Foothill's request, notice of all returns, disputes,
or claims, (g) upon Foothill's request, copies of invoices in connection with
its Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with its Accounts
and for Inventory and Equipment acquired by such Borrower, purchase orders and
invoices, (h) on a quarterly basis, a detailed list of such Borrower's
customers, (i) on a monthly basis, a calculation of the Dilution for the prior
month; and (j) such other reports as to the Collateral or the financial
condition of such Borrower as Foothill may request from time to time. Original
sales invoices evidencing daily sales shall be mailed by such Borrower to each
Account Debtor and, at Foothill's direction, the invoices shall indicate on
their face that such Borrower's Account has been assigned to Foothill and that
all payments are to be made directly to Foothill. In the event that, at any
time, Borrowers' excess borrowing availability under Section 2.1 shall be less
than $3,000,000, then Borrower agrees that Foothill may, in the exercise of its
reasonable credit judgment, require changes in the frequency and type of reports
required under this Section 6.2.
6.3 Financial Statements, Reports, Certificates. Deliver to Foothill: (a)
as soon as available, but in any event within 45 days after the end of each
month during each of Parent's fiscal years, a company prepared balance sheet,
income statement, and statement of cash flow covering Parent's operations during
such period; and (b) as soon as available, but in any event within 90 days after
the end of each of such Parent's fiscal years, financial statements of Parent
for each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Foothill and certified, without any qualifications, by
such accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any Default or Event of
Default. Such audited financial statements shall include a balance sheet, profit
and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management. In addition to the financial statements
referred to above, Parent agrees to deliver financial statements prepared on a
consolidating basis so as to present such Parent and each such related entity
separately, and on a consolidated basis.
Together with the above, Parent also shall deliver to Foothill such
Parent's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Parent with the Securities and
Exchange Commission, if any, as soon as the same are filed, or any other
information that is provided by Parent to its shareholders, and any other report
reasonably requested by Foothill relating to the financial condition of such
Parent.
Each month, together with the financial statements provided pursuant to
Section 6.3(a),Parent shall deliver to Foothill a certificate signed by its
-------------
chief financial officer to the effect that: (i) all financial statements
delivered or caused to be delivered to Foothill hereunder have been prepared in
accordance with GAAP (except, in the case of unaudited financial statements, for
the lack of footnotes and being subject to year-end audit
37
adjustments) and fairly present the financial condition of Parent, (ii) the
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date), (iii) for each month that also is the date on which a financial covenant
in Section 7.20is to be tested, a Compliance Certificate demonstrating in
-------------
reasonable detail compliance at the end of such period with the applicable
financial covenants contained in Section 7.20,and (iv) on the date of delivery
-- -------------
of such certificate to Foothill there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i), (ii),
or (iii), to the extent of any non-compliance, describing such non-compliance as
to which he or she may have knowledge and what action Parent has taken, is
taking, or proposes to take with respect thereto).
Each Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning such Borrower
that Foothill may request. Each Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to
Foothill, at such Borrower's expense, copies of such Borrower's financial
statements, papers related thereto, and other accounting records of any nature
in their possession, and to disclose to Foothill any information they may have
regarding such Borrower's business affairs and financial conditions.
6.4 Tax Returns. Deliver to Foothill copies of each of such Parent's future
federal income tax returns, and any amendments thereto, within 45 days of the
filing thereof with the Internal Revenue Service.
6.5 [Intentionally Omitted].
6.6 Returns. Cause returns and allowances, if any, as between such Borrower
and its Account Debtors to be on the same basis and in accordance with the usual
customary practices of such Borrower, as they exist at the time of the execution
and delivery of this Agreement. If, at a time when no Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to such
Borrower, such Borrower shall determine the reason for such return as soon as
reasonably practicable and, if such Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Foothill) in the appropriate amount to
such Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to such Borrower, such
Borrower promptly shall determine the reason for such return and, if Foothill
consents (which consent shall not be unreasonably withheld), issue a credit
memorandum (with a copy to be sent to Foothill) in the appropriate amount to
such Account Debtor.
6.7 Title to Equipment. Upon Foothill's request, such Borrower immediately
shall deliver to Foothill, properly endorsed,any and all evidences of ownership
of, certificates of title, or applications for title to any items of its
Equipment.
38
6.8 Maintenance of Equipment. Maintain its Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, such Borrower shall not permit any item
of its Equipment to become a fixture to real estate or an accession to other
property, and such Equipment shall at all times remain personal property.
6.9 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against such
Borrower or any of its property to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted Protest. Such
Borrower shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Foothill, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto. Such Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Foothill with proof satisfactory to Foothill
indicating that such Borrower has made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep its Personal Property Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Such Borrower also shall maintain business interruption,
public liability, product liability, and property damage insurance relating to
such Borrower's ownership and use of its Personal Property Collateral, as well
as insurance against larceny, embezzlement, and criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the type necessary
to insure the Improvements and Chattels (as such terms are defined in the
Mortgages), for the full replacement cost thereof, against any loss by fire,
lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage,
earthquakes, elevator collision, and other risks from time to time included
under "extended coverage" policies, in such amounts as Foothill may require, but
in any event in amounts sufficient to prevent such Borrower from becoming a
co-insurer under such policies, (ii) combined single limit bodily injury and
property damages insurance against any loss, liability, or damages on, about, or
relating to each parcel of Real Property Collateral, in an amount of not less
than $1,000,000; and (iii) insurance for such other risks as Foothill may
require. Replacement costs, at Foothill's option, may be redetermined by an
insurance appraiser, satisfactory to Foothill, not more frequently than once
every 12 months at such Borrower's cost.
39
(c) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All insurance required herein shall be written by companies which are authorized
to do insurance business in the State of California. All hazard insurance and
such other insurance as Foothill shall specify, shall contain a California Form
000XXX (XX)xxxxxxxxx endorsement, or an equivalent endorsement satisfactory to
Foothill, showing Foothill as sole loss payee thereof, and shall contain a
waiver of warranties. Every policy of insurance referred to in this Section
-------
6.10shall contain an agreement by the insurer that it will not cancel such
policy except after 30 days prior written notice to Foothill and that any loss
payable thereunder shall be payable notwithstanding any act or negligence of
such Borrower or Foothill which might, absent such agreement, result in a
forfeiture of all or a part of such insurance payment and notwithstanding (i)
occupancy or use of the Real Property Collateral for purposes more hazardous
than permitted by the terms of such policy, (ii) any foreclosure or other action
or proceeding taken by Foothill pursuant to the Mortgages upon the happening of
an Event of Default, or (iii) any change in title or ownership of the Real
Property Collateral. Such Borrower shall deliver to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory to Foothill
evidencing such insurance shall be delivered to Foothill prior to the expiration
of the existing or preceding policies. Such Borrower shall give Foothill prompt
notice of any loss covered by such insurance, and Foothill shall have the right
to adjust any loss. Foothill shall have the exclusive right to adjust all losses
payable under any such insurance policies without any liability to such Borrower
whatsoever in respect of such adjustments. Any monies received as payment for
any loss under any insurance policy including the insurance policies mentioned
above, shall be paid over to Foothill to be applied at the option of Foothill
either to the prepayment of the Obligations without premium, in such order or
manner as Foothill may elect, or shall be disbursed to such Borrower under stage
payment terms satisfactory to Foothill for application to the cost of repairs,
replacements, or restorations. Ail repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Foothill shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order or form as Foothill shall determine.
(e) Such Borrower shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section 6.10,unless Foothill is included thereon as named insured with the
-------------
loss payable to Foothill under a standard California 438BFU (NS) Mortgagee
endorsement, or its local equivalent. Such Borrower immediately shall notify
Foothill whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the same, and
originals of such policies immediately shall be provided to Foothill.
40
6.11 No Setoffs or Counterclaims. Make payments hereunder and under the
other Loan Documents by or on behalf of such Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep its Inventory and Equipment
only at the locations identified on Schedule 6.12; provided, however,that
----------------------------------
Borrowers may amend Schedule 6.12so long as such amendment occurs by written
--------------
notice to Foothill not less than 30 days prior to the date on which the
Inventory or Equipment of Borrowers is moved to such new location, so long as
such new location is within the continental United States, and so long as, at
the time of such written notification, Borrowers provide any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provides to Foothill a
Collateral Access Agreement.
6.13 Compliance with Laws. Comply with the requirements of all applicable
laws, rules, regulations, and orders of any governmental authority, including
the Fair Labor Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which, individually
or in the aggregate, would not have and could not reasonably be expected to
cause a Material Adverse Change.
6.14 Employee Benefits.
(a) Deliver to Foothill: (i) promptly, and in any event within 10 Business
Days after such Borrower or any of its Subsidiaries knows or has reason to know
that an ERISA Event has occurred that reasonably could be expected to result in
a Material Adverse Change, a written statement of the chief financial officer of
such Borrower describing such ERISA Event and any action that is being taken
with respect thereto by such Borrower, any such Subsidiary or ERISA Affiliate,
and any action taken or threatened by the IRS, Department of Labor, or PBGC.
Such Borrower or such Subsidiary, as applicable, shall be deemed to know all
facts known by the administrator of any Benefit Plan of which it is the plan
sponsor, (ii) promptly, and in any event within 3 Business Days after the filing
thereof with the IRS, a copy of each funding waiver request fried with respect
to any Benefit Plan and all communications received by such Borrower, any of its
Subsidiaries or, to the knowledge of such Borrower, any ERISA Affiliate with
respect to such request, and (iii) promptly, and in any event within 3 Business
Days after receipt by such Borrower, any of its Subsidiaries or, to the
knowledge of such Borrower, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's request, each of the
following: (i) a copy of each Plan (or, where any such plan is not in writing,
complete description thereof) (and if applicable, related trust agreements or
other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of such
41
Borrower or its Subsidiaries; (ii) the most recent determination letter issued
by the IRS with respect to each Benefit Plan; (iii) for the three most recent
plan years, annual reports on Form 5500 Series required to be filed with any
governmental agency for each Benefit Plan; (iv) all actuarial reports prepared
for the last three plan years for each Benefit Plan; (v) a listing of all
Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by such Borrower or any ERISA Affiliate to
each such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to such Borrower or
any ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan;
and (vii) the aggregate amount of the most recent annual payments made to former
employees of such Borrower or its Subsidiaries under any Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable under any
leases to which such Borrower is a party or by which such Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent that such Borrower fails timely to make payment of such
rents and other amounts payable when due under its leases, Foothill shall be
entitled, in its discretion, to reserve an amount equal to such unpaid amounts
against the Borrowing Base.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, such
Borrower will not, without Foothill's prior written approval which may be given
in Foothill's sole discretion, do any of the following:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with Indebtedness to
issuers of letters of credit that are the subject of L/C Guarantees;
(b) Indebtedness set forth in the latest financial statements of Borrowers
submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness evidenced by the Junior Notes and by that certain
$5,000,000 Promissory Note in favor of LaSalle National Bank, dated August 7,
1998;
(e) The private placement of subordinate debt on terms and conditions
consistent in all material respects with the X.X. Xxxxxxx draft Private
Placement Memorandum dated July 24, 1997, with subordination provisions no less
favorable than those set forth in those certain Subordination Agreements entered
into by Foothill in connection with the Junior Notes; and
42
(f) refinancings, renewals; or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1(and continuance or renewal of any
------------
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrowers, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii)such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv)to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d)and so long as the replacement Liens only encumber those assets or
--------------
property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or otherwise dispose
of any of such Borrower's properties or assets other than sales of Inventory to
buyers in the ordinary course of such Borrower's business as currently
conducted.
7.5 Change Name. Change such Borrower's name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect
to the obligations of any third Person except by endorsement of instruments or
items of payment for deposit to the account of such Borrower or which are
transmitted or turned over to Foothill.
7.7 Nature of Business. Make any change in the principal nature of such
Borrower's business.
43
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section 7. l(d)or,
---------------
so long as no Event of Default has occurred and is continuing, the prepayment of
the Junior Notes upon completion of a Financing or Sale Event, prepay, redeem,
retire, defease, purchase, or otherwise acquire any Indebtedness owing to any
third Person, other than the Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or change any
of the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Sections 7.
-----------
l(b), (c). or (d).
---------------------
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any of its Inventory on
xxxx and hold, sale or return, sale on approval, or other conditional terms of
sale.
7.11 Distributions. Make any distribution or declare or pay any dividends
(in cash or other property, other than capital stock) on, or purchase, acquire,
redeem, or retire any of such Borrower's capital stock, of any class, whether
now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of such Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or such Borrower's financial condition. Such Borrower
waives the right to assert a confidential relationship, if any, it may have with
any accounting firm or service bureau in connection with any information
requested by Foothill pursuant to or in accordance with this Agreement, and
agrees that Foothill may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.13 Investments. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b)loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of such Borrower
except for transactions that are in the ordinary course of such Borrower's
business, upon fair and
44
reasonable terms, that are fully disclosed to Foothill, and that are no less
favorable to such Borrower than would be obtained in an arm's length transaction
with a non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
7.16 [Intentionally Omitted].
7.17 Use of Proceeds. Use (a)the proceeds of the Advances made hereunder
for any purpose other than (i) on the Closing Date, (y) to repay in full the
outstanding principal, accrued interest, and accrued fees and expenses owing to
Existing Lender, and (z) to pay transactional costs and expenses incurred in
connection with this Agreement, and (ii) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Foothill and so long as,
at the time of such written notification, such Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a Collateral Access
Agreement with respect to such new location. The Inventory and Equipment of such
Borrower shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of such Borrower to engage, in any
prohibited transaction which is reasonably likely to result in a civil penalty
or excise tax described in Sections 406 of ERISA or 4975 of the IRC for which a
statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any accumulated
funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC),
whether or not waived;
(c) fail, or perm- it any Subsidiary of such Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of such Borrower to terminate, any
Benefit Plan where such event would result in any liability of such Borrower,
any of its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
45
(e) fail, or permit any Subsidiary of such Borrower to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of such Borrower to fail, to pay any
required installment or any other payment required under Section 412 of the IRC
on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of such Borrower to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of such Borrower, any Subsidiary of such Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of such Borrower to Multiemployer
Plan where such withdrawal is reasonably likely to of any such withdraw,
from any result in any liability entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of such Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000.
7.20 Financial Covenants. Have Parent fail to maintain:
(a) Minimum Tangible Net Worth. Minimum Tangible Net Worth of not less
than: (i) $20,000,000, measured as of any month end during Parent's fiscal year
1999, and (ii) $21,000,000, measured as of any month end thereafter.
(b) [Intentionally Omitted]
(c) [Intentionally Omitted]
7.21 Capital Expenditures. Borrowers shall, in the aggregate, make capital
expenditures in any fiscal year in excess of $3,000,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
46
8.2 If any Borrower fails to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in this Agreement, in any of the
Loan Documents, or in any other present or future agreement between such
Borrower and Foothill; provided, however,that Borrowers' failure to perform,
-------------------
keep, or observe the terms of Sections 6.2, 6.3, 6.4, 6.7, 6.8, 6.13, 6.14 or
--------------------------------------------
6.15 shall not constitute an Event of Default unless such failure continues for
---
five Business Days or more in the case of Section 6.2and otherwise 15 clays or
-----------
more;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Borrower;
8.6 If an Insolvency Proceeding is commenced against any Borrower and any
of the following events occur: (a) such Borrower consents to the institution of
the Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c)the petition commencing the Insolvency
Proceeding is not dismissed within 60 calendar days of the date of the filing
thereof; provided, however,that, during the pendency of such period, Foothill
-------------------
shall be relieved of its obligation to extend credit hereunder; (d) an interim
trustee is appointed to take possession of all or a substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, such Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If any Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of any Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether xxxxxx or otherwise, upon any of such Borrower's properties or assets
and the same is not paid on the payment date thereof; provided, however,that no
------------------
such Liens or debts for aggregate amounts of less than $250,000 (in the case of
the United States Government) or $1,000,000 (for any state, county or
municipality) shall constitute an Event of Default if the same are discharged
within 30 days of the date thereof; provided, however,that Foothill shall have
------------------
the right to establish a reserve in Borrowers' Loan Account for the amount of
such Liens;
8.9 If judgments or other claims, in excess of $250,000 in the aggregate,
become Liens or encumbrances upon any material portion of any Borrower's
properties or
47
assets, and such Liens or encumbrances are not discharged within 30 days of the
date thereof or stayed pending appeal;
8.10 If there is a default in any material agreement to which any Borrower
is a party with one or more third Persons (including LaSalle National Bank) and
such default (a) occurs at the final maturity of the obligations thereunder, or
(b) results in a right by such third Person(s), irrespective of whether
exercised, to accelerate the maturity of such Borrower's obligations thereunder;
8.11 If any Borrower makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness; or
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by any Borrower or any officer, employee, agent, or director of any Borrower, or
if any such warranty or representation is withdrawn.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrowers under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrowers and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of Foothill, but without affecting Foothill's
rights and security interests in the Personal Property Collateral or the Real
Property Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Foothill considers advisable, and in such cases,
Foothill will credit Borrowers' Loan Account with only the net amounts received
by Foothill in payment of such disputed Accounts after deducting all Foothill
Expenses incurred or expended in connection therewith;
48
(e) Cause Borrowers to hold all of their returned Inventory in trust for
Foothill, segregate all such returned Inventory from all other property of any
Borrower or in any Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon any Borrower or any guarantor, make
such payments and do such acts as Foothill considers necessary or reasonable to
protect its security interests in the Collateral. Borrowers agree to assemble
the Personal Property Collateral if Foothill so requires, and to make the
Personal Property Collateral available to Foothill as Foothill may designate.
Each Borrower authorizes Foothill to enter the premises where the Personal
Property Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or Lien that in Foothill's determination
appears to conflict with its security interests and to pay all expenses incurred
in connection therewith. With respect to any of Borrowers' owned or leased
premises, each Borrower hereby grants Foothill a license to enter into
possession of such premises and to occupy the same, without charge, for up to
120 days in order to exercise any of Foothill's rights or remedies provided
herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of Section 9505 of the Code), set off and apply
to the Obligations any and all (i) balances and deposits of any Borrower held by
Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of any
Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of any
Borrower held by Foothill, and any amounts received in the Lockbox Accounts, to
secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Personal Property Collateral. Foothill is hereby granted a license or other
right to use, without charge, any Borrower's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and each Borrower's rights under
all licenses and all franchise agreements shall inure to Foothill's benefit;
(j) Sell the Personal Property Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including any Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
49
(k) Foothill shall give notice of the disposition of the Personal Property
Collateral as follows:
(1) Foothill shall give Borrowers and each holder of a security interest in
the Personal Property Collateral who has filed with Foothill a written request
for notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Personal Property Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage prepaid, to
Borrowers as provided in Section 12,at least 5 days before the date fixed for
-----------
the sale, or at least 5 days before the date on or after which the private sale
or other disposition is to be made; no notice needs to be given prior to the
disposition of any portion of the Personal Property Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrowers
claiming an interest in the Personal Property Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall give notice of
the time and place by publishing a notice one time at least 5 days before the
date of the sale in a newspaper of general circulation in the county in which
the sale is to be held;
(1) Foothill may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the Personal Property
Collateral as provided above will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrowers.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by such Borrower could result
50
in a Material Adverse Change, in its discretion and without prior notice to
Borrowers, Foothill may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves in Borrowers' Loan Account as
Foothill deems necessary to protect Foothill from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type described in
Section 6.10,and take any action with respect to such policies as Foothill deems
-------------
prudent. Any such amounts paid by Foothill shall constitute Foothill Expenses.
Any such payments made by Foothill shall not constitute an agreement by Foothill
to make similar payments in the future or a waiver by Foothill of any Event of
Default under this Agreement. Foothill need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which such Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill complies with
its obligations, if any, under Section 9207 of the Code, Foothill shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrowers.
11.3 Indemnification. Borrowers shall pay, indemnify, defend, and hold
Foothill, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration (including any of the foregoing arising out of the administration
of the credit facilities hereunder on a joint borrowing basis) of this Agreement
and any other Loan Documents or the transactions contemplated herein, and with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrowers shall have no obligation to any Indemnified Person under this Section
-------
11.3 with respect to any Indemnified Liability
----
51
that a court of competent jurisdiction finally determines to have resulted from
the gross negligence or willful misconduct of such Indemnified Person. This
provision shall survive the termination of this Agreement and the repayment of
the Obligations.
11.4 Joint Borrowers.
(a) Each Borrower agrees that it is jointly and severally, directly and
primarily liable to Foothill for payment in full of all Obligations, whether for
principal, interest or otherwise and that such liability is independent of the
duties, obligations, and liabilities of the other Borrowers. Foothill may bring
a separate action or actions on each, any, or all of the Obligations against any
Borrower, whether action is brought against the other Borrowers or whether the
other Borrowers are joined in such action. In the event that any Borrower fails
to make any payment of any Obligations on or before the due date thereof, the
other Borrowers immediately shall cause such payment to be made or each of such
Obligations to be performed, kept, observed, or fulfilled.
(b) The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. Each Borrower agrees that its liability under the Loan
Documents shall be immediate and shall not be contingent upon the exercise or
enforcement by Foothill of whatever remedies it may have against the other
Borrowers, or the enforcement of any lien or realization upon any security
Foothill may at any time possess. Each Borrower consents and agrees that
Foothill shall be under no obligation (under Section 2899 or 3433 of the
California Civil Code or otherwise) to marshal any assets of any Borrower
against or in payment of any or all of the Obligations.
(c) Each Borrower acknowledges that it is presently informed as to the
financial condition of the other Borrowers and of all other circumstances which
a diligent inquiry would reveal and which bear upon the risk of nonpayment of
the Obligations. Each Borrower hereby covenants that it will continue to keep
informed as to the financial condition of the other Borrowers, the status of the
other Borrowers and of all circumstances which bear upon the risk of nonpayment
of the Obligations. Absent a written request from any Borrower to Foothill for
information, such Borrower hereby waives any and all rights it may have to
require Foothill to disclose to such Borrower any information which Foothill may
now or hereafter acquire concerning the condition or circumstances of the other
Borrowers.
(d) The liability of each Borrower under the Loan Documents includes
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Obligations after prior Obligations have
been satisfied in whole or in part. To
52
the maximum extent permitted by law, each Borrower hereby waives any right to
revoke its liability under the Loan Documents as to future indebtedness, and in
connection therewith, each Borrower hereby waives any rights it may have under
Section 2815 of the California Civil Code. If such a revocation is effective
notwithstanding the foregoing waiver, each Borrower acknowledges and agrees that
(a)no such revocation shall be effective until written notice thereof has been
received by Foothill, (b) no such revocation shall apply to any Obligations in
existence on such date (including, any subsequent continuation, extension, or
renewal thereof, or change in the interest rate, payment terms, or other terms
and conditions thereof), (c) no such revocation shall apply to any Obligations
made or created after such date to the extent made or created pursuant to a
legally binding commitment of Foothill in existence on the date of such
revocation, (d) no payment by such Borrower or from any other source prior to
the date of such revocation shall reduce the maximum obligation of the other
Borrowers hereunder, and (e) any payment by such Borrower or from any source
other than Borrowers, subsequent to the date of such revocation, shall first be
applied to that portion of the Obligations as to which the revocation is
effective and which are not, therefore, guaranteed hereunder, and to the extent
so applied shall not reduce the maximum obligation of each Borrower hereunder.
(e) (i) Each Borrower absolutely, unconditionally, knowingly, and
expressly waives:
(1) (A) notice of acceptance hereof; (B) notice of any loans or other
financial accommodations made or extended under the Loan Documents or the
creation or existence of any Obligations; (C) notice of the amount of the
Obligations, subject, however, to each Borrower's right to make inquiry of
Foothill to ascertain the amount of the Obligations at any reasonable time; (D)
notice of any adverse change in the financial condition of the other Borrowers
or of any other fact that might increase such Borrower's risk hereunder;
(E)notice of presentment for payment, demand, protest, and notice thereof as to
any instruments among the Loan Documents; and (F) all notices (except if such
notice is specifically required to be given to Borrowers hereunder or under the
Loan Documents) and demands to which such Borrower might otherwise be entitled.
(2) its right, under Sections 2845 or 2850 of the California Civil Code, or
otherwise, to require Foothill to institute suit against, or to exhaust any
rights and remedies which Foothill has or may have against, the other Borrowers
or any third party, or against any Collateral provided by the other Borrowers,
or any third party. In this regard, each Borrower agrees that it is bound to the
payment of all Obligations, whether now existing or hereafter accruing, as fully
as if such Obligations were directly owing to Foothill by such Borrower. Each
Borrower further waives any defense arising by reason of any disability or other
defense (other than the defense that the Obligations shall have been fully and
finally performed and indefeasibly paid) of the other Borrowers or by reason of
the cessation from any cause whatsoever of the liability of the other Borrowers
in respect thereof.
53
(3) (A) any rights to assert against Foothill any defense (legal or
equitable), set-off, counterclaim, or claim which such Borrower may now or at
any time hereafter have against the other Borrowers or any other party liable to
Foothill; (B) any defense, set-off, counterclaim, or claim, of any kind or
nature, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the Obligations or any
security therefor; (C) any defense such Borrower has to performance hereunder,
and any right such Borrower has to be exonerated, provided by Sections 2819,
2822, or 2825 of the California Civil Code, or otherwise, arising by reason of:
the impairment or suspension of Foothill's rights or remedies against the other
Borrowers; the alteration by Foothill of the Obligations; any discharge of the
other Borrowers' obligations to Foothill by operation of law as a result of
Foothill's intervention or omission; or the acceptance by Foothill of anything
in partial satisfaction of the Obligations; (D) the benefit of any statute of
limitations affecting such Borrower's liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of any statute of
limitations applicable to the Obligations shall similarly operate to defer or
delay the operation of such statute of limitations applicable to such Borrower's
liability hereunder.
(ii) Each Borrower absolutely, unconditionally, knowingly, and expressly
waives any defense arising by reason of or deriving from (i) any claim or
defense based upon an election of remedies by Foothill including any defense
based upon an election of remedies by Foothill under the provisions of Sections
580a, 580b, 580d, and 726 of the California Code of Civil Procedure or any
similar law of California or any other jurisdiction; or (ii) any election by
Foothill under Bankruptcy Code Section 111 l(b) to limit the amount of, or any
collateral securing, its claim against the Borrowers. Pursuant to California
Civil Code Section 2856(b):
"Each Borrower waives all rights and defenses arising out of an election of
remedies by the creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed such Borrower's rights of subrogation and reimbursement against
the other Borrowers by the operation of Section 580(d) of the California Code of
Civil Procedure or otherwise.
"Each Borrower waives all rights and defenses that such Borrower may have
because another Borrower's Obligations are secured by real property. This means,
among other things:
"(1) Foothill may collect from such Borrower without first foreclosing on
any real or personal property collateral pledged by another Borrower.
"(2) If Foothill forecloses on any collateral pledged by another Borrower:
real property
54
(A) The amount of the Obligations may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral is
worth more than the sale price.
(B) Foothill may collect from such Borrower even if Foothill, by
foreclosing on the real property collateral, has destroyed any right such
Borrower may have to collect from another Borrower.
"This is an unconditional and irrevocable waiver of any rights and defenses
such Borrower may have because the Obligations are secured by real property.
These rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of
Civil Procedure."
If any of the Obligations at any time is secured by a mortgage or deed of trust
upon real property, Foothill may elect, in its sole discretion, upon a default
with respect to the Obligations, to foreclose such mortgage or deed of trust
judicially or nonjudicially in any manner permitted by law, before or after
enforcing the Loan Documents, without diminishing or affecting the liability of
any Borrower hereunder except to the extent the Obligations are repaid with the
proceeds of such foreclosure. Each Borrower understands that (a) by virtue of
the operation of California's antideficiency law applicable to nonjudicial
foreclosures, an election by Foothill nonjudicially to foreclose such a mortgage
or deed of trust probably would have the effect of impairing or destroying
rights of subrogation, reimbursement, contribution, or indemnity of such
Borrower against the other Borrowers or other guarantors or sureties, and (b)
absent the waiver given by such Borrower, such an election would prevent
Foothill from enforcing the Loan Documents against such Borrower. Understanding
the foregoing, and understanding that such Borrower is hereby relinquishing a
defense to the enforceability of the Loan Documents, such Borrower hereby waives
any right to assert against Foothill any defense to the enforcement of the Loan
Documents, whether denominated "estoppel" or otherwise, based on or arising from
an election by Foothill nonjudicially to foreclose any such mortgage or deed of
trust. Each Borrower understands that the effect of the foregoing waiver may be
that each Borrower may have liability hereunder for amounts with respect to
which such Borrower may be left without rights of subrogation, reimbursement,
contribution, or indemnity against the other Borrower or other guarantors or
sureties. Each Borrower also agrees that the "fair market value" provisions of
Section 580a of the California Code of Civil Procedure shall have no
applicability with respect to the determination of such Borrower's liability
under the Loan Documents.
55
(iii) Until such time as all Obligations have been fully, finally, and
indefeasibly paid in full, in cash, each Borrower hereby absolutely,
unconditionally, knowingly, and expressly postpones: (1) any right of
subrogation such Borrower has or may have as against the other Borrowers with
respect to the Obligations; (2) any right to proceed against the other Borrowers
or any other Person, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which such Borrower may now have or hereafter
have as against the other Borrowers with respect to the Obligations; and (3) any
right to proceed or seek recourse against or with respect to any property or
asset of the other Borrowers.
(iv) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION
SET FORTH IN THIS SECTION 11.4, EACH BORROWER HEREBY ABSOLUTELY, KNOWINGLY,
UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL
BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821,
2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE
CALIFORNIA CIVIL CODE.
(f) Each Borrower consents and agrees that, without notice to or by such
Borrower, and without affecting or impairing the liability of such Borrower
hereunder, Foothill may, by action or inaction:
(i) compromise, settle, extend the duration or the time
for the payment of, or discharge the performance of, or
may refuse to or otherwise not enforce the Loan
Documents, or any part thereof, with respect to the
other Borrowers;
(ii) release the other Borrowers or grant other
indulgences to the other Borrowers in respect thereof;
or
(iii) release or substitute any guarantor, if any, of
the Obligations, or enforce, exchange,
release, or waive any security for the Obligations
or any guaranty of the Obligations, or any portion
thereof.
(g) Foothill shall have the right to seek recourse against each Borrower to
the fullest extent provided for herein, and no election by Foothill to proceed
in one form of action or proceeding, or against any party, or on any obligation,
shall constitute a waiver of Foothill's right to proceed in any other form of
action or proceeding
56
or against other parties unless Foothill has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by Foothill under the Loan Documents shall serve to
diminish the liability of any Borrower thereunder except to the extent that
Foothill finally and unconditionally shall have realized indefeasible payment by
such action or proceeding.
(h) The Obligations shall not be considered indefeasibly paid for purposes
of this Section 11.4unless and until all payments to Foothill are no longer
-------------
subject to any right on the part of any person, including any Borrower, any
Borrower as a debtor in possession, or any trustee (whether appointed pursuant
to 11 U.S.C., or otherwise) of any Borrower's assets to invalidate or set aside
such payments or to seek to recoup the amount of such payments or any portion
thereof, or to declare same to be fraudulent or preferential. Upon such full and
final performance and indefeasible payment of the Obligations, Foothill shall
have no obligation whatsoever to transfer or assign its interest in the Loan
Documents to any Borrower. In the event that, for any reason, any portion of
such payments to Foothill is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and each Borrower shall be liable
for the full amount Foothill is required to repay plus any and all costs and
expenses (including attorneys' fees and attorneys' fees incurred pursuant to 11
U.S.C.) paid by Foothill in connection therewith.
Borrowers and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or fight waived may
diminish, destroy or otherwise adversely affect rights which Borrowers otherwise
may have against other Borrowers, the Lender Group or others, or against
Collateral. If any of the waivers or consents herein are determined to be
contrary to any applicable law or public policy, such waivers and consents shall
be effective to the maximum extent permitted by law.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other Loan Document shall be in writing
and (except for financial statements and other informational documents which may
be sent by frost-class mail, postage prepaid) shall be personally delivered or
sent by registered or certified mail (postage prepaid, return receipt
requested), overnight courier, or telefacsimile to Borrower or to Foothill, as
the case may be, at its address set forth below:
If to Borrowers: c/o ALLIED HEALTHCARE PRODUCTS, INC.
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Vice President Finance
Fax No. 000.000.0000
57
with copies TO: XXXXXXXXXXXX, XXXXXX & XXXX P.C.
2000 Equitable Building
00 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
ATTN: Xxxxxxx X. Xxxxxxx, Esq.
Fax No. 000.000.0000
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
with copies TO: BUCHALTER, NEMER, FIELDS & YOUNGER
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 000.000.0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12,other than
-----------
notices by Foothill in connection with Sections 9504 or 9505 of the Code, shall
be deemed received on the earlier of the date of actual receipt or 3 days after
the deposit thereof in the mail. Each Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted by telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF-FOOTI4ffLL, IN ANY OTHER
58
COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH BORROWER AND FOOTHILL
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION !3.EACH BORROWER AND
-----------
FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND FOOTHILL REPRESENTS THAT THEY HAVE REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four months after
they are delivered to or received by Foothill, unless Borrowers request, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrowers' expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed effective
when executed by Borrowers and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however,that no Borrower may assign this Agreement or any rights or
------------
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release the assigning Borrower from its Obligations. Foothill may assign
this Agreement and its rights and duties hereunder and no consent or approval by
Borrowers is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
any Borrower or any Borrower's business. To the extent that Foothill assigns its
rights and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to
59
Borrowers and such assignment shall effect a novation between Borrowers and such
third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrowers,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended by a writing
signed by both Foothill and Borrowers.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or payment
of the Obligations by any Borrower or any guarantor of the Obligations or the
transfer by either or both of such parties to Foothill of any property of either
or both of such parties should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors' rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfers), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrowers or such guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
60
15.9 INTEGRATION. This Agreement, certain supplemental letters delivered
concurrently herewith, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
ALLIED HEALTHCARE PRODUCTS, INC.,
a Delaware corporation
By Xxx Xxxxxx Aggarwal
Title: President and Chief Executive Officer
B&F MEDICAL PRODUCTS, INC.,
a Delaware corporation
By Xxx Xxxxxx Aggarwal
Title: President and Chief Executive Officer
HOSPITAL SYSTEMS, INC.,
a California corporation
By Xxx Xxxxxx Aggarwal
Title: President and Chief Executive Officer
LIFE SUPPORT PRODUCTS, INC.,
a California corporation
By Xxx Xxxxxx Aggarwal
Title: President and Chief Executive Officer
61
FOOTHILL," CAPITAL CORPORATION,
a California corporation
By Xxxxxxxxxxx X Xxxxx
Title: Vice President
62
SCHEDULE E-I
See Schedule 6.12
Schedule P-!
Liens on the Sublette real property and related fixtures as evidenced by that
certain (i) Deed of Trust between Parent, Xxxxxx Xxxxxxxx, as Trustee and
LaSalle National Bank dated August 7, 1998 and (ii) UCC fixture filing attached
hereto, securing that certain $5,000,000 Promissory Note made by Parent in favor
of LaSalle National Bank.
Schedule P-I
Real Property Owned:
----------------------
Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
0000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
00 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Schedule 5.8
DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES
Allied Healthcare Products, Inc., a Delaware corporation, owns 100% of the
issued and outstanding stock of the following corporations:
B&F Medical Products, Inc., a Delaware corporation with 100,000 shares of common
stock, par value $. 01 (the "Common Stock"), authorized and 1,000 shares of
Common Stock issued and outstanding.
Hospital Systems, Inc., a California corporation with 100,000 shares of common
stock, no par value (the "Common Stock"), authorized and 100 shares of Common
Stock issued and outstanding.
Life Support Products, Inc., a California corporation with 3,000,000 shares of
stock authorized consisting of 2,571,367 shares of common stock, no par value
(the "Common Stock"), with 934,403 shares of Common Stock issued and outstanding
and 428,633 shares of Series A preferred stock, no par value (the "Preferred
Stock") with no shares of Preferred Stock issued and outstanding.
Omni-Tech Medical, Inc., a Kansas corporation ("Omni-Tech") with 100,000 shares
of common stock, par value of $1.00 (the "Common Stock") authorized and 100,000
shares of Common Stock issued and outstanding. Omni-Tech has no material assets
and is a dormant corporation.
SCHEDULE 5.10,
MATERIAL PROCEEDINGS
Product liability claims are asserted against the Borrowers from time to
time for various injuries alleged to have resulted from defects in the
manufacture and/or design of a Borrower's products. Product liability claims are
covered by the Borrowers comprehensive general liability insurance policies,
subject to certain deductible amounts. The Borrowers establish reserves for such
deductible amounts, which they believe to be adequate based on their previous
claims experience.
From time to time, the Borrowers are the subject of legal proceedings,
including proceedings other than product liability claims, such as claims
involving employee matters and similar claims. There are no material claims
currently pending which could have a material adverse affect.
The following is a list of pending and potential litigation:
I. HOSPITAL PRODUCTS DIVISION.
X. Xxxxxx v. Allied. Mist-O-Gen
-------------------------------
Jurisdiction: Circuit Court of Illinois, Will Co.
Date of incident: October 20, 1995
Case file date: October 15, 1996
Product involved: Mist-O-Gen TAB 25 Tubing Dryer
Case type: Personal injury
X. Xxxxxxx v. The Port Hope and District Hospital. et al.
---------------------------------------------------------------
Jurisdiction: Ontario (Canada) General Division
Date of incident: April 23, 1996
Case file date: April 21, 1997
Date of service: June 12, 1997
Product involved: Extractor
Case type: Wrongful Death
II. PENDING LITIGATION
D Dubkoff. et al. v. Northcoast Rehabilitation Hospital. et al.
- ---------------------------------------------------------------------
Jurisdiction: Superior Court for State of California,
Contra Costa County
Date of incident: June 15, 1996 .
Date of service: November 3, 1997
Product involved: Bear 3 Adult Volume Ventilator
Case type: Wrongful Death
B.
Xxxxx Xxxxxx v. Allied Healthcare Products. et al.
---------------------------------------------------------
Jurisdiction: District Court of Xxxxxx County, Texas
Date of incident: June 14, 1996
Date of service: July 3, 1998
Product involved: Oxygen Regulator
Case type: Personal Injury
Xxxxxxx Xxxx v. Allied Healthcare Products. et al.
---------------------------------------------------------
Jurisdiction: District Court of Xxxxxx County, Texas
Date of incident: June 14, 1996
Date of service: July 3, 1998
Product involved: Oxygen Regulator
Case type: Personal Injury
Xxxx X. Xxxxx, Jret ux v. Praxair. et al.
-------------------------------------------------
Jurisdiction: Court of Common Pleas,
Allegheny County Pennsylvania
Date of incident: April 4, 1997
Date of service: April 9, 1998
Product involved: Oxygen Regulator
Case type: Personal Injury
III. POTENTIAL LITIGATION - VENTILATION PRODUCTS DIVISION
A. Xxxxx Xxxxx
-------
Date of incident: March 22, 1997
Product involved: BEAR 2
Case type: Wrongful Death
X. Xxxxxxx
-------
Date of incident: December 22, 1993
Product involved: Unknown Bear product
Case type: Personal Injury
C. Xxxx- Xxx Xxxxxxx
-------------------
Date of incident: November 8, 1996
Case type: Wrongful Termination
IV. POTENTIAL LITIGATION
A. JWP Bankruptcy.This case involves an insolvent installer alleging
----------------
Allied owes approximately $94,000.00 arising out of an equipment
transaction around the Fall of 1996. We are in the process of gathering
the necessary documentation to show we have paid these bills by
credits.
B. Xxx Xxxxxxxx.Firefighter in Broward County, Florida who was burned
--------------
in an oxygen cylinder fire this Spring. They will allege, among other
things, a defective oxygen regulator. No suit has been filed.
C. Xxxx Szyczerba.Firefighter in the Chicagoland area burned in an
----------------
oxygen cylinder fire in 1996. They Will allege a defective regulator.
The items set forth on this Schedule 5.10 would not, if adversely decided,
individually or collectively cause a Material Adverse Change to Borrower.
SCHEDULE 5.13 EMPLOYEE BENEFITS
None.
SCHEDULE 6.12
LOCATION OF INVENTORY AND EQUIPMENT
Location of Parent's Inventory:
----------------------------------
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Location of Life Support's Inventory:
-----------------------------------------
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Locations of B&F's Inventory:
--------------------------------
0000 Xxxxxxxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000
00 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Location of Hospital System's Inventory:
--------------------------------------------
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Other Locations of Inventory:
--------------------------------
Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
Deroyal Industries
0000 Xxx 00, Xxxxx
Xxx Xxxxxxx, XX 00000
COMPLIANCE CERTIFICATE
(Amended and Restated Loan and Security Agreement Section 6.3)
Date ___________, 199__
Foothill Capital Corporation
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Attention:___________________
RE: Amended and Restated Loan and Security Agreement, dated as of September
1, 1998 (the "Agreement") by and between FOOT!~L CAPITAL CORPORATION
("Lender") on the one hand and ALLIED E[EALTI{CARE PRODUCTS, INC. ("Parent")
and certain of its subsidiaries (jointly "Borrowers") on the other hand.
Dear___________:
In accordance with Section 6.3 of the Agreement, this letter shall serve as
certification to Lender that to the best of my knowledge: (i) all financial
statements have been prepared in accordance with GAAP and fairly represent the
financial condition of Parent (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments), (ii) the representations and warranties of Borrowers set forth in
the Agreement and other Loan Documents are tree and correct in all material
respects on and as of the date of this certification (except to the extent that
such representations and warranties relate solely to an earlier date), (iii)
Parent is in compliance with the financial covenants set forth in Section 7.20
of the Agreement, and (iv) on the date of delivery of this certificate to Lender
there does not exist any condition or event that constitutes a Default or Event
of Default. Such certification is made as of the fiscal month
ending____________,199_.
Sincerely,
ALLIED HEALTHCARE PRODUCTS, INC.
By:_____________________
Vice-President Finance