REVOLVING CREDIT
AND SECURITY AGREEMENT
Revolving Credit and Security Agreement dated September 30, 1999 among
XXXXXX INTERNATIONAL CORP., a corporation organized under the laws of the State
of Delaware ("HIC"), HAPL LEASING CO., INC., a corporation organized under the
laws of the State of New York ("HAPL"), PULSE MICROSYSTEMS LTD., a corporation
organized under the laws of the Province of Ontario ("PULSE"), SEDECO, INC., a
corporation organized under the laws of the State of Texas ("SEDECO"), SEWING
MACHINE EXCHANGE, INC., a corporation organized under the laws of the State of
Illinois ("SEWING"), HOMETOWN THREADS, LLC, a limited liability company
organized under the laws of the State of Delaware ("HOMETOWN"), HJ GRASS ROOTS,
LLC, a limited liability company organized under the laws of the State of
Delaware ("HJ") and XXXXXX EQUIPMENT CONNECTION, INC., a corporation organized
under the laws of the State of Delaware ("CONNECTION") (HIC, HAPL, PULSE,
SEDECO, SEWING, HOMETOWN, HJ and CONNECTION, each a "Borrower" and collectively
"Borrowers"), the financial institutions which are now or which hereafter become
a party hereto (collectively, the "Lenders" and individually a "Lender") and PNC
BANK, NATIONAL ASSOCIATION, a national banking association ("PNC"), as agent for
Lenders (PNC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP as applied in preparation of the
audited financial statements of Borrowers for the fiscal year ended January 31,
1999.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Acceptances" shall mean any existing and future nondiscounted drafts which
involve any Borrower or beneficiary under a Letter of Credit as drawer that are
processed and accepted for payment by Agent or other accepting bank in its
absolute discretion.
"Accountants" shall have the meaning set forth in Section 9.7 hereof.
"Advances" shall mean and include the Revolving Advances, Letters of
Credit, and Acceptances.
"Advance Rates" shall have the meaning set forth in Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 5% or
more of the securities having ordinary voting power for the election of
directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.
"Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
"Authority" shall have the meaning set forth in Section 4.19(d).
"Base Rate" shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
"Blocked Accounts" shall have the meaning set forth in Section 4.15(h).
"Borrower" or "Borrowers" shall have the meaning set forth in the preamble
to this Agreement and shall extend to all permitted successors and assigns of
such Persons.
"Borrowers on a consolidated basis" shall mean the Borrowers and those
other entities, if any, that would be included in the consolidated financial
statements of the Borrowers prepared in accordance with GAAP.
"Borrowers' Account" shall have the meaning set forth in Section 2.8.
"Borrowing Agent" shall mean HIC.
"Business Day" shall mean any day other than a day on which commercial
banks in New York are authorized or required by law to close.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. "9601 et seq.
"Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any Borrower
or (b) any merger or consolidation of or with any Borrower other than permitted
hereunder, or sale of all or substantially all of the property or assets of any
Borrower other than permitted hereunder. For purposes of this definition,
"control of Borrower" shall mean the power, direct or indirect, to elect a
majority of the board of directors of any Borrower.
"Change of Ownership" shall mean (a) with respect to the Borrowers other
than HIC, 50% or more of their common stock is no longer owned or controlled by
HIC and, (b) with respect to HIC, Xxxxxx Xxxxxxx and Xxxx Xxxxxx shall cease to
maintain ownership, directly or indirectly, of a majority of such number of
shares of voting stock of HIC as would enable the holder thereof to elect a
majority of the members of the board of directors of HIC.
"Charges" shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom duties, fees, assessments, liens, claims and charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts, imposed by any taxing or other authority, domestic or
foreign (including, without limitation, the Pension Benefit Guaranty Corporation
or any environmental agency or superfund), upon the Collateral, any Borrower or
any of its Affiliates.
"Closing Date" shall mean the date set forth in the introductory paragraph
contained on page 1 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and the regulations promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) the Leasehold Interests,
(f) all of each Borrower's right, title and interest in and to (i) its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Borrower's rights as a consignor, a consignee,
an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in
transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all
additional amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any
goods securing this Agreement; (v) all of each Borrower's contract rights,
rights of payment which have been earned under a contract right, instruments,
documents, chattel paper, warehouse receipts, deposit accounts, money,
securities and investment property; (vi) if and when obtained by any Borrower,
all real and personal property of third parties in which such Borrower has been
granted a lien or security interest as security for the payment or enforcement
of Receivables; and (vii) any other goods, personal property or real property
now owned or hereafter acquired in which any Borrower has expressly granted a
security interest or may in the future grant a security interest to Agent
hereunder, or in any amendment or supplement hereto or thereto, or under any
other agreement between Agent and any Borrower;
(g) all of each Borrower's ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e), or (f)
of this Paragraph; and
(h) all proceeds and products of (a), (b), (c), (d), (e) or (f) in whatever
form, including, but not limited to: cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.
"Commitment Percentage" of any Lender shall mean the percentage set forth
below such Lender's name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a document in the form of
Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, necessary to carry on any
Borrower's business, including, without limitation, any Consents required under
all applicable federal, state or other applicable law.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414 of the Code.
"Copyrights Security Agreement" shall mean the Copyrights Security
Agreement in the form attached hereto as Exhibit 2.1(b).
"Customer" shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
"Default" shall mean an event which, with the giving of notice or passage
of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth in Section 2.16(a)
hereof.
"Depository Accounts" shall have the meaning set forth in Section 4.15(h)
hereof.
"Documents" shall have the meaning set forth in Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Base Rate.
"Early Termination Date" shall have the meaning set forth in Section 13.1
hereof.
"Earnings Before Interest and Taxes" shall mean for any period the sum of
(i) net income (or loss) of Borrowers on a consolidated basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
Borrowers on a consolidated basis for such period, plus (iii) all charges
against income of Borrowers on a consolidated basis for such period for federal,
state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory excluding work in
process located at the Inventory locations set forth on Schedule 1.2B attached
hereto, with respect to each Borrower valued at the lower of cost or market
value, determined on a first-in-first-out basis, which is not used or in Agent's
reasonable opinion, obsolete, slow moving or unmerchantable and which Agent, in
its reasonable discretion, shall not deem ineligible Inventory, based on such
considerations as Agent may from time to time deem appropriate including,
without limitation, whether the Inventory is subject to a perfected, first
priority security interest in favor of Agent and whether the Inventory conforms
to all standards imposed by any governmental agency, division or department
thereof which has regulatory authority over such goods or the use or sale
thereof. Eligible Inventory shall include all Inventory in-transit for which
title has passed to a Borrower, which is insured to the full value thereof and
for which Agent shall have in its possession (a) all negotiable bills of lading
properly endorsed and (b) all non-negotiable bills of lading issued in Agent's
name.
"Eligible Leases" shall mean Leases, which the Agent, in its reasonable
discretion, shall not deem an ineligible Lease, based on such considerations as
Agent may from time to time deem appropriate. A Lease shall not be deemed an
Eligible Lease unless such Lease is subject to the Agent's first priority
perfected security interest and no other lien (other than Permitted
Encumbrances) and the age of the Lease does not exceed 150 days from its
origination.
"Eligible Receivables" shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the ordinary course of
such Borrower's business and which Agent, in its reasonable credit judgment,
shall deem to be an Eligible Receivable, based on such considerations as Agent
may from time to time deem appropriate. A Receivable shall not be deemed
eligible unless such Receivable is subject to Agent's first priority perfected
security interest and no other Lien (other than Permitted Encumbrances), and is
evidenced by an invoice or other documentary evidence satisfactory to Agent. In
addition, no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by any Borrower to another Borrower or to
an Affiliate of any Borrower or to a Person controlled by an Affiliate of any
Borrower;
(b) it is due or unpaid more than ninety (90) days after the original
invoice date, unless the receivable is thirty (30) days or less past its due
date and does not exceed 150 days after original invoice date;;
(c) fifty percent (50%) or more of the Receivables from such Customer are
not deemed Eligible Receivables hereunder, which percentage may, in Agent's
reasonable discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty contained in this Agreement
with respect to such Receivable has been breached;
(e) the Customer shall (i) apply for, suffer, or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or a substantial part of its property or call a meeting of
its creditors, (ii) admit in writing its inability, or be generally unable, to
pay its debts as they become due or cease operations of its present business,
(iii) make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the continental United States of
America, unless the sale is on letter of credit, guaranty or acceptance terms,
in each case acceptable to Agent in its reasonable discretion;
(g) the sale to the Customer is on a xxxx-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper;
(h) Agent believes, in its reasonable judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason of the
Customer's financial inability to pay;
(i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have not been shipped and
delivered to and accepted by the Customer or the services giving rise to such
Receivable have not been performed by the applicable Borrower and accepted by
the Customer or the Receivable otherwise does not represent a final sale;
(k) the Receivables of the Customer exceed a credit limit determined by
Agent, in its reasonable discretion, to the extent such Receivable exceeds such
limit;
(l) the Receivable is subject to any offset, deduction, defense, dispute,
or counterclaim, the Customer is also a creditor or supplier of a Borrower or
the Receivable is contingent in any respect or for any reason;
(m) the applicable Borrower has made any agreement with any Customer for
any deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;
(n) shipment of the merchandise or the rendition of services has not been
completed;
(o) any return, rejection or repossession of the merchandise has occurred;
(p) such Receivable is not payable by a Borrower; or
(q) such Receivable is not otherwise satisfactory to Agent as determined in
good faith by Agent in the exercise of its discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning set forth in Section
4.19(d) hereof.
"Environmental Laws" shall mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
"Equipment" shall mean and include as to each Borrower all of such
Borrower's goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
"Event of Default" shall mean the occurrence of any of the events set forth
in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by PNC from three Federal funds brokers of recognized
standing selected by PNC.
"Formula Amount" shall have the meaning set forth in Section 2.1(a).
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean and include as to each Borrower all of
such Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all chose in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, service marks, trade secrets, goodwill, copyrights, design rights,
registrations, licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security interests or
other security held by or granted to such Borrower to secure payment of any of
the Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Governmental Body" shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Hazardous Discharge" shall have the meaning set forth in Section 4.19(d)
hereof.
"Hazardous Substance" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
"Ineligible Security" shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. section 24, Seventh), as amended.
"Inventory" shall mean and include as to each Borrower all of such
Borrower's now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any contract of service or
held for sale or lease, all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Borrower's business or used in selling or furnishing
such goods, merchandise and other personal property, and all documents of title
or other documents representing them.
"Inventory Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(ii) hereof.
"Issuer" shall mean any Person who issues a Letter of Credit and/or accepts
a draft pursuant to the terms hereof.
"Lease" shall mean any financing lease provided by HAPL to one of its
Customers with respect to Equipment which is the subject of a Revolving Advance
under Section 2.04(a) hereof, which Lease is in form and substance reasonably
satisfactory to the Agent.
"Lease Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(iii) hereof.
"Lease Financing Subloan": Advances made pursuant to Section 2.4(a) hereof.
"Leasehold Interests" shall mean all of each Borrower's right, title and
interest in and to the premises set forth on Schedules 4.5, 4.15(c) and 4.19.
"Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
"Letter of Credit and Acceptance Fees" shall have the meaning set forth in
Section 3.2.
"Letters of Credit" shall have the meaning set forth in Section 2.9.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of the applicable Person or
Persons, (b) any Borrower's ability to pay the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, or Agent's Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent's and each Lender's rights and remedies under this
Agreement and the Other Documents, provided, however, that nothing shall be
deemed to have a Material Adverse Effect on Sedeco, Sewing, Hometown, HJ or
Connection unless it also has a Material Adverse Effect on all of the Borrower
taken as a whole.
"Maximum Loan Amount" shall mean $20,000,000.
"Maximum Revolving Advance Amount" shall mean $20,000,000.
"Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean and include any and all of each Borrower's
Indebtedness and/or liabilities to Agent or Lenders or any corporation that
directly or indirectly controls or is controlled by or is under common control
with Agent or any Lender of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and several, absolute or
contingent, due or to become due, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, regardless of how such indebtedness or
liabilities arise or by what agreement or instrument they may be evidenced or
whether evidenced by any agreement or instrument, including, but not limited to,
any and all of any Borrower's Indebtedness and/or liabilities under this
Agreement, the Other Documents or under any other agreement between Agent or
Lenders and any Borrower and all obligations of any Borrower to Agent or Lenders
to perform acts or refrain from taking any action.
"Other Documents" shall mean the Note, the Fee Letter the Power of
Attorney, the Collateral Assignment of Patents, Trademarks, Copyrights and
Copyrights Security Agreement, and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter executed
by any Borrower and/or delivered to Agent or any Lender in respect of the
transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or other entity owning,
directly or indirectly at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
"Participant" shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
"Patent Security Agreement" shall mean the Patent Security Agreement in the
form attached hereto as Exhibit 2.1(b).
"Payment Office" shall mean initially Xxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no effect on the
priority of the Liens in favor of Agent or the value of the assets in which
Agent has such a Lien and a stay of enforcement of any such Lien shall be in
effect; (c) Liens disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of any Borrower's business; (f)
judgment Liens that have been stayed or bonded and mechanics', workers',
materialmen's or other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not due or which are
being contested in good faith by the applicable Borrower; (g) Liens placed upon
fixed assets hereafter acquired to secure a portion of the purchase price
thereof, provided that (x) any such lien shall not encumber any other property
of the Borrowers except for the proceeds of such property, and (y) the aggregate
amount of Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount provided for in
Section 7.6; (h) Liens disclosed on Schedule 1.2; and (i) Liens incurred as a
result of the sale, assignment or funding of recourse and non-recourse leases by
HAPL.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within the meaning of Section
3(3) of ERISA, maintained for employees of Borrowers or any member of the
Controlled Group or any such Plan to which any Borrower or any member of the
Controlled Group is required to contribute on behalf of any of its employees.
"Power of Attorney" shall mean each Power of Attorney executed by each
Borrower in favor of the Agent for the ratable benefit of the Lenders.
"Pro Forma Financial Statements" shall have the meaning set forth in
Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth in Section 16.3
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C. "
6901 et seq., as same may be amended from time to time.
"Real Property" shall mean all of each Borrower's right, title and interest
in and to all real property owned and/or leased to any Borrower, all as
identified on Schedule 4.19 hereto.
"Receivables" shall mean and include, as to each Borrower, all of such
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrowers by their Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to such Borrower arising out of or in connection with
the sale or lease of Inventory or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set forth in Section
2.1(a)(y)(i) hereof.
"Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event described in Section
4043(b) of ERISA or the regulations promulgated thereunder.
"Required Lenders" shall mean Lenders holding at least sixty-six and
two-thirds percent (66-2/3%) of the Advances and, if no Advances are
outstanding, shall mean Lenders holding sixty-six and two-thirds percent
(66-2/3%) of the Commitment Percentages.
"Reserve Percentage" shall mean the maximum effective percentage in effect
on any day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding.
"Revolving Advances" shall mean Advances made other than Letters of Credit
and Acceptances.
"Revolving Credit Note" shall mean the promissory note referred to in
Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate per annum equal to
the Base Rate in effect on such day plus one-half of one percent (.50%) with
respect to Domestic Rate Loans.
"Senior Debt Payments" shall mean and include all cash actually expended by
Borrowers to make (a) interest payments on any Advances hereunder, plus, (b)
payments for all fees, commissions and charges set forth herein and with respect
to any Advances, plus (c) capitalized lease payments, plus (d) payments with
respect to any other Indebtedness for borrowed money plus (e) tax payments.
"Settlement Date" shall mean the Closing Date and thereafter Wednesday of
each week unless such day is not a Business Day in which case it shall be the
next succeeding Business Day.
"Stockholders Equity" shall have the meaning as defined by GAAP excluding,
however, the cost to the Borrower of redemptions permitted pursuant to Section
7.7 hereof and occurring after the date hereof.
"Subsidiary" shall mean a corporation or other entity of whose shares of
stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person; however, Tajima USA, Inc. shall
not be considered a subsidiary for the purpose of this definition.
"Term" shall have the meaning set forth in Section 13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which constitutes grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that will reasonably be expected result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Toxic Substance" shall mean and include any material present on the Real
Property or the Leasehold Interests which have been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. " 2601 et seq., applicable state law,
or any other applicable Federal or state laws now in force or hereafter enacted
relating to toxic substances. "Toxic Substance" includes but is not limited to
asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.
"Trademarks Security Agreement" shall mean the Trademarks Security
Agreement in the form attached hereto as Exhibit 2.1(b).
"Transactions" shall have the meaning set forth in Section 5.5(a) hereof.
"Transferee" shall have the meaning set forth in Section 16.3(b) hereof.
"Undrawn Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus (b) the sum of (i) the outstanding amount of Advances plus (ii)
all amounts due and owing to Borrowers' trade creditors which are outstanding
sixty (60) days beyond normal trade terms, plus (iii) fees and expenses for
which Borrowers are liable but which have not been paid or charged to Borrowers'
Account.
"Week" shall mean the time period commencing with the opening of business
on a Monday and ending on the end of business the following Friday.
"Working Capital" at a particular date, shall mean the excess, if any, of
Current Assets over Current Liabilities at such date.
1.3. Uniform Commercial Code Terms. All terms used herein and defined in
the Uniform Commercial Code as adopted in the State of New Jersey shall have the
meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party,
including, without limitation, references to any of the Other Documents, shall
include any and all modifications or amendments thereto and any and all
extensions or renewals thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances to Borrowers in aggregate amounts outstanding at any time equal to such
Lender's Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount less the aggregate amount of outstanding Letters of Credit and
Acceptances or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of Section 2.1(b) hereof
("Receivables Advance Rate"), of Eligible Receivables, plus
(ii) up to the lesser of (A) 55%, subject to the provisions of Section
2.1(b) hereof ("Inventory Advance Rate"), of the value of the Eligible Inventory
or (B) $12,500,000 in the aggregate at any one time, plus
(iii) up to the lesser of (A) 85%, subject to the provisions of Section
2.1(b) hereof ("Lease Advance Rate") of the original equipment cost of the
Leases held for sale (the Receivables Advance Rate, the Inventory Advance Rate
and the Lease Advance Rate shall be referred to collectively as the "Advance
Rates"), or (B) $5,000,000 in the aggregate at any one time, minus
(iv) such reserves as Agent may reasonably deem proper and necessary from
time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i), (ii) and
(iii) minus (y) Section 2.1 (a)(y)(iv) at any time and from time to time shall
be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory note ("Revolving Credit Note") substantially
in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be increased or decreased
by Agent at any time and from time to time in the exercise of its reasonable
discretion. Each Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the reserves may
limit or restrict Advances requested by Borrowing Agent.
2.2. Procedure for Revolving Advances Borrowing. Borrowing Agent on behalf
of any Borrower may notify Agent prior to 11:00 a.m. on a Business Day of a
Borrower's request to incur, on that day, a Revolving Advance hereunder. Should
any amount required to be paid as interest hereunder, or as fees or other
charges under this Agreement or any other agreement with Agent or Lenders, or
with respect to any other Obligation, become due, same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in the amount
required to pay in full such interest, fee, charge or Obligation under this
Agreement or any other agreement with Agent or Lenders, and such request shall
be irrevocable.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers' Account on Agent's books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to the applicable Borrower on the day so requested by way of
credit to such Borrower's operating account at PNC, or such other bank as
Borrowing Agent may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been requested by any Borrower, be disbursed
to Agent to be applied to the outstanding Obligations giving rise to such deemed
request.
2.4. Additional Limitations Regarding Advances Against Eligible Leases.
Advances against Eligible Leases shall be in minimum amounts of not less than
$250,000.
2.5. Maximum Advances. The aggregate balance of Revolving Advances, Letters
of Credit and Acceptances outstanding at any time shall not exceed $20,000,000.
2.6. Repayment of Advances.
(a) The Advances shall be due and payable in full on the last day of the
Term subject to earlier prepayment as herein provided.
(b) Each Borrower recognizes that the amounts evidenced by checks, notes,
drafts or any other items of payment relating to and/or proceeds of Collateral
may not be collectible by Agent on the date received. In consideration of
Agent's agreement to conditionally credit Borrowers' Account as of the Business
Day on which Agent receives those items of payment, each Borrower agrees that,
in computing the charges under this Agreement, all items of payment shall be
deemed applied by Agent on account of the Obligations one (1) Business Day after
the Business Day Agent receives such payments via wire transfer or electronic
depository check. Agent is not, however, required to credit Borrowers' Account
for the amount of any item of payment which is unsatisfactory to Agent and Agent
may charge Borrowers' Account for the amount of any item of payment which is
returned to Agent unpaid.
(c) All payments of principal, interest and other amounts payable
hereunder, or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers'
Account or by making Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and all other amounts payable
hereunder, or under any related agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.
2.7. Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
2.8. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account ("Borrowers' Account") in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers, during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers' specific exceptions thereto within thirty (30)
days after such statement is received by Borrowing Agent. The records of Agent
with respect to the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.
2.9. Letters of Credit and Acceptances. Subject to the terms and conditions
hereof, Agent shall (a) issue or cause the issuance of Letters of Credit
("Letters of Credit") on behalf of any Borrower or (b) accept, or cause to be
accepted Acceptances; provided, however, that Agent will not be required to
issue or cause to be issued any Letters of Credit or accept or cause to be
accepted any Acceptances to the extent that the face amount of such Letters of
Credit and Acceptances would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) outstanding Letters of Credit plus (iii) outstanding
Acceptances to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount. The maximum amount of outstanding Letters of Credit and
Acceptances shall not collectively exceed $7,500,000 in the aggregate at any
time. All disbursements or payments related to Letters of Credit and Acceptances
shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and
shall bear interest at the Revolving Interest Rate for Domestic Rate Loans;
Letters of Credit that have not been drawn upon shall not bear interest.
2.10. Issuance of Letters of Credit; Creation of Acceptances.
(a) Borrowing Agent, on behalf of Borrowers, may request Agent to issue or
cause the issuance of a Letter of Credit by delivering to Agent at the Payment
Office, Agent's form of Letter of Credit Application (the "Letter of Credit
Application") completed to the satisfaction of Agent; and, such other
certificates, documents and other papers and information as Agent may reasonably
request. Borrowing Agent, on behalf of Borrowers, also has the right to give
instructions and make agreements with respect to any application, any applicable
letter of credit and security agreement, any applicable letter of credit
reimbursement agreement and/or any other applicable agreement, any letter of
credit and the disposition of documents, disposition of any unutilized funds,
and to agree with Agent upon any amendment, extension or renewal of any Letter
of Credit.
(b) Each Letter of Credit shall, among other things, (i) provide for the
payment of sight drafts or acceptances of usance drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have an expiry date not later than six (6)
months after such Letter of Credit's date of issuance and in no event later than
the last day of the Term. Each Letter of Credit shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any amendments or revision thereof
adhered to by the Issuer and, to the extent not inconsistent therewith, the laws
of the State of New Jersey.
(c) Agent shall use its reasonable efforts to notify Lenders of the request
by Borrowing Agent for a Letter of Credit or an Acceptance hereunder.
(d) Agent shall have absolute discretion whether to accept any draft.
Without in any way limiting Agent's absolute discretion whether to accept any
draft, Borrowing Agent will not present for acceptance any draft, and Agent will
generally not accept any drafts (i) that arise out of transactions involving the
sale of goods by any Borrower not in the ordinary course of its business, (ii)
that involve a sale to an Affiliate of any Borrower, (iii) that involve any
purchase for which Agent has not received all related documents, instruments and
forms requested by Agent, (iv) for which Agent is unable to locate a purchaser
in the ordinary course of business on standard terms, or (v) that is not
eligible for discounting with Federal Reserve Banks pursuant to paragraph 7 of
Section 13 of the Federal Reserve Act, as amended.
(e) Subject to terms set by Agent from time to time in its discretion with
respect to the acceptance of drafts generally, Borrowing Agent on behalf of any
Borrower may request Acceptances on any Business Day, by delivering to Agent a
request for an Acceptance in substantially the form of Exhibit 2.10 and, upon
demand, copies of all invoices, delivery receipts and related documents relating
to that request that Agent might require. Provided that the request for
Acceptance is received prior to 11:00 a.m. and approved by Agent, Agent shall
make the proceeds of the Acceptance available to the applicable Borrower by
crediting the amount of the Acceptance in lawful money of the United States and
in immediately available funds to the Borrowers' Account.
(f) Borrowers shall pay to Agent the amount of any Acceptance on or before
its maturity date. In addition, Agent is hereby irrevocably authorized, in its
sole discretion, to make Revolving Advances under Section 2.1(a) from time to
time, or to charge any account of Borrowers, to pay any Acceptance for which
payment is due, or at any time after the occurrence of an Event of Default to
fund cash collateral for any outstanding Acceptance.
(g) Each Letter of Credit and Acceptance shall be payable in Dollars or Yen
and shall be in the face amount of at least $100,000. The maturity of each
Acceptance shall be in any 30 day increment equal to or greater than 30 and less
than or equal to 180 days or, if such day is not a Business Day, on the next
succeeding Business Day and, in any event, no later than the day preceding the
expiration of the Term.
2.11. Requirements For Issuance of Letters of Credit and Acceptances.
(a) In connection with the issuance of any Letter of Credit or Acceptance,
Borrowers shall indemnify, save and hold Agent, each Lender and each Issuer
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, any Lender or any Issuer and reasonable
expenses and reasonable attorneys' fees incurred by Agent, any Lender or Issuer
arising out of, or in connection with, any Letter of Credit or Acceptance to be
issued or created for any Borrower. Borrowers shall be bound by Agent's or any
Issuer's regulations and good faith interpretations of any Letter of Credit or
Acceptance issued or created for Borrowers' Account, although this
interpretation may be different from its own; and, neither Agent, nor any
Lender, nor any Issuer nor any of their correspondents shall be liable for any
error, negligence, or mistakes, whether of omission or commission, in following
Borrowing Agent's or any Borrower's instructions or those contained in any
Letter of Credit, Acceptance or of any modifications, amendments or supplements
thereto or in issuing or paying any Letter of Credit or Acceptance, except for
Agent's, any Lender's, any Issuer's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct any Issuer to name the
applicable Borrower as the "Applicant" or "Account Party" of each Letter of
Credit. If Agent is not the Issuer of any Letter of Credit, Borrower shall
authorize and direct the Issuer to deliver to Agent all instruments, documents,
and other writings and property received by the Issuer pursuant to the Letter of
Credit or any Acceptance related thereto and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit, the application therefor or any Acceptance therefor.
(c) In connection with all Letters of Credit and Acceptances issued or
caused to be issued or created by Agent under this Agreement, each Borrower
hereby appoints Agent, or its designee, as its attorney, with full power and
authority (i) to sign and/or endorse such Borrower's name upon any warehouse or
other receipts, letter of credit applications and acceptances; (ii) to sign such
Borrower's name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department ("Customs") in the name of such Borrower or
Agent or Agent's designee, and to sign and deliver to Customs officials powers
of attorney in the name of such Borrower for such purpose; and (iv) to complete
in such Borrower's name or Agent's, or in the name of Agent's designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent nor its attorneys
will be liable for any acts or omissions nor for any error of judgment or
mistakes of fact or law, except for Agent's or its attorney's willful
misconduct. This power, being coupled with an interest, is irrevocable as long
as any Letters of Credit or Acceptances remain outstanding.
(d) Each Lender shall to the extent of the percentage amount equal to the
product of such Lender's Commitment Percentage times the aggregate amount of all
unreimbursed reimbursement obligations arising from disbursements made or
obligations incurred with respect to the Letters of Credit or Acceptances be
deemed to have irrevocably purchased an undivided participation in each such
unreimbursed reimbursement obligation. In the event that at the time a
disbursement is made the unpaid balance of Revolving Advances exceeds or would
exceed, with the making of such disbursement, the lesser of the Maximum
Revolving Advance Amount or the Formula Amount, and such disbursement is not
reimbursed by Borrowers within two (2) Business Days, Agent shall promptly
notify each Lender and upon Agent's demand each Lender shall pay to Agent such
Lender's proportionate share of such unreimbursed disbursement together with
such Lender's proportionate share of Agent's unreimbursed costs and expenses
relating to such unreimbursed disbursement. Upon receipt by Agent of a repayment
from any Borrower of any amount disbursed by Agent for which Agent had already
been reimbursed by Lenders, Agent shall deliver to each Lender that Lender's pro
rata share of such repayment. Each Lender's participation commitment shall
continue until the last to occur of any of the following events: (A) Agent
ceases to be obligated to issue or cause to be issued Letters of Credit or
Acceptances hereunder; (B) no Letter of Credit or Acceptances issued or created
hereunder remains outstanding and uncancelled or (C) all Persons (other than the
applicable Borrower) have been fully reimbursed for all payments made under or
relating to Letters of Credit and Acceptances.
2.12. Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower's failure to perform or comply with its obligations under this
Agreement or any Other Document including, without limitation, any Borrower's
obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' Account as a Revolving Advance under Section 2.1(a) and
added to the Obligations.
2.13. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by Borrowers on account of the
principal of and interest on the Revolving Advances, shall be applied to the
Revolving Advances pro rata according to the applicable Commitment Percentages
of Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by any Borrower on account of principal, interest and
fees shall be made without set off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in Sections
2.13(a) and (b) hereof, commencing with the first Business Day following the
Closing Date, each borrowing of Revolving Advances shall be advanced by Agent
and each payment by any Borrower on account of Revolving Advances shall be
applied first to those Revolving Advances advanced by Agent. On or before 1:00
P.M., New York time, on each Settlement Date commencing with the first
Settlement Date following the Closing Date, Agent and Lenders shall make certain
payments as follows: (I) if the aggregate amount of new Revolving Advances made
by Agent during the preceding Week (if any) exceeds the aggregate amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each Lender shall provide Agent with funds in an amount equal to its
applicable Commitment Percentage of the difference between (w) such Revolving
Advances and (x) such repayments and (II) if the aggregate amount of repayments
applied to outstanding Revolving Advances during such Week exceeds the aggregate
amount of new Revolving Advances made during such Week, then Agent shall provide
each Lender with funds in an amount equal to its applicable Commitment
Percentage of the difference between (y) such repayments and (z) such Revolving
Advances.
(ii) Each Lender shall be entitled to earn interest at the applicable
Revolving Interest Rate on outstanding Advances which it has funded.
(iii) Promptly following each Settlement Date, Agent shall submit to each
Lender a certificate with respect to payments received and Advances made during
the Week immediately preceding such Settlement Date. Such certificate of Agent
shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefited Lender") shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender's
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender's Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of Lenders; provided, however, that if
all or any portion of such excess payment or benefits is thereafter recovered
from such benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Each Lender so purchasing a portion of another Lender's Advances may
exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
(e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowers of its receipt of any such notice from a Lender.
If such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times (iii)
the number of days from and including such Settlement Date to the date on which
such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(e) shall be conclusive, in the absence of manifest error. If such amount is not
in fact made available to Agent by such Lender within three (3) Business Days
after such Settlement Date, Agent shall be entitled to recover such an amount,
with interest thereon at the rate per annum then applicable to such Revolving
Advances hereunder, on demand from Borrowers; provided, however, that Agent's
right to such recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.14. Mandatory Prepayments. When any Borrower sells or otherwise disposes
of any Collateral other than Inventory in the ordinary course of business,
Borrowers shall repay the Advances in an amount equal to the net proceeds of
such sale (i.e., gross proceeds less the reasonable costs of such sales or other
dispositions), such repayments to be made promptly but in no event more than one
(1) Business Day following receipt of such net proceeds, and until the date of
payment, such proceeds shall be held in trust for Agent. The foregoing shall not
be deemed to be implied consent to any such sale otherwise prohibited by the
terms and conditions hereof.
2.15. Use of Proceeds. Borrowers shall apply the proceeds of Advances to
(a) repay existing indebtedness, (b) pay fees and expenses relating to this
transaction, (c) to provide for their working capital and letter of credit
needs; and (d) provide short term equipment lease warehouse financing to HAPL in
an aggregate amount not to exceed $5,000,000.
2.16. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained herein, in the event
any Lender (x) has refused (which refusal constitutes a breach by such Lender of
its obligations under this Agreement) to make available its portion of any
Advance or (y) notifies either Agent or Borrowing Agent that it does not intend
to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a "Lender Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.16 while such Lender Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders (the "Non-Defaulting
Lenders") which are not Defaulting Lenders based on their respective Commitment
Percentages, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender pro rata based on the aggregate of the outstanding Advances of that type
of all Lenders at the time of such application; provided, that, such amount
shall not be applied to any Advances of a Defaulting Lender at any time when,
and to the extent that, the aggregate amount of Advances of any Non-Defaulting
Lender exceeds such Non-Defaulting Lender's Commitment Percentage of all
Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give instructions to Agent
or to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
(d) Other than as expressly set forth in this Section 2.16, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this Section
2.16 shall be deemed to release any Defaulting Lender from its obligations under
this Agreement and the Other Documents, shall alter such obligations, shall
operate as a waiver of any default by such Defaulting Lender hereunder, or shall
prejudice any rights which any Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such Defaulting Lender
hereunder.
(e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the last
day of each month with respect to Domestic Rate Loans. Interest charges shall be
computed on the actual principal amount of Advances outstanding during the month
(the "Monthly Advances") at a rate per annum equal to with respect to Revolving
Advances, the applicable Revolving Interest Rate. Whenever, subsequent to the
date of this Agreement, the Base Rate is increased or decreased, the Revolving
Interest Rate for Domestic Rate Loans shall be similarly changed without notice
or demand of any kind by an amount equal to the amount of such change in the
Base Rate during the time such change or changes remain in effect. Upon and
after the occurrence of an Event of Default, and during the continuation
thereof, the Obligations shall bear interest at the Revolving Interest Rate for
Domestic Loans plus two (2%) percent per annum (the "Default Rate"). All
interest shall be calculated on the daily outstanding on a 360 day/year for
actual number of days allows.
3.2. Letter of Credit and Acceptance Fees.
(a) Borrowers shall pay (x) to Agent, for the benefit of Lenders, fees for
each Letter of Credit for the period from and excluding the date of issuance of
same to and including the date of expiration or termination, equal to the
average daily face amount of each outstanding Letter of Credit multiplied by
one-half of one percent (.50%) and fees for each Acceptance for the period from
and excluding the date of creation of same to and including the date of
expiration or termination, equal to the average daily face amount of each
outstanding Acceptance multiplied by one and one-half percent (1.50%) per annum,
such fees to be calculated on the basis of a 360-day year for the actual number
of days elapsed and to be payable monthly in arrears on the first day of each
month and on the last day of the Term and (y) to the Issuer, any and all fees
and expenses as agreed upon by the Issuer and the Borrowing Agent in connection
with any Letter of Credit, including, without limitation, in connection with the
opening, amendment or renewal of any such Letter of Credit and any acceptances
created thereunder and shall reimburse Agent for any and all fees and expenses,
if any, paid by Agent to the Issuer (all of the foregoing fees, the "Letter of
Credit and Acceptance Fees"). All such charges shall be deemed earned in full on
the date when the same are due and payable hereunder and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason. Any
such charge in effect at the time of a particular transaction shall be the
charge for that transaction, notwithstanding any subsequent change in the
Issuer's prevailing charges for that type of transaction. All Letter of Credit
Fees and Acceptance Fees payable hereunder shall be deemed earned in full on the
date when the same are due and payable hereunder and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
3.3. (a) Closing Fee. Upon the execution of this Agreement, Borrowers shall
pay to Agent a closing fee of $250,000 less that portion of the deposit fee of
$75,000 heretofore paid by Borrowers to Agent remaining after application of
such fee to out of pocket expenses.
(b) Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the sum of Revolving Advances and outstanding Letters of
Credit and Acceptances for each day of such month does not equal the Maximum
Loan Amount, then Borrowers shall pay to Agent for the ratable benefit of
Lenders a fee at a rate equal to one half of one percent (.50%) per annum on the
amount by which the Maximum Loan Amount exceeds such average daily unpaid
balance. Such fee shall be payable to Agent in arrears on the last day of each
month.
3.4. (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral
evaluation fee equal to $2,000 per month commencing on the first day of the
month following the Closing Date and on the first day of each month thereafter
during the Term. The collateral evaluation fee shall be deemed earned in full on
the date when same is due and payable hereunder and shall not be subject to
rebate or proration upon termination of this Agreement for any reason.
(b) Collateral Monitoring Fee. Borrowers shall pay to Agent on the first
day of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and which monitoring
is undertaken by Agent or for Agent's benefit - a collateral monitoring fee in
an amount equal to $675 per day for each person, plus all costs and
disbursements incurred by Agent in the performance of such examination or
analysis.
3.5. Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.7, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) and the office or branch where Agent or
any Lender (as so defined) makes or maintains any Eurodollar Rate Loan with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender or the London interbank Eurodollar market
any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or
any Lender of making, renewing or maintaining its Advances hereunder by an
amount that Agent or such Lender deems to be material or to reduce the amount of
any payment (whether of principal, interest or otherwise) in respect of any of
the Advances by an amount that Agent or such Lender deems to be material, then,
in any case Borrowers shall promptly pay Agent or such Lender, upon its demand,
such additional amount as will compensate Agent or such Lender for such
additional cost or such reduction, as the case may be. Agent or such Lender
shall certify the amount of such additional cost or reduced amount to Borrowers,
and such certification shall be conclusive absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations under this Agreement and
the Other Documents, each Borrower hereby assigns, pledges and grants to Agent
for the ratable benefit of each Lender a continuing security interest in and to
all of its Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. Each Borrower shall xxxx its books and records
as may be necessary or appropriate to evidence, protect and perfect Agent's
security interest and shall cause its financial statements to reflect such
security interest.
4.2. Perfection of Security Interest. Each Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent's security interest in the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments of assignment
as Agent may specify, and stamping or marking, in such manner as Agent may
specify, any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements satisfactory
to Agent, and (v) executing and delivering financing statements, instruments of
pledge, mortgages, notices and assignments, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent's security interest under the Uniform
Commercial Code or other applicable law. Agent is hereby authorized to file
financing statements signed by Agent instead of Borrower in accordance with
Section 9-402(2) of Uniform Commercial Code as adopted in the State of New
Jersey. All charges, expenses and fees Agent may incur in doing any of the
foregoing, and any local taxes relating thereto, shall be charged to Borrowers'
Account as a Revolving Advance under Section 2.1(a) of a Domestic Rate Loan and
added to the Obligations, or, at Agent's option, shall be paid to Agent for the
ratable benefit of Lenders immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and protect
all Collateral for Agent's general account and make no disposition thereof
whether by sale, lease or otherwise except: (a) the sale of Inventory in the
ordinary course of business, (b) the sale by HAPL of leases and Equipment in the
ordinary course of business. The Agent shall release its lien and security
interest in the leases and Equipment of HAPL upon (i) their sale as set forth
above in Subsection (b) and (ii) upon payment to the Agent of the proceeds
arising out of their sale, and (c) obsolete Inventory not to exceed $300,000 per
annum.
4.4. Preservation of Collateral. In addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent's interest in and to preserve the
Collateral, including the hiring of such security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of any Borrower's premises a custodian who shall have full
authority to do all acts necessary to protect Agent's interests in the
Collateral; (c) may lease warehouse facilities to which Agent may move all or
part of the Collateral; (d) may use any Borrower's owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Each Borrower shall
cooperate fully with all of Agent's efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent's
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Borrowers' Account as a Revolving
Advance of a Domestic Rate Loan and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at the time
the Collateral becomes subject to Agent's security interest: (a) each Borrower
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority security interest in each and every item of
the its respective Collateral to Agent; and, except for Permitted Encumbrances
the Collateral shall be free and clear of all Liens and encumbrances whatsoever;
(b) each document and agreement executed by each Borrower or delivered to Agent
or any Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of each Borrower that appear on
such documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) each Borrower's Equipment and Inventory shall
be located as set forth on Schedule 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except with respect to
the sale of Inventory and the sale or assignment by HAPL of leases and Equipment
in the ordinary course of business.
4.6. Defense of Agent's and Lenders' Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent's interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent's prior written
consent, pledge, sell (except Inventory and leases and Equipment by HAPL in the
ordinary course of business), assign, transfer, create or suffer to exist a Lien
upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Each Borrower shall defend
Agent's interests in the Collateral against any and all Persons whatsoever. At
any time following demand by Agent for payment of all Obligations, Agent shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including without limitation:
labels, stationery, documents, instruments and advertising materials. If Agent
exercises this right to take possession of the Collateral, Borrowers shall, upon
demand, assemble it in the best manner possible and make it available to Agent
at a place reasonably convenient to Agent. In addition, with respect to all
Collateral, Agent and Lenders shall be entitled to all of the rights and
remedies set forth herein and further provided by the Uniform Commercial Code or
other applicable law. Each Borrower shall, and Agent may, on Default, instruct
all suppliers, carriers, forwarders, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver same to Agent and/or subject to Agent's order and
if they shall come into any Borrower's possession, they, and each of them, shall
be held by such Borrower in trust as Agent's trustee, and such Borrower will
immediately deliver them to Agent in their original form together with any
necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
any Borrower's financial statements, trial balances or other accounting records
of any sort in the accountant's or auditor's possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower's financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise; however, Agent and each Lender will attempt
to obtain such information or materials directly from such Borrower prior to
obtaining such information or materials from such accountants or such
authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to its respective Collateral or any part thereof or to the
operation of such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on such Borrower. The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and each Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may enter upon any of
Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk of any loss of any
nature whatsoever with respect to the Collateral. At each Borrower's own cost
and expense in amounts and with carriers reasonably acceptable to Agent, each
Borrower shall (a) keep all its insurable properties and properties in which
each Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in the case of companies
engaged in businesses similar to such Borrower's including, without limitation,
business interruption insurance;, (b) maintain a bond in such amounts as is
customary in the case of companies engaged in businesses similar to such
Borrower insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of such
Borrower either directly or through authority to draw upon such funds or to
direct generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which such Borrower is engaged in business; (e) furnish Agent with (i) copies of
all policies and evidence of the maintenance of such policies by the renewal
thereof at least thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a), and (c)
above, and providing (A) that all proceeds thereunder shall be payable to Agent,
(B) no such insurance shall be affected by any act or neglect of the insured or
owner of the property described in such policy, and (C) that such policy and
loss payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and the
applicable Borrower to make payment for such loss to Agent and not to such
Borrower and Agent jointly. If any insurance losses are paid by check, draft or
other instrument payable to any Borrower and Agent jointly, Agent may endorse
such Borrower's name thereon and do such other things as Agent may deem
advisable to reduce the same to cash. Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a), and (c)
above. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations, in such order as Agent in its sole discretion shall
determine. Any surplus shall be paid by Agent to Borrowers or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Borrowers to
Agent, on demand.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain insurance
as hereinabove provided, or to keep the same in force, Agent, if Agent so
elects, may obtain such insurance and pay the premium therefor on behalf of
Borrower, and charge Borrowers' Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Borrower or
any of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any tax by any governmental
authority is or may be imposed on or as a result of any transaction between any
Borrower and Agent or any Lender which Agent or any Lender may be required to
withhold or pay or if any taxes, assessments, or other Charges remain unpaid
after the date fixed for their payment, or if any claim shall be made which, in
Agent's or any Lender's opinion, may possibly create a valid Lien on the
Collateral, Agent may without notice to Borrowers pay the taxes, assessments or
other Charges and each Borrower hereby indemnifies and holds Agent and each
Lender harmless in respect thereof. Agent will not pay any taxes, assessments or
Charges to the extent that any Borrower has contested or disputed those taxes,
assessments or Charges in good faith, by expeditious protest, administrative or
judicial appeal or similar proceeding provided that any related tax lien is
stayed and sufficient reserves are established to the reasonable satisfaction of
Agent to protect Agent's security interest in or Lien on the Collateral. The
amount of any payment by Agent under this Section 4.13 shall be charged to
Borrowers' Account as a Revolving Advance and added to the Obligations and,
until Borrowers shall furnish Agent with an indemnity therefor (or supply Agent
with evidence satisfactory to Agent that due provision for the payment thereof
has been made), Agent may hold without interest any balance standing to
Borrowers' credit and Agent shall retain its security interest in any and all
Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect (unless Borrower in
the exercise of its business judgment decides that it is not in Borrower's best
interest to keep a lease in full force and effect, provided that the Agent has
received an executed Landlord's Subordination Agreement with respect to such
lease) and, at Agent's request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables shall be a bona fide and
valid account representing a bona fide indebtedness incurred by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach hereof) with respect to an absolute sale or lease and delivery of goods
upon stated terms of a Borrower, or work, labor or services theretofore rendered
by a Borrower as of the date each Receivable is created. Same shall be due and
owing in accordance with the applicable Borrower's standard terms of sale
without dispute, setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the best of each Borrower's
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Customer is obligated in full when due
or with respect to such Customers of any Borrower who are not solvent such
Borrower has set up on its books and in its financial records bad debt reserves
adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's chief executive office is
located at the addresses set forth on Schedule 4.15(c) hereto. Until written
notice is given to Agent by Borrowing Agent of any other office at which any
Borrower keeps its records pertaining to Receivables, all such records shall be
kept at such executive office.
(d) Collection of Receivables. Until any Borrower's authority to do so is
terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so), each Borrower
will, at such Borrower's sole cost and expense, but on Agent's behalf and for
Agent's account, collect as Agent's property and in trust for Agent all amounts
received on Receivables, and shall not commingle such collections with any
Borrower's funds or use the same except to pay Obligations. Each Borrower shall,
upon request, deliver to Agent, or deposit in the Blocked Account, in original
form and on the date of receipt thereof, all checks, drafts, notes, money
orders, acceptances, cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At any time Agent shall have
the right to send notice of the assignment of, and Agent's security interest in,
the Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall have the sole
right to collect the Receivables, take possession of the Collateral, or both.
Agent's actual collection expenses, including, but not limited to, stationery
and postage, telephone and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be charged to
Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf. Agent shall have the right
to receive, endorse, assign and/or deliver in the name of Agent or any Borrower
any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent's designee as such Borrower's
attorney with power (i) to endorse such Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or xxxx of lading
relating to any of the Receivables, drafts against Customers, assignments and
verifications of Receivables; (iii) to send verifications of Receivables to any
Customer; (iv) to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent's interest in the Collateral and to file
same; (v) to demand payment of the Receivables; (vi) to enforce payment of the
Receivables by legal proceedings or otherwise; (vii) to exercise all of
Borrowers' rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) to settle, adjust, compromise, extend or renew
the Receivables; (ix) to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) to prepare, file and sign such Borrower's
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) to prepare, file and sign such Borrower's name on any notice of Lien,
assignment or satisfaction of Lien or similar document in connection with the
Receivables; and (xii) to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross (not mere) negligence; this power
being coupled with an interest is irrevocable while any of the Obligations
remain unpaid. Agent shall have the right at any time to change the address for
delivery of mail addressed to any Borrower to such address as Agent may
designate and to receive and open and return all mail addressed to any Borrower.
(g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Receivables or any instrument received in payment thereof, or for
any damage resulting therefrom. Following the occurrence of an Event of Default
or Default Agent may, without notice or consent from any Borrower, xxx upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit or upon any terms any of the Receivables or any other securities,
instruments or insurance applicable thereto and/or release any obligor thereof.
Agent is authorized and empowered to accept the return of the goods represented
by any of the Receivables, without notice to or consent by any Borrower, all
without discharging or in any way affecting any Borrower's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion Account. All proceeds of
Collateral shall, at the direction of Agent, be deposited by Borrowers into a
lockbox account, dominion account or such other "blocked account" ("Blocked
Accounts") as Agent may require pursuant to an arrangement with such bank as may
be selected by Borrowers and be acceptable to Agent. Borrowers shall issue to
any such bank, an irrevocable letter of instruction directing said bank to
transfer such funds so deposited to Agent, either to any account maintained by
Agent at said bank or by wire transfer to appropriate account(s) of Agent. All
funds deposited in such "blocked account" shall immediately become the property
of Agent and Borrowers shall obtain the agreement by such bank to waive any
offset rights against the funds so deposited. Neither Agent nor any Lender
assumes any responsibility for such "blocked account" arrangement, including
without limitation, any claim of accord and satisfaction or release with respect
to deposits accepted by any bank thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent at a bank or
banks for the deposit of such funds and Borrowers shall deposit all proceeds of
Collateral or cause same to be deposited, in kind, in such Depository Accounts
of Agent in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without Agent's consent, compromise or
adjust any material amount of the Receivables (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of such Borrower.
4.16. Inventory. To the extent Inventory held for sale or lease has been
produced by any Borrower, it has been and will be produced by such Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as amended, and
all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved,
except if Borrower in its exercise of its business judgment determines that such
replacements and repairs thereto should not be made. No Borrower shall use or
operate the Equipment in violation of any law, statute, ordinance, code, rule or
regulation.
4.18. Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Borrower's agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. Neither
Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, assume any of any Borrower's obligations under any contract or
agreement assigned to Agent or such Lender, and neither Agent nor any Lender
shall be responsible in any way for the performance by any Borrower of any of
the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure that the Real
Property remains in compliance with all Environmental Laws and they shall not
place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.
(b) Borrowers shall establish and maintain a system to assure and monitor
continued compliance with all applicable Environmental Laws which system shall
include periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with the use of the Real
Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a "Hazardous Discharge") or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower's interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the "Authority"), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow Agent to protect its security interest in the Real Property
and is not intended to create nor shall it create any obligation upon Agent or
any Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Borrower
to dispose of Hazardous Substances and shall continue to forward copies of
correspondence between any Borrower and the Authority regarding such claims to
Agent until the claim is settled. Borrowers shall promptly forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property that any Borrower is required to file under any Environmental Laws.
Such information is to be provided solely to allow Agent to protect Agent's
security interest in the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Borrower shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Borrower shall fail to comply with
any of the requirements of any Environmental Laws, Agent on behalf of Lenders
may, but without the obligation to do so, for the sole purpose of protecting
Agent's interest in Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent from time to time, Borrowers
shall provide Agent, at Borrowers' expense, with an environmental site
assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean up of such Hazardous
Discharge shall be acceptable to Agent. If such estimates, individually or in
the aggregate, exceed $100,000, Agent shall have the right to require Borrowers
to post a bond, letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including reasonable attorney's fees, suffered or incurred by
Agent or Lenders under or on account of any Environmental Laws, including,
without limitation, the assertion of any Lien thereunder, with respect to any
Hazardous Discharge, the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss, liability, damage
and expense is attributable to any Hazardous Discharge resulting from actions on
the part of Agent or any Lender. Borrowers' obligations under this Section 4.19
shall arise upon the discovery of the presence of any Hazardous Substances at
the Real Property, whether or not any federal, state, or local environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances. Borrowers' obligation and the indemnifications hereunder
shall survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all references to Real Property
shall be deemed to include all of Borrowers' right, title and interest in and to
its owned and leased premises.
4.20. Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule 1.2, no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all its
respective Obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws, certificate of incorporation or
other applicable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification. (a) Each Borrower is duly incorporated
and in good standing under the laws of the state listed on Schedule 5.2(a) and
is qualified to do business and is in good standing in the states listed on
Schedule 5.2(a) which constitute all states in which qualification and good
standing are necessary for such Borrower to conduct its business and own its
property and where the failure to so qualify could reasonably be expected to
have a Material Adverse Effect on such Borrower. Each Borrower has delivered to
Agent true and complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are listed on Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
5.4. Tax Returns. Each Borrower's federal tax identification number is set
forth on Schedule 5.4. Each Borrower has filed all federal, state and local tax
returns and other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are due and payable
or has made adequate reserves for the payment of such taxes. Federal, state and
local income tax returns of each Borrower have been examined and reported upon
by the appropriate taxing authority or closed by applicable statute and
satisfied for all fiscal years prior to and including the fiscal year ending
January 31, 1999. The provision for taxes on the books of each Borrower are
adequate for all years not closed by applicable statutes, and for its current
fiscal year, and no Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The twelve-month cash flow projections of the Borrowers on a
consolidated basis and their projected balance sheets as of the Closing Date,
copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections") were
prepared by the Chief Financial Officer of the Borrowers, are based on
underlying assumptions which provide a reasonable basis for the projections
contained therein and reflect Borrowers' judgment based on present circumstances
of the most likely set of conditions and course of action for the projected
period. The cash flow Projections together with the Pro Forma Balance Sheet, are
referred to as the "Pro Forma Financial Statements".
(b) The consolidated and consolidating balance sheets of the Borrowers, and
such other Persons described therein as of July 31, 1999 and the related
statements of income, changes in stockholder's equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application in which such
accountants concur and present fairly the financial position of the Borrowers at
such date and the results of their operations for such period. Since July 31,
1999 there has been no change in the condition, financial or otherwise, of
Borrowers as shown on the consolidated balance sheet as of such date and no
change in the aggregate value of machinery, equipment and Real Property owned by
Borrowers, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5.6. Corporate Name. No Borrower has been known by any other corporate name
in the past five years and does not sell Inventory under any other name except
as set forth on Schedule 5.6, nor has any Borrower been the surviving
corporation of a merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years, except as set
forth on Schedule 5.6a.
5.7. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its facilities, business,
assets, property, leaseholds and Equipment are in compliance in all material
respects with, the provisions of the Federal Occupational Safety and Health Act,
the Environmental Protection Act, RCRA and all other Environmental Laws; there
have been no outstanding citations, notices or orders of non-compliance issued
to any Borrower or relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations.
(b) Each Borrower has been issued all required federal, state and local
licenses, certificates or permits relating to all applicable Environmental Laws.
(c) (i) There are no visible signs of releases, spills, discharges, leaks
or disposal (collectively referred to as "Releases") of Hazardous Substances at,
upon, under or within any Real Property; (ii) there are no underground storage
tanks or polychlorinated biphenyls on the Real Property; (iii) ]the Real
Property has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property, excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or Default.
(a) After giving effect to the Transactions, Borrowers are and shall remain
solvent, able to pay their debts as they mature, have capital sufficient to
carry on their business and all businesses in which they are about to engage,
and (i) as of the Closing Date, the fair present saleable value of their assets,
calculated on a going concern basis, is in excess of the amount of their
liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
their assets (calculated on a going concern basis) will be in excess of the
amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no Borrower has (i) any pending
or, to the best of Borrower's knowledge, threatened litigation, arbitration,
actions or proceedings which involve the possibility of having a Material
Adverse Effect on such Borrower, and (ii) any liabilities nor indebtedness for
borrowed money other than the Obligations.
(c) No Borrower is in violation of any applicable statute, regulation or
ordinance in any respect which could reasonably be expected to have a Material
Adverse Effect on such Borrower, nor is any Borrower in violation of any order
of any court, governmental authority or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled Group maintains or
contributes to any Plan other than those listed on Schedule 5.8(d) hereto.
Except as set forth in Schedule 5.8(d), (i) no Plan has incurred any
"accumulated funding deficiency," as defined in Section 302(a)(2) of ERISA and
Section 412(a) of the Code, whether or not waived, and each Borrower and each
member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) no
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) at this time, the current value of the assets
of each Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the Controlled Group
knows of any facts or circumstances which would materially and adversely change
the value of such assets and accrued benefits and other liabilities, (vi) no
Borrower nor any member of the Controlled Group has breached any of the
responsibilities, obligations or duties imposed on it by ERISA with respect to
any Plan, (vii) no Borrower nor any member of a Controlled Group has incurred
any liability for any excise tax arising under Section 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability, (viii) no
Borrower nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which
would constitute or result in a Termination Event with respect to any such Plan
which is subject to ERISA, (ix) each Borrower and each member of the Controlled
Group has made all contributions due and payable with respect to each Plan, (x)
there exists no event described in Section 4043(b) of ERISA, for which the
thirty (30) day notice period contained in 29 CFR `2615.3 has not been waived,
(xi) no Borrower nor any member of the Controlled Group has any fiduciary
responsibility for investments with respect to any plan existing for the benefit
of persons other than employees or former employees of any Borrower and any
member of the Controlled Group, and (xii) no Borrower nor any member of the
Controlled Group has withdrawn, completely or partially, from any Multiemployer
Plan so as to incur liability under the Multiemployer Pension Plan Amendments
Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, copyrights, copyright applications, design rights, trade names,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are valid and have been duly registered or filed with
all appropriate governmental authorities and constitute all of the intellectual
property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such material
patent, trademark, copyright, design right, trade name, trade secret or license
and no Borrower is aware of any grounds for any challenge, except as set forth
in Schedule 5.9 hereto. Each patent, patent application, patent license,
trademark, trademark application, trademark license, service xxxx, service xxxx
application, service xxxx license, copyright, copyright application and
copyright license owned or held by any Borrower and all trade secrets used by
any Borrower consist of original material or property developed by such Borrower
or was lawfully acquired by such Borrower from the proper and lawful owner
thereof. Each of such items has been maintained so as to preserve the value
thereof from the date of creation or acquisition thereof. With respect to all
software used by any Borrower, such Borrower is in possession of all source and
object codes related to each piece of software or is the beneficiary of a source
code escrow agreement, each such source code escrow agreement being listed on
Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state,
provincial or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect on such Borrower.
5.11. Default of Indebtedness. Except as set forth in Schedule 5.11 hereto,
no Borrower is in default in the payment of the principal of or interest on any
Indebtedness or under any instrument or agreement under or subject to which any
Indebtedness has been issued and no event has occurred under the provisions of
any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default
thereunder.
5.12. No Default. No Borrower is in default in the payment or performance
of any of its contractual obligations and no Default has occurred which has
caused the acceleration of the obligations.
5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could reasonably be expected to have a
Material Adverse Effect on such Borrower. No Borrower has agreed or consented to
cause or permit in the future (upon the happening of a contingency or otherwise)
any of its property, whether now owned or hereafter acquired, to be subject to a
Lien which is not a Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Borrower's
employees threatened or in existence and no labor contract is scheduled to
expire during the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U or
Regulation G of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for "purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.
5.17. Disclosure. No representation or warranty made by any Borrower in
this or in any financial statement, report, certificate or any other document
furnished in connection herewith contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading. There is no fact known to Borrowers or which
reasonably should be known to Borrowers which Borrowers have not disclosed to
Agent in writing with respect to the transactions contemplated by this Agreement
which could reasonably be expected to have a Material Adverse Effect on any
Borrower.
5.18 Section 20 Subsidiaries. The Borrower does not intend to use and shall
not use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during any underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
5.19. Swaps. No Borrower is a party to, nor will it be a party to, any swap
agreement whereby such Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
5.21. Application of Certain Laws and Regulations. No Borrower nor any
Affiliate of any Borrower is subject to any statute, rule or regulation which
regulates the incurrence of any Indebtedness, including without limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone, telegraph or other public utility
services.
5.22 Business and Property of Borrower. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than continuing to act
as a single source provider of electronic computer-controlled embroidery
machinery and related value added products and services and retail sales of
embroidery services, and activities necessary to conduct the foregoing. On the
Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.
5.23. Year 2000. The Borrowers and their Subsidiaries have reviewed the
areas within their business and operations which could be materially and
adversely affected by, and have developed or are developing a program to address
on a timely basis, the risk that certain computer applications used by the
Borrowers or their Subsidiaries (or any of their respective material suppliers,
customers or vendors) may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). The Year 2000 Problem will not have Material Adverse
Effect.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers' Account for all such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets. (a)
Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, trade names, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Borrower except
that SEWING, HJ, HOMETOWN, SEDECO and CONNECTION, may be dissolved and
liquidated or merged into another Borrower, provided that their assets are
transferred to the other Borrowers; and (c) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any political
subdivision thereof where the failure to do so could reasonably be expected to
have a Material Adverse Effect on such Borrower.
6.3. Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect on any Borrower.
6.4. Government Receivables. Take all steps necessary to protect Agent's
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the United States,
any state or any department, agency or instrumentality of any of them.
6.5. Minimum Stockholders Equity. Maintain at all times a Stockholders
Equity, to be tested on a quarterly basis, of not less than: $65,500,000 for the
fiscal quarter ending October, 31, 1999, $64,500,000 for the fiscal quarter
ending January 31, 2000, $64,500,000 for the fiscal quarter ending April 30,
2000,; and for each fiscal quarter thereafter, Stockholders Equity may not be
less than the Stockholders Equity for the immediately preceding quarter.
6.6. Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.
6.7. Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such reserves as Agent may
reasonably deem proper and necessary, subject at all times to any applicable
subordination arrangement in favor of Lenders.
6.8. Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the Obligations and
termination of this Agreement:
7.1. Merger, Consolidation, Acquisition, Joint Venture and Sale of Assets.
(a) Enter into any merger, consolidation, joint venture or other
reorganization with or into any other Person or acquire all or a substantial
portion of the assets or stock of any Person or permit any other Person to
consolidate with or merge with it, except for acquisitions and joint ventures
not to exceed $200,000 per fiscal quarter except for mergers into themselves.
(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except in the ordinary course of its business, and except that (i) HAPL
may sell leases on a recourse and non-recourse basis and Inventory and Equipment
in the ordinary course of business, (ii) Borrower may sell or otherwise dispose
of assets no longer useful in the conduct of its business up to $250,000 per
annum, and (iii) HAPL may lease Equipment in the ordinary course of its
business.
7.2. Creation of Liens. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
7.3. Guarantees. Except as set forth on Schedule 7.3 hereto, become liable
upon the obligations of any Person by assumption, endorsement or guaranty
thereof or otherwise (other than to Lenders) except the endorsement of checks in
the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or stock of, or any other
interest in, any Person, except (a) obligations issued or guaranteed by the
United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers'
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
7.5. Loans. Make advances, loans or extensions of credit to any Person,
including without limitation, any Parent, Subsidiary or Affiliate except with
respect to (a) the extension of commercial trade credit in connection with the
sale of Inventory in the ordinary course of its business and (b) loans to its
employees in the ordinary course of business not to exceed the aggregate amount
of $200,000 at any time outstanding.
7.6. Capital Expenditures. Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases) in any
fiscal year in an amount in excess of $750,000.
7.7. Dividends. Declare, pay or make any cash dividend or distribution on
any shares of the common stock or preferred stock of any Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of any Borrower, except that common and/or preferred stock of Borrower may
be redeemed provided the cost to the Borrower of such redemption does not exceed
$200,000 per fiscal quarter.
7.8. Indebtedness. Except as set forth on Schedule 5.8 attached hereto,
create, incur, assume or suffer to exist any Indebtedness (exclusive of trade
debt) except in respect of Indebtedness to Lenders hereunder.
7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary course of business for assets or property which are useful in,
necessary for and are to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, any Affiliate, except transactions disclosed in the
ordinary course of business, on an arm's length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $1,500,000 in any one fiscal year (exclusive of any rent
required to replace Borrower's Hauppauge, N.Y. or Fort Worth, TX premises, if
sold).
7.12. Subsidiaries.
(a) Form any Subsidiary unless (i) such Subsidiary expressly joins in this
Agreement as a borrower and becomes jointly and severally liable for the
obligations of Borrowers hereunder, under the Note, and under any other
agreement between any Borrower and Lenders and (ii) Agent shall have received
all documents, including legal opinions, it may reasonably require to establish
compliance with each of the foregoing conditions.
(b) Enter into any partnership, joint venture or similar arrangement
(except as permitted by Section 7.1 hereto).
7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
ending January 31 or make any significant change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any Lender's
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower's business as conducted
on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, Bylaws. Amend, modify or
waive any term or material provision of its Articles of Incorporation or Bylaws
provided, however, the Agent shall receive notice of such amendment with copies
thereof within ten (10) days after the effective date of such amendment.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or indirectly,
prepay any Indebtedness (other than to Lenders), or repurchase, redeem, retire
or otherwise acquire any Indebtedness of any Borrower except that the Borrower
may prepay its mortgage obligation to Chase with respect to its property located
in Happauggue, NY.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Lenders, immediately prior to or concurrently with
the making of such Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Note duly executed and delivered by
an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement, any related agreement or under law or reasonably requested by
the Agent to be filed, registered or recorded in order to create, in favor of
Agent, a perfected security interest in or lien upon the Collateral shall have
been properly filed, registered or recorded in each jurisdiction in which the
filing, registration or recordation thereof is so required or requested;
(c) Corporate Proceedings of Borrowers. Agent shall have received a copy of
the resolutions in form and substance reasonably satisfactory to Agent, of the
Board of Directors of each Borrower authorizing (i) the execution, delivery and
performance of this Agreement, the Note, and any other related agreements
(collectively the "Documents") and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case certified by
the Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
(d) Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation of each Borrower, and all amendments thereto,
certified by the Secretary of State or other appropriate official of its
jurisdiction of incorporation together with copies of the Bylaws of each
Borrower and all agreements of each Borrower's shareholders certified as
accurate and complete by the Secretary of each Borrower;
(f) Good Standing Certificates. Agent shall have received good standing
certificates for each Borrower, issued by the Secretary of State or other
appropriate official of each Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of each Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinion. Agent shall have received executed legal opinions in
form and substance satisfactory to Agent which shall cover such matters incident
to the transactions contemplated by this Agreement, the Note, and related
agreements as Agent may reasonably require and each Borrower hereby authorizes
and directs such counsel to deliver such opinions to Agent and Lenders;
(h) No Litigation. (i) No litigation, investigation or proceeding before or
by any arbitrator or Governmental Body shall be continuing or threatened against
any Borrower or against the officers or directors of any Borrower (A) in
connection with the Other Documents or any of the transactions contemplated
thereby and which, in the reasonable opinion of Agent, is deemed material or (B)
which could, in the reasonable opinion of Agent, have a Material Adverse Effect;
and (ii) no injunction, writ, restraining order or other order of any nature
materially adverse to any Borrower or the conduct of its business or
inconsistent with the due consummation of the Transactions shall have been
issued by any Governmental Body;
(i) Financial Condition Certificates. Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(i).
(j) Collateral Examination. Agent shall have completed Collateral
examinations and received appraisals, the results of which shall be satisfactory
in form and substance to Lenders, of the Receivables, Inventory, General
Intangibles, and Equipment of each Borrower and all books and records in
connection therewith;
(k) Fees. Agent shall have received all fees payable to Agent and Lenders
on or prior to the Closing Date pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have received a copy of the
Pro Forma Financial Statements which shall be satisfactory in all respects to
Lenders;
(m) Insurance. Agent shall have received in form and substance satisfactory
to Agent, certified copies of Borrowers' casualty insurance policies, together
with loss payable endorsements on Agent's standard form of loss payee
endorsement naming Agent as loss payee, and certified copies of Borrowers'
liability insurance policies, together with endorsements naming Agent as a
co-insured;
(n) Payment Instructions. Agent shall have received written instructions
from Borrowers directing the application of proceeds of the initial Advances
made pursuant to this Agreement;
(o) Blocked Accounts. Agent shall have received duly executed agreements
establishing the Blocked Accounts or Depository Accounts with financial
institutions acceptable to Agent for the collection or servicing of the
Receivables and proceeds of the Collateral;
(p) Consents. Agent shall have received any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;
(q) No Adverse Material Change. (i) since January 31, 1999, there shall not
have occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent shall have been proven to be inaccurate or
misleading in any material respect;
(r) Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements satisfactory to Agent with respect to all premises
leased by Borrowers at which Inventory is located and for which Advances are
being made;
(s) Other Documents. Agent shall have received all executed Other
Documents, all in form and substance satisfactory to Agent;
(t) Contract Review. Agent shall have reviewed all material contracts of
Borrowers including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent;
(u) Borrowing Base. Agent shall have received evidence from Borrowers that
the aggregate amount of Eligible Receivables and Eligible Inventory is
sufficient in value and amount to support Advances in the amount requested by
Borrowers on the Closing Date;
(v) Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrowers shall have Undrawn Availability of at least $4,000,000,
after deducting all closing fees and expenses and subtracting all trade payables
of 60 days or more past due. This Undrawn Availability shall be evidenced by a
Borrowing Base Certificate, in form and substance reasonably satisfactory to the
Agent;
(w) Financial Statements. Receipt and satisfactory review of audited fiscal
year end January 31, 1999 consolidated financial statements of the Borrowers,
together with the most recent interim financial statements and projected
financial information of the Borrowers on a consolidated basis.
(x) Perfection. All actions necessary to perfect and protect the security
interest of the Agent with respect to the Collateral.
(y) Compliance. Evidence that the Borrowers are in compliance in all
material respects with all pertinent federal, state and local regulations,
including, but not limited to those with respect to EPA, OSHA and ERISA.
(z) 10Q Report. Agent shall have received Borrowers' draft July 31, 1999
10Q Report and projected financial information.
(aa) Security Agreements. Agent shall have received the Patent Security
Agreement, Copyright Security Agreement and Trademark Security Agreement duly
executed and delivered by an authorized officer of each Borrower subject
thereto.
(bb) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including, without limitation, the
initial Advance), is subject to the satisfaction of the following conditions
precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement and any related
agreements to which it is a party, and each of the representations and
warranties contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement or
any related agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Lenders, in their
sole discretion, may continue to make Advances notwithstanding the existence of
an Event of Default or Default and that any Advances so made shall not be deemed
a waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances requested to be made,
after giving effect thereto, the aggregate Advances shall not exceed the maximum
amount of Advances permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material amount of goods or claims or disputes asserted by any Customer or
other obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) accounts receivable agings, (b)
accounts payable schedules and (c) Inventory reports. In addition, each Borrower
will deliver to Agent at such intervals as Agent may require: (i) confirmatory
assignment schedules, (ii) copies of Customer's invoices, (iii) evidence of
shipment or delivery, and (iv) such further schedules, documents and/or
information regarding the Collateral as Agent may require including, without
limitation, trial balances and test verifications. Agent shall have the right to
confirm and verify all Receivables by any manner and through any medium it
considers advisable and do whatever it may deem reasonably necessary to protect
its interests hereunder. The items to be provided under this Section are to be
in form satisfactory to Agent and executed by each Borrower and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the Collateral, and any Borrower's failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's Lien with respect
to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the delivery
of the financial statements referred to in Sections 9.7 and 9.8, with a
certificate signed by the President of each Borrower stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local laws relating to environmental protection and control
and occupational safety and health. To the extent any Borrower is not in
compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any litigation, suit
or administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance, and of any suit or administrative proceeding, which in any
such case could reasonably be expected to have a Material Adverse Effect on any
Borrower.
9.5. Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower (with respect to obligations in excess of $50,000) which
might result in the acceleration of the maturity of any Indebtedness, including
the names and addresses of the holders of such Indebtedness with respect to
which there is a default existing or with respect to which the maturity has been
or could be accelerated, and the amount of such Indebtedness; and (e) any other
development in the business or affairs of any Borrower which could reasonably be
expected to have a Material Adverse Effect; in each case describing the nature
thereof and the action Borrowers propose to take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within one hundred five
(105) days after the end of each fiscal year of Borrowers, financial statements
of Borrowers on a consolidating and consolidated basis including, but not
limited to, statements of income and stockholders' equity and cash flow from the
beginning of the current fiscal year to the end of such fiscal year and the
balance sheet as at the end of such fiscal year, all prepared in accordance with
GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and reasonably satisfactory to
Agent (the "Accountants"). The report of the Accountants shall be accompanied by
a statement of the Accountants certifying that (i) they have caused the Loan
Agreement to be reviewed, (ii) in making the examination upon which such report
was based either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any related
agreement or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers' compliance with the requirements or restrictions
imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof. In addition, the
reports shall be accompanied by a certificate of each Borrower's Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by such
Borrower with respect to such event, and such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Agent within fifty (50) days
after the end of each fiscal quarter, an unaudited balance sheet of Borrowers on
a consolidated and consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a consolidated and
consolidating basis reflecting results of operations from the beginning of the
fiscal year to the end of such quarter and for such quarter, prepared on a basis
consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate signed by the Chief Financial Officer of each
Borrower, which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such default and, such certificate shall have appended
thereto calculations which set forth Borrowers' compliance with the requirements
or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof.
9.9. Other Reports. Furnish Agent as soon as available, but in any event
within ten (10) days after the issuance thereof, with copies of such financial
statements, reports and returns as each Borrower shall send to its stockholders.
9.10. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Note have been complied with by Borrowers including, without
limitation and without the necessity of any request by Agent, (a) copies of all
environmental audits and reviews, (b) at least thirty (30) days prior thereto,
notice of any Borrower's opening of any new office or place of business or any
Borrower's closing of any existing office or place of business, and (c) promptly
upon any Borrower's learning thereof, notice of any labor dispute to which any
Borrower may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
any Borrower is a party or by which any Borrower is bound.
9.11. Projected Operating Budget. Furnish Agent, no later than thirty (30)
days prior to the beginning of each Borrower's fiscal years commencing with
fiscal year 2001, a month by month projected operating budget and cash flow of
Borrowers on a consolidated and consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer of each
Borrower to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.12. Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.13. Notice of Suits, Adverse Events. Furnish Agent with prompt notice of
(i) any lapse or other termination of any Consent issued to any Borrower by any
Governmental Body or any other Person that is material to the operation of any
Borrower's business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of any periodic or
special reports filed by any Borrower with any Governmental Body or Person, if
such reports indicate any material change in the business, operations, affairs
or condition of any Borrower, or if copies thereof are requested by Lender, and
(iv) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Borrower.
9.14. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.15. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.16 Eligible Leases. Furnish Agent, upon the request of Agent, the
following with respect to each Eligible Lease: (a) an executed copy of said
Lease, (b) a schedule of all Equipment which is the subject of said Lease,
together with model numbers, the name of manufacturers, serial numbers, etc.,
(c) evidence of insurance on the Equipment subject to the Leases, (d) evidence
of HAPL's acquisition and ownership of the Equipment being lease, (e) a delivery
and acceptance certificate executed by the lessee of the Lease, (f) all such
other information or documentation as Agent may reasonably require.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
10.2. any representation or warranty made or deemed made by any Borrower in
this Agreement or any related agreement or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial information when due
or when requested which is unremedied for a period of fifteen (15) days, or (ii)
permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against a material portion of any Borrower's property which is not
stayed or lifted within thirty (30) days, unless the same is diligently being
contested in good faith, and the Borrowers have established satisfactory
reserves satisfactory to the Agent and the Lender;
10.5. except as otherwise provided for in Sections 10.1 and 10.3, failure
or neglect of any Borrower to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any other agreement or
arrangement, now or hereafter entered into between any Borrower and Agent or any
Lender [except for a failure or neglect of Borrower to perform, keep or observe
any term, provision, condition or covenant, contained in Sections 4.9, 4.11,
6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is cured within 10 days from the
occurrence of such failure or neglect;
10.6. any judgment or judgments are rendered or judgment liens filed
against any Borrower for an aggregate amount in excess of $500,000 which within
sixty (60) days of such rendering or filing is not either satisfied, stayed or
discharged of record, unless the same is diligently being contested in good
faith, and the Borrowers have established reserves satisfactory to the Agent and
the Lender;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. any Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. any Subsidiary of any Borrower, or any Guarantor, shall (i) apply
for, consent to or suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of itself or of
all or a substantial part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion has a Material Adverse Effect;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest;
10.12. a default of the obligations of any Borrower under any other
agreement to which it is a party shall occur which has Material Adverse Effect
and is not cured within any applicable grace period;
10.13. any Change of Ownership or Change of Control shall occur, except
that Xxxxxx Xxxxxxx may exercise his option to acquire 10% of the membership
interest of HJ and Hometown;
10.14. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;
10.15. (i) any Governmental Body shall (A) revoke, terminate, suspend or
adversely modify any licenseor permit of any Borrower, the continuation of which
is material to the continuation of any Borrower's business, or (B) commence
proceedings to suspend, revoke, terminate or adversely modify any such license,
permit, and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (c) schedule or conduct a hearing on the renewal of any license,
permit, necessary for the continuation of any Borrower's business and the staff
of such Governmental Body issues a report recommending the termination,
revocation, suspension or material, adverse modification of such license,
permit, ; (ii) any agreement which is necessary or material to the operation of
any Borrower's business shall be revoked or terminated and not replaced by a
substitute acceptable to Agent within thirty (30) days after the date of such
revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect
on any Borrower;
10.16. any portion of the Collateral shall be seized or taken by a
Governmental Body, or any Borrower or the title and rights of any Borrower or
any Original Owner which is the owner of any material portion of the Collateral
shall have become the subject matter of litigation which might, in the
reasonable opinion of Agent, upon final determination, result in impairment or
loss of the security provided by this Agreement or the Other Documents;
10.17. The operations of any Borrower's manufacturing facility are
interrupted, which interruption could be reasonably be expected to having a
Material Adverse Effect.
10.18. an event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or
condition, together with all other such events or conditions, any Borrower or
any member of the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Agent, would have a Material Adverse Effect on any
Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of Default
pursuant to Section 10.7 all Obligations shall be immediately due and payable
and this Agreement and the obligation of Lenders to make Advances shall be
deemed terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
Borrower in any involuntary case under any state or federal bankruptcy laws, the
obligation of Lenders to make Advances hereunder shall be terminated other than
as may be required by an appropriate order of the bankruptcy court having
jurisdiction over any Borrower. Upon the occurrence of any Event of Default,
Agent shall have the right to exercise any and all other rights and remedies
provided for herein, under the Uniform Commercial Code and at law or equity
generally, including, without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by any available
judicial procedure and/or to take possession of and sell any or all of the
Collateral with or without judicial process. Agent may, upon Default, enter any
of Borrower's premises or other premises without legal process and without
incurring liability to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand, take the Collateral
and remove the same to such place as Agent may deem advisable and Agent may
require Borrowers to make the Collateral available to Agent at a convenient
place. With or without having the Collateral at the time or place of sale, Agent
may sell the Collateral, or any part thereof, at public or private sale, at any
time or place, in one or more sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as Agent may elect. Except as
to that part of the Collateral which is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Agent
shall give Borrowers reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to Borrowers at least five (5)
days prior to such sale or sales is reasonable notification. At any public sale
Agent or any Lender may bid for and become the purchaser, and Agent, any Lender
or any other purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind, including any
equity of redemption and such right and equity are hereby expressly waived and
released by each Borrower. In connection with the exercise of the foregoing
remedies, Agent is granted permission to use all of each Borrower's trademarks,
trade styles, trade names, patents, patent applications, licenses, franchises
and other proprietary rights which are used in connection with (a) Inventory for
the purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied as follows: first, to the reasonable
costs, expenses and attorneys' fees and expenses incurred by Agent for
collection and for acquisition, completion, protection, removal, storage, sale
and delivery of the Collateral; second, to interest due upon any of the
Obligations and any fees payable under this Agreement; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrowers shall
remain liable to Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence of an Event of Default hereunder,
Agent and such Lender shall have a right to apply any Borrower's property held
by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment
of any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made, credit extended, Collateral received or delivered, or any
other action taken in reliance hereon, and all other demands and notices of any
description, except such as are expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and shall
be binding upon the respective successors and permitted assigns of each
Borrower, Agent and each Lender, shall become effective on the date hereof and
shall continue in full force and effect until September 30, 2002 (the "Term")
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days' prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the "Early Termination Date"), Borrowers shall pay to Agent for
the benefit of Lenders an early termination fee in an amount equal to (x) one
percent (1%) of the Maximum Loan Amount if the Early Termination Date occurs on
or after the Closing Date to and including the date immediately preceding the
first anniversary of the Closing Date, and (y) one-half of one percent (.50%) of
the Maximum Loan Amount if the Early Termination Date occurs on or after the
first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date. The immediately preceding
fee shall not apply if the Obligations are refinanced by the Lenders.
13.2. Termination. The termination of the Agreement shall not affect any
Borrower's, Agent's or any Lender's rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers' Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been paid or performed in full after the
termination of this Agreement or each Borrower has furnished Agent and Lenders
with an indemnification satisfactory to Agent and Lenders with respect thereto.
Accordingly, each Borrower waives any rights which it may have under Section
9-404(1) of the Uniform Commercial Code to demand the filing of termination
statements with respect to the Collateral, and Agent shall not be required to
send such termination statements to each Borrower, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest, fees (except the fees set forth in Sections
3.3(a) and 3.4), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. Agent may perform any of its duties hereunder by or through its agents
or employees. As to any matters not expressly provided for by this Agreement
(including without limitation, collection of the Note) Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification reasonably satisfactory to Agent with
respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any of the
Other Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Other Documents
or for any failure of any Borrower to perform its obligations hereunder. Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any of the Other Documents, or to inspect the
properties, books or records of any Borrower. The duties of Agent as respects
the Advances to Borrowers shall be mechanical and administrative in nature;
Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any obligations in
respect of this Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower in connection with the making and the continuance of
the Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of each Borrower.
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Advances or at
any time or times thereafter except as shall be provided by any Borrower
pursuant to the terms hereof. Agent shall not be responsible to any Lender for
any recitals, statements, information, representations or warranties herein or
in any agreement, document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Note, the Other Documents or the financial
condition of any Borrower, or the existence of any Event of Default or any
Default.
Agent may resign on sixty (60) days' written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term "Agent" shall mean such successor agent effective upon its
appointment, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent's resignation as Agent, the provisions of this Article
XIV shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or a
Borrower referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
(not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, and 9.9 from any Borrower pursuant
to the terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to borrow, sign and endorse notes, and
execute and deliver all instruments, documents, writings and further assurances
now or hereafter required hereunder, on behalf of such Borrower or Borrowers,
and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party.
(c) All Obligations shall be joint and several, and each Borrower shall
make payment upon the maturity of the Obligations by acceleration or otherwise,
and such obligation and liability on the part of each Borrower shall in no way
be affected by any extensions, renewals and forbearance granted to Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any Borrower, and such
agreement by each Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent or any Lender to the
other Borrowers or any Collateral for such Borrower's Obligations or the lack
thereof.
15.2. Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Borrowers' property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applied to contracts to be
performed wholly within the State of New Jersey . Any judicial proceeding
brought by or against any Borrower with respect to any of the Obligations, this
Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New Jersey , United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New Jersey.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against any Borrower in the courts of any other jurisdiction. Each Borrower
waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of Middlesex, State of New Jersey .
16.2. Entire Understanding. (a) This Agreement and the documents executed
concurrently herewith contain the entire understanding between each Borrower,
Agent and each Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each Borrower's, Agent's and each
Lender's respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other than by an agreement in writing, signed by the party to be
charged. Each Borrower acknowledges that it has been advised by counsel in
connection with the execution of this Agreement and Other Documents and is not
relying upon oral representations or statements inconsistent with the terms and
provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2 (b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrowers thereunder or the conditions,
provisions or terms thereof of waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all Lenders:
(i) increase the Commitment Percentage of any Lender.
(ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by
Borrowers to Lenders pursuant to this Agreement.
(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 16.2(b).
(iv) release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate value in
excess of $500,000.
(v) change the rights and duties of Agent.
(vi) permit any Revolving Advance to be made if after giving effect thereto
the total of Advances outstanding hereunder would exceed the Formula Amount for
more than sixty (60) consecutive Business Days or exceed one hundred and ten
percent (110%) of the Formula Amount.
(vii) increase the Advance Rates above the Advance Rates in effect on the
Closing Date.
(viii) increase the Maximum Revolving Advance Amount.
Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
In the event that Agent requests the consent of a Lender pursuant to this
Section 15.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to matter that was the subject of the request. In the event that
Agent requests the consent of a Lender pursuant to this Section 15.2 and such
consent is denied, then PNC may, at its option, require such Lender to assign
its interest in the Advances to PNC or to another Lender or to any other Person
designated by the Agent (the "Designated Lender"), for a price equal to the then
outstanding principal amount thereof plus accrued and unpaid interest and fees
due such Lender, which interest and fees shall be paid when collected from
Borrower. In the event PNC elects to require any Lender to assign its interest
to PNC or to the Designated Lender, PNC will so notify such Lender in writing
within forty five (45) days following such Lender's denial, and such Lender will
assign its interest to PNC or the Designated Lender no later than five (5) days
following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender, PNC or the Designated Lender, as appropriate, and
Agent.
16.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the regular course of commercial
banking business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each
such transferee or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without limitation
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that Borrowers shall not be required to pay to
any Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrowers be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Transferee. Each Borrower hereby grants to any
Transferee a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Transferee as security for the
Transferee's interest in the Advances.
(c) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in minimum amounts of not less than $5,000,000 pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording. Upon such execution, delivery, acceptance
and recording, from and after the transfer effective date determined pursuant to
such Commitment Transfer Supplement, (i) Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder
shall, to the extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from the purchase by
such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrowers hereby
consent to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrowers shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing. Notwithstanding any other provision contained herein
to the contrary, no Lender may sell, assign or transfer all or any part of its
rights under this Agreement to any Purchasing Lender without the consent of the
Borrowing Agent unless the Borrowing Agent has refused to provide consent to two
prior potential Purchasing Lenders.
(d) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Advances owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrowers, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Advance recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$2,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to such Lender by or on behalf of Borrowers pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrowers,
which information shall be held by the Transferee or Purchasing Lender as
confidential.
16.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for any Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors, Affiliates, employees and agents from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement or the Other
Documents, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the gross negligence or willful
misconduct of the party being indemnified.
16.6. Notice. Any notice or request hereunder may be given to any Borrower
or to Agent or any Lender at their respective addresses set forth below or at
such other address as may hereafter be specified in a notice designated as a
notice of change of address under this Section. Any notice or request hereunder
shall be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, (d) telex or telegram, subsequently
confirmed by registered or certified mail, or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic confirmation of its
receipt, in each case addressed to each party at its address set forth below or
at such other address as has been furnished in writing by a party to the other
by like notice:
(A) If to Agent or PNC Bank, National Association
PNC at: Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, V.P.
Telephone: 000-000-0000
Telecopier: 000-000-0000
with a copy to: Wilentz, Xxxxxxx & Xxxxxxx, P.A.
00 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
(B) If to a Lender other than Agent, as specified on the signature pages
hereof
(C) If to Borrowing Agent or any Borrower, at: Xxxxxx International Corp.
.P.O. Box 18004, 000 Xxxxxxxx Xxxx. Xxxxxxxxx, XX 00000 Attention: Xxxxxxx
Xxxxxx Telephone: (000) 000-0000 x0000 Telecopier: (000) 000-0000
with a copy to: Ruskin, Moscou, Xxxxx & Faltischek, P.C.
000 Xxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxx, Esq.
Telephone: 000-000-0000
Telecopier: 000-000-0000
16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survive termination of this Agreement and
the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including, without limitation,
reasonable attorneys' fees (including the allocated costs of in house counsel)
and disbursements incurred by Agent, Agent on behalf of Lenders and Lenders (a)
in all efforts made to enforce payment of any Obligation or effect collection of
any Collateral, or (b) in connection with the entering into, modification,
amendment, administration and enforcement of this Agreement or any consents or
waivers hereunder and all related agreements, documents and instruments, or (c)
in instituting, maintaining, preserving, enforcing and foreclosing on Agent's
security interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.
16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent
or attorney for any of them, shall be liable to any Borrower for consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
16.13. Counterparts; Telecopied Signatures. This Agreement may be executed
in any number of and by different parties hereto on separate counterparts, all
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
16.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
16.15. Confidentiality; Sharing Information. (a) Agent, each Lender and
each Transferee shall hold all non-public information obtained by Agent, such
Lender or such Transferee pursuant to the requirements of this Agreement in
accordance with Agent's, such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by applicable law or
court order, Agent, each Lender and each Transferee shall use its best efforts
prior to disclosure thereof, to notify the applicable Borrower of the applicable
request for disclosure of such non-public information (A) by a Governmental Body
or representative thereof (other than any such request in connection with an
examination of the financial condition of a Lender or a Transferee by such
Governmental Body) or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any materials
furnished by any Borrower other than those documents and instruments in
possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been
terminated. (b) Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to such
Borrower or one or more of its Affiliates (in connection with this Agreement or
otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such
Lender and each Borrower hereby authorizes each Lender to share any information
delivered to such Lender by such Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this
Agreement, to any such Subsidiary or Affiliate of such Lender, it being
understood that any such Subsidiary or Affiliate of any Lender receiving such
information shall be bound by the provision of Section 16.15 as if it were a
Lender hereunder. Such authorization shall survive the repayment of the other
Obligations and the termination of the Loan Agreement.
16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including, without limitation, announcements which
are commonly known as tombstones, in such publications and to such selected
parties as Agent shall in its sole and absolute discretion deem appropriate.
Each of the parties has signed this Agreement as of the day and year first
above written.
XXXXXX INTERNATIONAL CORP.
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
HAPL LEASING CO., INC.
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
PULSE MICROSYSTEMS LTD
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
SEDECO, INC.
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
SEWING MACHINE EXCHANGE, INC.
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
XXXXXX EQUIPMENT CONNECTION, INC.
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Vice President
----------------------------------
Address
HOMETOWN THREADS, LLC
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Chief Financial Officer
and Treasurer
----------------------------------
Address
HJ GRASSROOTS, LLC
By:/s/ Xxxxxxx Xxxxxx
------------------
Name: XXXXXXX XXXXXX
Title: Chief Financial Officer
and Treasurer
----------------------------------
Address
PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
By:/s/ Xxxxx X. Raphaels
---------------------
Name: XXXXX X. RAPHAELS
Title: Vice President
Xxx Xxxxx Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Commitment Percentage: 100%
[LENDER]
By:_______________________________
Name:_____________________________
Title:______________________________
----------------------------------
Address
Commitment Percentage: ____%
INDEX
Page
I DEFINITIONS..........................................................................................
1.1 Accounting Terms..............................................................................
1.2 General Terms.................................................................................
1.3 Uniform Commercial Code Terms.................................................................
1.4 Certain Matters of Construction................................................................
II ADVANCES, PAYMENTS....................................................................................
2.1 Revolving Advances
Discretionary Rights...........................................................................
2.2 Procedure for Revolving Advances Borrowing.....................................................
2.3 Disbursement of Advance Proceeds...............................................................
2.4 Additional Limitations Regarding Advances Against Eligible Leases..............................
2.5 Maximum Advances...............................................................................
2.6 Repayment of Advances..........................................................................
2.7 Repayment of Excess Advances...................................................................
2.8 Statement of Account...........................................................................
2.9 Letters of Credit and Acceptances..............................................................
2.10 Issuance of Letters of Credit Creation of Acceptances..........................................
2.11 Requirements for Issuance of Letters of Credit and Acceptances.................................
2.12 Additional Payments............................................................................
2.13 Manner of Borrowing and Payment................................................................
2.14 Mandatory Prepayments..........................................................................
2.15 Use of Proceeds................................................................................
2.16 Defaulting Lender..............................................................................
III INTEREST AND FEES.....................................................................................
3.1 Interest.......................................................................................
3.2 Letter of Credit and Acceptance Fees...........................................................
3.3 Closing Fee/Facility Fee.......................................................................
3.4 Collateral Evaluation Fee......................................................................
3.5 Computation Monitoring Fee.....................................................................
3.6 Maximum Charges................................................................................
3.7 Increased Costs................................................................................
IV COLLATERAL: GENERAL TERMS.............................................................................
4.1 Security Interest in the Collateral............................................................
4.2 Perfection of Security Interest................................................................
4.3 Disposition of Collateral......................................................................
4.4 Preservation of Collateral.....................................................................
4.5 Ownership of Collateral........................................................................
4.6 Defense of Agent's and Lenders' Interests......................................................
4.7 Books and Records..............................................................................
4.8 Financial Disclosure...........................................................................
4.9 Compliance with Laws...........................................................................
4.10 Inspection of Premises.........................................................................
4.11 Insurance......................................................................................
4.12 Failure to Pay Insurance.......................................................................
4.13 Payment of Taxes...............................................................................
4.14 Payment of Leasehold Obligations...............................................................
4.15 Receivables....................................................................................
4.16 Inventory......................................................................................
4.17 Maintenance of Equipment.......................................................................
4.18 Exculpation of Liability.......................................................................
4.19 Environmental Matters..........................................................................
4.20 Financing Statements...........................................................................
V REPRESENTATIONS AND WARRANTIES........................................................................
5.1 Authority......................................................................................
5.2 Formation and Qualification....................................................................
5.3 Survival of Representations and Warranties.....................................................
5.4 Tax Returns....................................................................................
5.5 Financial Statements...........................................................................
5.6 Corporate Name.................................................................................
5.7 O.S.H.A. and Environmental Compliance..........................................................
5.8 Solvency; No Litigation, Violation, Indebtedness or Default....................................
5.9 Patents, Trademarks, Copyrights and Licenses...................................................
5.10 Licenses and Permits...........................................................................
5.11 Default of Indebtedness........................................................................
5.12 No Default.....................................................................................
5.13 No Burdensome Restrictions.....................................................................
5.14 No Labor Disputes..............................................................................
5.15 Margin Regulations.............................................................................
5.16 Investment Company Act.........................................................................
5.17 Disclosure.....................................................................................
5.18 Section 20 Subsidiaries........................................................................
5.19 Swaps..........................................................................................
5.20 Conflicting Agreements.........................................................................
5.21 Application of Certain Laws and Regulations....................................................
5.22 Business and Property of Borrower..............................................................
5.23 Year 2000......................................................................................
VI AFFIRMATIVE COVENANTS.................................................................................
6.1 Payment of Fees................................................................................
6.2 Conduct of Business and Maintenance of Existence and Assets....................................
6.3 Violations.....................................................................................
6.4 Government Receivables.........................................................................
6.5 Minimum Stockholders Equity....................................................................
6.6 Execution of Supplemental Instruments..........................................................
6.7 Payment of Indebtedness........................................................................
6.8 Standards of Financial Statements..............................................................
6.9 Exercise of Rights.............................................................................
VII NEGATIVE COVENANTS....................................................................................
7.1 Merger, Consolidation, Acquisition and Sale of Assets..........................................
7.2 Creation of Liens..............................................................................
7.3 Guarantees.....................................................................................
7.4 Investments....................................................................................
7.5 Loans..........................................................................................
7.6 Capital Expenditures...........................................................................
7.7 Dividends......................................................................................
7.8 Indebtedness...................................................................................
7.9 Nature of Business.............................................................................
7.10 Transactions with Affiliates...................................................................
7.11 Leases.........................................................................................
7.12 Subsidiaries...................................................................................
7.13 Fiscal Year and Accounting Changes.............................................................
7.14 Pledge of Credit...............................................................................
7.15 Amendment of Articles of Incorporation, Bylaws.................................................
7.16 Compliance with ERISA..........................................................................
7.17 Prepayment of Indebtedness.....................................................................
7.18 Subordinated Note..............................................................................
7.19 Other Agreements...............................................................................
VIII CONDITIONS PRECEDENT..................................................................................
8.1 Conditions to Initial Advances.................................................................
8.2 Conditions to Each Advance.....................................................................
IX INFORMATION AS TO BORROWERS...........................................................................
9.1 Disclosure of Material Matters.................................................................
9.2 Schedules......................................................................................
9.3 Environmental Reports..........................................................................
9.4 Litigation.....................................................................................
9.5 Material Occurrences...........................................................................
9.6 Government Receivables.........................................................................
9.7 Annual Financial Statements....................................................................
9.8 Quarterly Financial Statements.................................................................
9.9 Other Reports..................................................................................
9.10 Additional Information.........................................................................
9.11 Projected Operating Budget.....................................................................
9.12 Variances From Operating Budget................................................................
9.13 Notice of Suits, Adverse Events................................................................
9.14 ERISA Notices and Requests.....................................................................
9.15 Additional Documents...........................................................................
9.16 Eligible Leases................................................................................
X EVENTS OF DEFAULT.....................................................................................
XI LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT............................................................
11.1 Rights and Remedies............................................................................
11.2 Agent's Discretion.............................................................................
11.3 Setoff.........................................................................................
11.4 Rights and Remedies not Exclusive..............................................................
XII WAIVERS AND JUDICIAL PROCEEDINGS......................................................................
12.1 Waiver of Notice...............................................................................
12.2 Delay..........................................................................................
12.3 Jury Waiver....................................................................................
XIII EFFECTIVE DATE AND TERMINATION........................................................................
13.1 Term...........................................................................................
13.2 Termination....................................................................................
XIV REGARDING AGENT
14.1 Appointment....................................................................................
14.2 Nature of Duties...............................................................................
14.3 Lack of Reliance on Agent and Resignation......................................................
14.4 Certain Rights of Agent........................................................................
14.5 Reliance.......................................................................................
14.6 Notice of Default..............................................................................
14.7 Indemnification................................................................................
14.8 Agent in its Individual Capacity...............................................................
14.9 Delivery of Documents..........................................................................
14.10 Borrowers' Undertaking to Agent................................................................
XV BORROWING AGENCY......................................................................................
15.1 Borrowing Agency Provisions....................................................................
15.2 Waiver of Subrogation..........................................................................
XVI MISCELLANEOUS.........................................................................................
16.1 Governing Law..................................................................................
16.2 Entire Understanding...........................................................................
16.3 Successors and Assigns; Participations; New Lenders............................................
16.4 Application of Payments........................................................................
16.5 Indemnity......................................................................................
16.6 Notice.........................................................................................
16.7 Survival.......................................................................................
16.8 Severability...................................................................................
16.9 Expenses.......................................................................................
16.10 Injunctive Relief..............................................................................
16.11 Consequential Damages..........................................................................
16.12 Captions.......................................................................................
16.13 Counterparts; Telecopied Signatures............................................................
16.14 Construction...................................................................................
16.15 Confidentiality; Sharing Information...........................................................
16.16 Publicity......................................................................................
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.1(b) Collateral Assignment of Patents, Trademarks,
Copyrights and Copyrights Security Agreement
Exhibit 2.10 Acceptance
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 16.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 1.2B Eligible Inventory Locations
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 4.19 Real Property
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.6(a) Mergers and Consolidation
Schedule 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.11 Default of Indebtedness
Schedule 5.14 Labor Disputes
Schedule 7.3 Guarantees
REVOLVING CREDIT AND SECURITY AGREEMENT
DATED: September, 30, 1999
AMONG
XXXXXX INTERNATIONAL CORP., HAPL
LEASING CO., INC., PULSE MICROSYSTEMS LTD.,
SEDECO, INC., SEWING MACHINE EXCHANGE, INC.
XXXXXX EQUIPMENT CONNECTION, INC., HOMETOWN THREADS, LLC, HJ GRASS ROOTS, LLC
AND
PNC BANK, NATIONAL ASSOCIATION
AS AGENT AND LENDER
AND
OTHER LENDERS LISTED ON THE SIGNATURE PAGE
AS LENDERS
