LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT made and dated as of June 20, 2003, by
and between
FIVE STAR GROUP, INC., a corporation of the State of Delaware
with its principal corporate place of business at 000 Xxxxxx
Xxxx, Xxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx 00000 with its
mailing address at 000 Xxxxxx Xxxx, X.X. Xxx 0000, Xxxx
Xxxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx 00000 (hereinafter referred
to as "BORROWER")
and
FLEET CAPITAL CORPORATION, a corporation organized and
existing under the laws of the State of Rhode Island with
offices at 000 Xxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxxx, Xxx
Xxxxxx 00000 (being hereinafter referred to as "LENDER")
WITNESSES THAT:
(1) WHEREAS, BORROWER is desirous of borrowing $25,000,000 from LENDER in
the form of a revolving loan (called the "Revolving Loan" in this Agreement and
more fully defined in Section 2.1 below);
(2) WHEREAS, BORROWER seeks to enter into a relationship with LENDER
setting forth an understanding relating to the manner by which BORROWER may
obtain advances under such Revolving Loan from LENDER and the time and the
manner of the repayment of such advances;
(3) WHEREAS, LENDER is willing to enter into this Agreement but only if the
conditions contained in this Agreement are satisfied;
(4) WHEREAS, to induce LENDER to enter into this Agreement and to extend
the benefits of the Revolving Loan to BORROWER, BORROWER is willing to execute
this Agreement and comply with the provisions of this Agreement or cause them to
be complied with;
NOW THEREFORE in consideration of the premises and the covenants contained
in this Agreement and for other good and valuable consideration, BORROWER and
LENDER do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS OF "BORROWER" and "LENDER". The terms BORROWER and LENDER
shall have the meanings given those terms in the Preliminary Statements of this
Agreement.
1.2 "ACCESSIONS" means, in addition to the definition of Accessions as
contained in the UCC, Goods that are physically united with other Goods in such
a manner that the identity of the original Goods is not lost.
1.3 "ACCOUNTING TERMS". Any accounting terms used in this Agreement that
are not specifically defined herein shall have the meanings customarily given to
them in accordance with GAAP as in effect on the date of this Agreement, except
that references in Article V and/or Article VI to GAAP shall be deemed to refer
to generally accepted accounting principles as in effect on the date of the
financial statements delivered pursuant thereto and consistently applied over
the period to which they relate.
1.4 "ACCOUNTS" or "ACCOUNTS RECEIVABLE" means, in addition to the
definition of Account as contained in the UCC, all of the accounts, contract
rights of BORROWER (including its rights as an unpaid vendor, or lienor,
including stoppage in transit, replevin and reclamation), including without
limitation any right to the payment of a monetary obligation, whether or not
earned by performance (a) for property that has been or is to be sold, leased,
licensed, assigned or otherwise disposed of, (b) for services rendered or to be
rendered, (c) for a policy of insurance issued or to be issued, (d) for a
secondary obligation incurred or to be incurred; (e) for energy provided or to
be provided; (f) for the use or hire of a vessel under a charter or other
contract; (g) arising out of the use of a credit or charge card or information
contained on or for use with the card; (h) Health-Care-Insurance Receivables and
Bondable Transition Property. The term does not include (i) rights to payment
evidenced by Chattel Paper or an Instrument; (ii) Commercial Tort Claims; (iii)
Deposit Accounts; (iv) Investment Property; (v) Letter-of-Credit Rights or
Letters of Credit; (vi) rights to payment for money or funds advanced or sold,
other than rights arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.5 "ACCOUNT DEBTOR" means, in addition to the definition of Account Debtor
as contained in the UCC, the person or persons obligated to BORROWER on an
Account, Chattel Paper or General Intangible, or who is represented by BORROWER
to be so obligated.
1.6 "ACH FACILITY" means any automatic clearinghouse facility now or
hereafter provided to BORROWER by LENDER's Affiliate Fleet National Bank.
1.7 "ADVANCES" is a collective term which means all cash advances and
extensions of monetary credit (including those reimbursable expenses of LENDER
deemed to be Advances under this Agreement and other amounts which LENDER is
authorized by this Agreement to charge against the Revolving Loan) now or at any
time hereafter made by LENDER to, on behalf of or for the account of BORROWER
under the Revolving Loan and/or any of the other Liabilities.
1.8 "AGREEMENT" is a collective term which means all of the following:
(a) this Loan and Security Agreement; and
(b) all extensions, modifications (including without limitation
modifications increasing or decreasing the amount of the Revolving Loan),
refinancings, renewals, substitutions, replacements and/or redatings
hereof.
1.9 "ASSET PURCHASE AGREEMENT" means that certain Asset Purchase Agreement
dated August 31, 1998 between SELLER (as seller and under the name FIVE STAR
GROUP, INC.") and BORROWER (as buyer and under the name "FIVE STAR ACQUISITION
CORP.") relating to the sale by SELLER and the purchase by BORROWER of SELLER's
assets, a copy of such Asset Purchase Agreement being attached to the
Certification Responsive to the Loan Agreement.
1.10 "AUTHORIZATION TO CHARGE" has the meaning given that term in Section
2.8 below.
1.11 "BLOCKED ACCOUNTS" shall mean the checking/demand deposit operating
accounts (if more than one) which is maintained either in LENDER's name or in
BORROWER's name for the benefit of LENDER at one or more financial institutions
(including Fleet National Bank and any other LENDER's Affiliate) of LENDER's
choosing and into which are to be deposited all Collateral Proceeds, including
without limitation all sums from any of the Lockboxes.
1.12 "BOOKS AND RECORDS" means, in addition to the definition of "General
Intangibles contained in the UCC, all books and records (including such books
and records as are contained in computerized storage media), including, without
limitation, all inventory, purchasing, accounting, sales, export, import,
manufacturing, banking and shipping records, all customer and supplier lists,
files, records, literature and correspondence and all advertising, marketing and
public relations materials, drawings, engineering, manufacturing and assembly
information, operating and training manuals, quotations, bids, trade association
membership, customer credit information and pricing information, business plans,
studies and analysis and personnel records.
1.13 "BORROWING BASE CERTIFICATE" means that certain certification in the
form attached hereto as Exhibit "A" for certifications which are required to be
submitted no less frequently than weekly, setting forth, among other things,
information relating to amounts and agings of Eligible Receivables and/or
amounts and values of Eligible Inventory.
1.14 "BUSINESS DAY" shall mean a day on which LENDER and LENDER's Affiliate
Fleet National Bank are open for business during its usual business hours and
offering substantially all its services.
1.15 "CERTIFICATION AS TO LIENS" means any certification now or hereafter
given by BORROWER setting forth the existence or non-existence of UCC liens
filed against BORROWER.
1.16 "CERTIFICATION RESPONSIVE TO THE GUARANTY" is a collective term which
means the certification of GUARANTOR as to the truth and accuracy of certain
representations and warranties set forth in the Guaranty, to which is attached
each of the following:
(a) Exhibit "A": the Certification of an assistant corporate secretary
or the corporate secretary of GUARANTOR as to a true, complete and correct
copy of the resolutions adopted by GUARANTOR's Board of Directors
authorizing the execution, delivery and performance of the Guaranty and any
other documents required thereunder or hereunder;
(b) Exhibit "B": the Certification of an assistant corporate secretary
or the corporate secretary of GUARANTOR as to the true, complete and
correct copy of the incumbency and specimen signatures of those officers of
GUARANTOR who are to execute the Guaranty and any other documents required
thereunder or hereunder;
(c) Exhibit "C": a true, complete and correct copy of GUARANTOR's
Certificate of Incorporation, as amended;
(d) Exhibit "D": a true, complete and correct copy of GUARANTOR's
By-Laws, as amended;
(e) Exhibit "E": the certificate as to the Good Standing of GUARANTOR
for the State of Delaware;
(f) Exhibit "F": the certificate as to the Good Standing of GUARANTOR
for the State of New York.
1.17 "CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT" is a collective term
which means the certification of BORROWER as to the truth and accuracy of
certain representations and warranties, to which is attached each of the
following:
(a) Exhibit "A": the Certification of an assistant corporate secretary
or the corporate secretary of BORROWER as to a true, complete and correct
copy of the resolutions adopted by BORROWER's Board of Directors
authorizing the execution and delivery of this Agreement, the borrowings
hereunder, and the execution and delivery of the other Loan Documents;
(b) Exhibit "B": the Certification of an assistant corporate secretary
or the corporate secretary of BORROWER as to a true, complete and correct
copy of the incumbency and specimen signatures of those officers of
BORROWER who are to execute this Agreement and the other Loan Documents;
and
(c) Exhibit "C": a true, complete and correct copy of BORROWER's
Certificate of Incorporation, as amended (including, the certificate of
amendment changing BORROWER's name from FIVE STAR ACQUISITION CORP. to FIVE
STAR GROUP, INC.);
(d) Exhibit "D": a true, complete and correct copy of BORROWER's
By-Laws, as amended;
(e) Exhibit "E: the certificate as to BORROWER's "Good Standing" in
the State of Delaware;
(f) Exhibit "F": the certificate as to BORROWER's "Good Standing" and
authorization to do business in the State of Connecticut;
(g) Exhibit "G": the certificate as to BORROWER's "Good Standing: and
authorization to do business in the State of Maryland;
(h) Exhibit "H": the certificate as to BORROWER's "Good Standing" and
authorization to do business in the State of New Jersey;
(i) Exhibit "I": the certificate as to BORROWER's "Good Standing" and
authorization to do business in the State of New York;
(j) Exhibit "J": copy of the Asset Purchase Agreement;
(k) Exhibit "K": copy of the Xxxx of Sale transferring assets sold by
SELLER (under its current name "JL DISTRIBUTORS, INC.") and bought by
BORROWER (under the name "FIVE STAR GROUP, INC.") pursuant to the Asset
Purchase Agreement.
1.18 "CHATTEL PAPER" means, in addition to the definition of Chattel Paper
as contained in the UCC, a record or records that evidence both a monetary
obligation and one or more of the following: a security interest in specific
Goods, a security interest in specific Goods and software used in the Goods, a
security interest in specific Goods and license of software used in the Goods, a
lease of specific Goods, or a lease of specific Goods and license of software
used in the Goods. Chattel Paper also includes: (i) Tangible Chattel Paper
(i.e., Chattel Paper evidenced by a record or records consisting of information
that is inscribed on a tangible medium) and (ii) Electronic Chattel Paper (i.e.,
Chattel Paper evidenced by a record or records consisting of information stored
in an electronic medium). The term does not include (x) charters of other
contracts involving the use or hire of a vessel or (y) records that evidence a
right to payment arising out of the use of a credit or charge card or
information contained on or for use with the card. If a transaction is evidenced
by records that include an instrument or series of instruments, the group of
records taken together constitutes Chattel Paper.
1.19 "COLLATERAL" is a collective term which means all of the following:
(a) all property (including but not limited to all Collateral
described in Article III of this Agreement), whether real, personal or
mixed, or tangible or intangible, now or at any time hereafter given,
assigned or pledged to LENDER to secure the Liabilities by BORROWER or by
GUARANTOR; and
(b) all products and Proceeds of the foregoing.
1.20 "COLLATERAL LOCATIONS" is a collective term which means the locations
set forth on Exhibit B attached hereto.
1.21 "COLLATERAL PROCEEDS" is a collective term which means each of the
following:
(a) all Proceeds (including proceeds in the form of cash, invoices,
Accounts Receivable, checks, notes, instruments for the payment of money,
remittances in kind, and the like) which BORROWER receives from any sale,
lease, transfer, exchange or other disposition of any of the Collateral
(whether tangible or intangible) and/or from services rendered by BORROWER
to Account Debtors and other third parties; and
(b) all other sums received by BORROWER as payment for services
rendered by it to Account Debtors and/or other third parties and/or as
payment from any sale, lease, transfer, exchange or other disposition of
any of its assets (whether tangible or intangible) or which BORROWER
receives for any other reason whatsoever; and
(c) all products and Proceeds of all the foregoing, including
insurance proceeds and condemnation awards.
1.22 "COLLATERAL UPDATE CERTIFICATE" means that certain certification in
the form attached hereto as Exhibit C (or as otherwise acceptable to LENDER).
1.23 "COMMERCIAL TORT CLAIMS" means, in addition to the definition of
Commercial Tort Claims as contained in the UCC, a claim arising in tort with
respect to which (a) the claimant is an organization or (b) the claimant is an
individual and the claim arose in the course of claimant's business or
profession and does not include damages arising out of personal injury to or
death of an individual.
1.24 "CONSIGNMENTS" means, in addition to the definition of Consignments as
contained in the UCC, a transaction, regardless of form, in which Goods are
delivered to a merchant for the purpose of sale and the merchant (i) deals in
Goods of that kind under a name other than that of the person making delivery;
(ii) is not an auctioneer; and (iii) is not generally known by its creditors to
be substantially engaged in selling the Goods of others.
1.25 "CONTRACT RIGHTS" means any right of BORROWER to receive payment or
performance under a contract not yet earned by payment and/or performance and
any franchise right to operate a business.
1.26 "DEFAULT RATE" means a rate per annum equal to the lesser of (a) 200
basis points in excess of the contractual rate of interest which would otherwise
be paid by BORROWER without giving effect to any reduction to which BORROWER may
be entitled by compliance with Performance Benchmark #1 or Performance Benchmark
#2 or Performance Benchmark #3 or (b) the maximum rate allowed by law, it being
intended that at no time shall the rate of interest payable on the Revolving
Loan be calculated at a rate higher than the maximum rate allowed by law.
1.27 "ELIGIBLE INVENTORY" is a collective term which means and includes
such of BORROWER's Inventory which is and at all times shall continue in all
respects to be acceptable and satisfactory to LENDER in its discretion,
exercised in good faith and using reasonable commercial judgment, and which, not
in limitation of the foregoing, also consists of the following:
(a) that portion of BORROWER's inventory of finished goods held for
sale by BORROWER, normally and currently saleable in the ordinary course of
BORROWER's business, and which at all times pertinent hereto is of good and
merchantable quality, free from defects, as to which LENDER has a perfected
first priority lien, and which is located at the Collateral Locations, and
as to which BORROWER has satisfied all terms, conditions, warranties and
representations of this Agreement and the other Loan Documents and which is
valued at the lower of (i) its cost (where cost is computed at historic
invoiced purchase price without adjustment for subsequently received
rebates) or (ii) its market value; but
(b) Eligible Inventory does not include any of the following:
(1) catalogs and other promotional materials of any kind;
(2) raw materials;
(3) work in process;
(4) any returned items unless returned in salable condition;
(5) any damaged, defective or recalled items;
(6) any obsolete items;
(7) any items used as demonstrators, prototypes or salesmen's
samples;
(8) any items of Inventory which have been consigned to BORROWER
or as to which any third person claims a lien;
(9) any items of Inventory which have been consigned by BORROWER
to a consignee;
(10) any items of Inventory which BORROWER maintains on a xxxx and
hold basis;
(11) packing and shipping materials;
(12) Inventory which in the reasonable judgment of LENDER
exercised in good faith using reasonable commercial judgment is
considered to be slow moving or otherwise not merchantable.
1.28 "ELIGIBLE RECEIVABLES" is a collective term which means and includes
such of BORROWER's Accounts Receivable which are and at all times shall continue
in all respects to be acceptable and satisfactory to LENDER in its discretion,
exercised in good faith and using reasonable commercial judgment, and which, not
in limitation of the foregoing, also consist of Accounts Receivable which are
created by BORROWER in the ordinary course of business in an arm's length third
party transaction, are genuine and in all respects are what they purport to be.
In addition to the foregoing, an Account shall be deemed to be an Eligible
Receivable only if as of the date of computation of Eligible Receivables, such
Account shall not have been outstanding for more than ninety (90) days from the
date of the invoice, provided, however, that the following shall apply:
(a) if the Account is in respect of goods to be sold by the Account
Debtor in a new retail establishment (i.e., a new customer for BORROWER for
a period of one-year) from the establishment of the relationship), then,
such Account shall not have been outstanding for more than two hundred
seventy (270) days from the date of invoice, provided, that the maximum
amount of Accounts beyond 90 days from the date of the invoice which shall
be considered Eligible Receivables pursuant to this Subsection (a) shall
not exceed $75,000 in the aggregate at any time; and
(b) in the case of a "dated sale", if the terms of sale were otherwise
entered into by BORROWER in respect of such invoice in the ordinary course
of BORROWER's business, (1) then, as of the date of computation of Eligible
Receivables, such Account shall not have been outstanding for more than one
hundred fifty (150) days from the date of the invoice related to such
"dated sale", (2) provided, however, that if the Account relates to the
sale of "Cabot's Stain", then such Account shall not have been outstanding
for more than one hundred eighty (180) days from the date of the invoice
related to such "dated sale", (3) further, provided, that the maximum
amount of Accounts which shall be considered Eligible Receivables pursuant
to this Subsection (b) shall not exceed $4,000,000 in the aggregate at any
time, and of such amount, not more than $1,500,000 in the aggregate of such
Accounts shall at any time consist of the Accounts referred to in
Subsection (b)(2) of this definition.
1.29 "EQUIPMENT" means, in addition to the definition of Equipment
contained in the UCC, Goods of every kind, nature and description and whether
affixed to realty or not, other than Inventory, farm products or consumer goods.
1.30 "EVENT OF DEFAULT" has the meaning set forth in Article VII of this
Agreement.
1.31 "GAAP" means generally accepted accounting principles, consistently
applied over the period to which they relate.
1.32 "GENERAL INTANGIBLES" means each and all of the following:
(a) all property included within the definition of General Intangibles
contained in the UCC,
(b) any personal property, including things in action, payment
intangibles and software but does not include Accounts, Chattel Paper,
Commercial Tort Claims, Deposit Accounts, Documents, Goods, Instruments,
Investment Property, Letter-of-Credit Rights, Letters of Credit, money, and
oil, gas or other minerals before extraction,
(c) all rights of BORROWER, including but not limited to all rights to
property, choses in action and other rights of BORROWER not otherwise
specifically included elsewhere in this Agreement, further including but
not limited to all present and future federal and state tax refunds,
trademarks (including without limitation Five Star Products), trade names
(including without limitation Five Star Products), service marks,
copyrights and patents, all rights under license agreements for the use of
same, warranties, insurance proceeds and condemnation awards; and
(d) (1) all inventions (whether patentable or unpatentable and whether
or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (2) all trademarks (including, without limitation,
the trade xxxx Five Star Products) service marks, trade dress, logos, trade
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith; (3)
all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith; (4) all mask works and
all applications, registrations, and renewals in connection therewith; (5)
all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals, secret processes and
procedures, engineering, production, assembly, design, installation, other
technical drawings and specifications, working notes and memos, market
studies, consultants' reports, technical and laboratory data, competitive
samples, engineering prototypes, and all similar property of any nature,
tangible or intangible); (6) all computer software (including data and
related documentation), computer applications software, owned or licensed,
whether for general business usage (e.g., accounting, word processing,
graphics, spreadsheet analysis, etc.) or specific, unique-to-the-business
usage (e.g., order processing, manufacturing, process control, shipping,
etc.) and computer operating, security or programming software; (7) all
rights in and to any domain names and url addresses; (8) all other
proprietary rights; and (9) all copies and tangible embodiments thereof (in
whatever form or medium);
(e) all federal, foreign, state, local and other governmental
consents, licenses, permits, franchises, approvals, notifications, numbers
and identifiers issued by governmental authorities, grants and other
authorizations required for the operation of BORROWER's business;
(f) all unperformed commitments or obligations owing to BORROWER which
pertain to BORROWER's business;
(g) all other tangible and intangible assets (including the telephone
and facsimile numbers used in connection with BORROWER's business, all
causes of action, rights of action (whether in tort, contract or
otherwise), contract rights and warranty and product liability claims
against third parties), unliquidated rights and claims pursuant to
warranties made by manufacturers, suppliers or vendors, claims for refunds,
rights of off-set and credits of all kinds, which are used or useful in or
necessary to the operation of BORROWER's business; and
(h) all of the goodwill associated with BORROWER's business as a going
concern.
1.33 "GOODS" means, in addition to the definition of Goods as contained in
the UCC, all things that are movable when a security interest attaches and
includes all articles of tangible personal property capable of being sold,
supplied, leased or otherwise disposed of, and shall include all of BORROWER's
right, title and interest in and to any Goods or other property underlying or
securing any of the Accounts Receivable.
1.34 "GUARANTOR" means "FIVE STAR PRODUCTS, INC." (formerly known as
"AMERICAN DRUG COMPANY, INC.", a corporation of the State of Delaware with its
principal corporate place of business at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxx Floor,
White Plains, Xxxxxxxxxxx Xxxxxx, Xxx Xxxx 00000.
1.35 "GUARANTY" is a collective term which means all of the following:
(a) that certain unlimited guaranty (dated even date herewith) given
by GUARANTOR to LENDER guaranteeing payment and performance of the
Liabilities; and
(b) all extensions, modifications, refinancings, renewals,
substitutions, replacements and/or redatings of such certain guaranty.
1.36 "INSTRUMENT" means, in addition to the definition of instrument as
contained in the UCC, a negotiable instrument or a security, or any other
writing which evidences a right to the payment of a monetary obligation and is
not itself a security agreement or lease and is of the type which is, in the
ordinary course of business, transferred by delivery with any necessary
endorsement or assignment. The term does not include (i) Investment Property,
(ii) Letters of Credit, (iii) writings that evidence a right to payment arising
out of the use of a credit or charge card or information contained on or for use
with the card.
1.37 "INVENTORY" means, in addition to the definition of Inventory as
contained in the UCC, Goods (other than farm goods) which are (a) leased by
BORROWER as lessor, or (b) held by BORROWER for sale or lease or to be furnished
under contracts of service, or (c) are furnished by BORROWER under a contract of
service, or (d) consist of raw materials, work in process, finished Goods or
materials used or consumed in a business (including materials and supplies,
incidentals, packaging materials and all other items which contribute to the
finished product or to the promotion or sale thereof) and all Goods returned by
or reclaimed from customers.
1.38 "LANDLORD'S CONSENTS" is a collective term which means those certain
waivers and consents (including warehouseman consents) pursuant to which the fee
owners of the Collateral Locations (or any other location at which BORROWER's
property is located) allow LENDER to come onto such premises in order to
exercise its rights against BORROWER upon the occurrence of an Event of Default
hereunder.
1.39 "LENDER'S AFFILIATE" means any entity (including Fleet National Bank
and any successor thereto) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
LENDER, or any entity under the control of FleetBoston Financial Corporation (or
any successor thereto).
1.40 "LENDING FORMULA" means the lesser of:
(a) $25,000,000 LESS the "Swap Reserve" (i.e., the amount
approximating the marked to market exposure from time to time of LENDER or
LENDER's Affiliate under the Master Agreement), such "Swap Reserve" to be
instituted only if BORROWER has elected the Extended Maturity Date and
BORROWER's Fixed Charge Coverage (as defined in Article V below) is less
than 1.13 to 1.0 as at any testing date which said Article V fixes for such
covenant; or
(b) the total of the loan value of Eligible Receivables PLUS the "loan
value" of Eligible Inventory.
1.41 "LETTER-OF-CREDIT RIGHTS" means, in addition to the definition of
Letter of Credit Rights as contained in the UCC, a right to payment and
performance under a Letter of Credit whether or not the beneficiary has demanded
or is at the time entitled to demand payment or performance, excluding, however,
the right of a beneficiary to demand payment or performance under a Letter of
Credit. 1.42 "LIABILITIES" means all of the following:
(a) principal due on the Revolving Loan and the Revolving Note
(including all Advances and re-Advances under the Revolving Loan and the
Revolving Note) to be paid with interest thereon as required by this
Agreement and the Revolving Note;
(b) Advances, re-Advances, borrowings and re-borrowings which are and
which may be made from time to time to BORROWER under this Agreement not in
compliance with the Lending Formula or the "loan value" requirements of
Article II;
(c) Advances, re-Advances, borrowings and re-borrowings which are and
which may be made from time to time to BORROWER under the ACH Facility;
(d) Advances, re-Advances, borrowings and re-borrowings which are and
which may be made from time to time to BORROWER under this Agreement over
and above any monetary limitation on the Revolving Loan and/or the ACH
Facility and/or over and above any other lending limitation contained in
this Agreement, and the interest thereon;
(e) any and all claims, damages, losses, liabilities, reasonable costs
or expenses whatsoever which LENDER may incur (or which may be claimed
against LENDER by any person or entity whatsoever including LENDER's
affiliate Fleet National Bank) by reason of or in connection with the
execution and delivery of, or payment or failure to pay under the Revolving
Loan and/or the ACH Facility and/or this Agreement;
(f) all other indebtedness, liabilities and obligations owing,
arising, due and payable from BORROWER to LENDER of every kind or nature,
whether absolute or contingent, due or to become due, joint or several,
liquidated or unliquidated, matured or unmatured, primary or secondary, now
existing or hereafter incurred, purchase money or nonpurchase money,
arising under this Agreement or any of the other Loan Documents, regardless
of the form or purpose of such indebtedness, liabilities or obligations,
including, without limitation, any and all interest, commissions, checking
account overdrafts, bank overdrafts, and other obligations, liabilities and
indebtedness (including indebtedness owed under any ACH Facility) owed by
BORROWER to LENDER or any LENDER's Affiliate (whether direct or indirect,
primary, secondary, contingent, joint or several, and regardless of how
acquired by LENDER or any such Lender's Affiliate) which are due or which
will arise or become due in the future, no matter how or when arising and
whether under any now existing or future agreement or instrument of
whatever nature (1) between BORROWER and LENDER or (2) between BORROWER and
any LENDER's Affiliate or (3) otherwise;
(g) the performance and fulfillment by BORROWER of all the terms,
conditions, promises, covenants and provisions contained in this Agreement,
or in any now existing agreement or future agreement or instrument of
whatever nature (1) between BORROWER and LENDER or (2) between BORROWER and
any LENDER's Affiliate (including without limitation any Master Agreement);
(h) BORROWER's obligation to indemnify LENDER from and against any and
all claims, damages, losses, liabilities, reasonable costs or expenses
whatsoever which LENDER may incur (or which may be claimed against LENDER
by any person or entity whatsoever including any LENDER's Affiliate) by
reason of or in connection with BORROWER's execution and delivery of the
Loan Documents, or payment or failure to pay under the Revolving Loan; and
(i) the amount due upon any notes or other obligations given to, or
received by, LENDER or any LENDER's Affiliate on account of the obligations
and liabilities described in Subsection (a) through and including
Subsection (h) above.
1.43 "LIBOR-RELATED DEFINITIONS": The following terms shall have the
meanings given to them in the Sections referenced below: (a) "LIBOR" shall have
the meaning given that term in Section 2.6(e)(1) below.
(b) "LIBOR Based Interest Period" shall have the meaning given that
term in Section 2.6(e)(2) below.
(c) "LIBOR Based Rate" shall have the meaning given that term in
Section 2.6(c) below.
(d) "LIBOR Option" shall have the meaning given that term in Section
2.6(a)(1)(2) below.
(e) "LIBOR Reserve Percentage" shall have the meaning given that term
in Section 2.6(e)(3) below.
(f) "London Banking Day" shall have the meaning given that term in
Section 2.6(e)(4) below.
(g) "Principal Balance" shall have the meaning given that term in
Section 2.6(e)(5) below.
(h) "Roll over Date" shall have the meaning given that term in Section
2.6(e)(6) below.
1.44 "LOAN DOCUMENTS" means this Agreement, the Certification as to Liens,
the Certification Responsive to the Loan Agreement, the Certification Responsive
to the Guaranty, the Guaranty, the Revolving Note, the Subordination Agreement,
UCC Financing Statements, and any agreements, documents or instruments now or
hereafter executed by BORROWER and/or GUARANTOR and delivered to LENDER with
respect to the transactions contemplated by this Agreement and all extensions,
modifications or renewals of any or all of the foregoing.
1.45 "LOAN VALUE" means: (a) As it relates to Eligible Receivables:
Eligible Receivables shall normally have a "loan value" of eighty percent (80%)
of such Eligible Receivables, provided, however, that LENDER in good faith and
in the exercise of its reasonable commercial judgment may on prior notice to
BORROWER fix the aforesaid advance rate at some lesser percentage.
(b) As it relates to Eligible Inventory: Eligible Inventory shall
normally have a "loan value" of up to the lesser of $14,300,000 or 55% of
the value of Eligible Inventory, provided, however, that LENDER in good
faith and in the exercise of its reasonable commercial judgment may on
prior notice to BORROWER fix the aforesaid "loan value" at some lesser
amount or percentage.
1.46 "LOCKBOX" means the secured deposit box maintained in the name of
BORROWER for the benefit of LENDER at a LENDER's Affiliate (including Fleet
National Bank) and/or at another financial institution approved by LENDER and
into which BORROWER deposits Collateral Proceeds.
1.47 "MASTER AGREEMENT" shall mean means any ISDA [International Swap
Dealers Association, Inc.] Master Agreement relating to interest rate contracts
and/or determinations hereafter entered into between BORROWER and LENDER's
Affiliate Fleet National Bank or other financial institution (and all
confirmations and schedules relating thereto, including those now or hereafter
relating to the Revolving Loan) and all extensions, modifications, refinancings,
renewals, substitutions, replacements and/or redatings thereof.
1.48 "MATERIALLY ADVERSE EFFECT" shall mean a materially adverse effect on
the business, condition (financial or otherwise), operations, performance or
properties of BORROWER (and/or its Subsidiaries) taken as a whole or GUARANTOR
(and/or its Subsidiaries) taken as a whole.
1.49 "MATURITY DATE" shall mean June 30, 2006, provided, however, that
within 30 days from the date hereof, BORROWER may on written notice to LENDER
extend the Maturity Date to June 30, 2008, provided further, however, that any
such election will not be effective unless within 90 days from the date hereof,
BORROWER enters into a Master Agreement with LENDER relating to a forward
starting swap fixing the rate of interest payable on no less than $12,000,000
and not more than $15,000,000 of the principal amount of the Revolving Loan
during the three years commencing within 30 days before or after the second
anniversary of the date hereof, such extended June 30, 2008 Maturity Date being
called the "Extended Maturity Date".
1.50 "OUTSTANDING" is an adjective which means "unpaid at any one specific
time", and has such meaning regardless whether the applicable underlying
obligations owed under the Revolving Loan and/or any of the other Liabilities
are matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, accrued or not-yet-accrued and/or due
or not-yet-due.
1.51 "PERFORMANCE BENCHMARK #1" means the performance achievements set
forth in Section 5.22 below.
1.52 "PERFORMANCE BENCHMARK #2" means the performance achievements set
forth in Section 5.22 below.
1.53 "PERFORMANCE BENCHMARK #3" means the performance achievements set
forth in Section 5.22 below.
1.54 "PERMITTED LIENS" means, as of any particular time, any of the
following, so long as none of the following (except liens or security interests
held by or in favor of LENDER) constitutes a lien against BORROWER's Accounts or
Inventory: (a) liens at any time granted by BORROWER in favor of LENDER pursuant
hereto;
(b) liens for taxes, assessments and other governmental charges not
yet subject to penalties for non-payment or the payment of which is being
contested in food faith and for which BORROWER has established cash
reserves in an amount satisfactory to LENDER;
(c) statutory liens of carriers, mechanics, materialmen, landlords,
warehouseman and other similar liens imposed by law, which are incurred in
the ordinary course of business for sums not yet overdue by more than 90
days or which, if due and payable, are being properly contested and for
which BORROWER has established cash reserves in an amount satisfactory to
LENDER;
(d) liens arising out of non-final judgments or awards against
BORROWER which are being properly contested and for which BORROWER has
established cash reserves in an amount satisfactory to LENDER;
(e) liens resulting from pledges or deposits made by BORROWER in the
ordinary course of its business in connection with workers' compensation
laws, unemployment insurance laws, social security laws, or similar
legislation, or good faith deposits or security deposits in connection with
bids, tenders, contracts (other than for the payment of borrowed money), or
leases to which BORROWER is a party, or deposits to secure public or
statutory obligations of BORROWER or deposits of cash or United States
Government Bonds to secure surety, appeal, performance or other similar
bonds to which BORROWER is a party, or deposits as security for contested
taxes or import duties or for the payment of rent;
(f) survey exceptions, encumbrances, easements or reservations of, or
rights of, others for rights of way, highways and railroad crossings,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real properties.
(g) liens consented to by LENDER in writing.
1.55 "PRIME BASED RATE" shall have the meaning given that term in Section
2.6(b) below.
1.56 "PRIME RATE" means the variable rate of interest set from time to time
by Fleet National Bank as its usual, short-term base lending rate to its
commercial borrowers. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer.
From time to time LENDER makes loans to certain customers at rates of interest
below the Prime Rate of Fleet National Bank.
1.57 "PROCEEDS" means, in addition to the definition of proceeds given in
the UCC, all additions, substitutions, replacements, and increments to the
Collateral, including cash and non-cash proceeds of all of the Collateral in
whatever form, including negotiable instruments and other instruments for the
payment of money, Chattel Paper, security agreements or other documents,
insurance or condemnation awards and any Collateral purchased with Proceeds.
1.58 "REGULATORY CHANGE" means as to LENDER, any change after the date of
this Agreement in United States federal, or state, or foreign, laws or
regulations (including Regulation D and the laws or regulations that designate
any assessment rate relating to certificates of deposit or otherwise (including
the "Assessment Rate" if applicable to any Advance) or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of banks, including LENDER, of or under any United States federal, or
state, or foreign laws or regulations (whether or not having the force of law)
by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
1.59 "RECONCILIATION CERTIFICATE" means that certain certification in the
form attached hereto as Exhibit D for certifications which are required to be
submitted no less frequently than monthly (unless otherwise specified herein),
setting forth, among other things, information relating to adjustments in
amounts and/or values of the Collateral.
1.60 "REVISED ARTICLE 9" means Article 9 of the Uniform Commercial Code in
the form adopted by the State of New Jersey in 2001.
1.61 "REVOLVING LOAN" has the meaning set forth in Section 2.1 of this
Agreement.
1.62 "REVOLVING NOTE" means the master promissory note executed by BORROWER
on the date hereof in favor of LENDER so as to evidence the indebtedness of
BORROWER to LENDER with respect to any and all Advances made by LENDER under the
Revolving Loan and all extensions, modifications or renewals of such note.
1.63 "SELLER" means JL DISTRIBUTORS, INC. (formerly known as FIVE STAR
GROUP, INC.), a Delaware corporation whose name is to be changed to and whose
principal corporate place of business at 0 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx
Xxxx (New York County), New York 10019.
1.64 "SUBORDINATION AGREEMENT" is a collective term which means the
agreement pursuant to which SELLER subordinates its right to repayment of
certain indebtedness owed to it by BORROWER to LENDER's right to repayment of
the Liabilities.
1.65 "SUBORDINATED SELLER NOTE" means that certain $4,500,000 (face amount)
note dated August 2, 2002, a copy of which is attached hereto as Exhibit A to
the Subordination Agreement, relating to BORROWER's remaining payment
obligations under the Asset Purchase Agreement.
1.66 "SUBSIDIARY" means any corporation or other entity more than a
majority (by number of votes) of the voting interest therein is at the time
owned or controlled by BORROWER or a Subsidiary of BORROWER.
1.67 "SUPPORTING OBLIGATIONS" means, in addition to the definition of
Supporting Obligations as contained in the UCC, a Letter-of-Credit Right or
secondary obligation that supports the payment or performance of an Account,
Chattel Paper, Document, General Intangible, Instrument or Investment Property.
1.68 "UCC" shall mean the Uniform Commercial Code, as now in effect and as
from time to time hereafter in effect in the State of New Jersey.
1.69 UCC DEFINITIONS. All terms defined in Articles 1 or 9 of the UCC shall
have the meanings given therein unless otherwise defined herein.
ARTICLE II
2.1 ESTABLISHMENT OF THE REVOLVING LOAN.
(a) Upon BORROWER's request, made to LENDER pursuant to Section 2.12,
LENDER hereby agrees, from time to time but subject to the terms and the
conditions of this Agreement, to make Advances and re-Advances to BORROWER under
a revolving loan facility, to be disbursed by LENDER in the manner specified in
Section 2.3. (b) Such Advances and re-Advances constitute the "Revolving Loan"
described throughout this Agreement.
2.2 MAXIMUM PERMITTED REVOLVING LOAN BORROWINGS.
(a) The maximum which may be Outstanding under the Revolving Loan at any
one time cannot exceed the Lending Formula.
(b) The "loan value" of Eligible Inventory and Eligible Receivables will be
determined by LENDER using the information supplied by BORROWER to LENDER in the
Borrowing Base Certificate, together with any other information which BORROWER
is required to give LENDER pursuant to Section 5.6 below.
2.3 DISBURSEMENT OF REVOLVING LOAN ADVANCES.
BORROWER shall give LENDER notice of each borrowing hereunder as provided
in Section 2.12 hereof. LENDER, upon its receipt thereof but only to the extent
BORROWER is allowed to borrow hereunder, shall disburse such sum to BORROWER by
crediting BORROWER's demand deposit operating account at Fleet National Bank (or
other financial institution acceptable to LENDER) and charging BORROWER's
Revolving Loan account on LENDER's books. Advances can be made, however, by
means other than as aforesaid.
2.4 RIGHT TO RECEIVE REVOLVING LOAN ADVANCES.
(a) So long as the Advances Outstanding under the Revolving Loan do
not exceed the Lending Formula and so long as BORROWER is otherwise in
compliance with the terms and conditions of this Agreement, (1) BORROWER may
borrow, re-pay and re-borrow Advances under the Revolving Loan at any time
during the period from the date hereof up to the day before the Maturity Date
and (2) repayment by BORROWER of Advances Outstanding under the Revolving Loan
shall not affect the ability of BORROWER to borrow and re-borrow under this
Agreement.
(b) To the extent that by operation of any circumstance which causes
the amount of all Advances Outstanding under the Revolving Loan to violate the
Lending Formula, LENDER may in its discretion make no other Advances hereunder
until such Outstanding Advances are in compliance with the Lending Formula.
Nothing in the foregoing shall limit LENDER's right to declare an Event of
Default because of such non-compliance.
(c) In addition and notwithstanding anything in this Agreement to the
contrary, the obligation of LENDER to continue making advances under the
Revolving Loan shall terminate upon the expiration of this Agreement and shall
be suspended upon written notice (except in the case of the occurrence of an
Event of Default described in Section 7.6, Section 7.7 and Section 7.8 as to
which no notice shall be required) from LENDER to BORROWER of the occurrence and
during the continuance of any of the following events:
(1) an Event of Default hereunder; or
(2) an event which, except for the passage of time or the giving of notice,
would be such an Event of Default.
2.5 REPAYMENT OF REVOLVING LOAN ADVANCES.
(a) Subject to the other provisions of this Section and this Agreement and
so long as (1) the Advances Outstanding under the Revolving Loan do not exceed
the Lending Formula, (2) BORROWER is otherwise in compliance with the terms and
conditions of this Agreement, any and all Advances shall be repayable on the
Maturity Date unless the term of this Agreement or LENDER's Revolving Loan
relationship with BORROWER is sooner accelerated or terminated or modified as
provided herein. On the Maturity Date, all Advances Outstanding under the
Revolving Loan, plus accrued interest and other amounts Outstanding thereunder,
shall be due and owing, unless sooner due or payable as provided herein.
(b) Notwithstanding the foregoing provisions of subsection (a) above, prior
to the Maturity Date the principal owing on the Revolving Loan shall be repaid
on a continuing and continual basis as follows:
(1) (A) BORROWER agrees to and shall establish and maintain, or permit
LENDER to establish and maintain as determined from time to time by LENDER in
its discretion, one or more Lockboxes and/or Blocked Accounts.
(B) BORROWER agrees as follows:
(i) Each Lockbox is one of the Deposit Accounts described in Article III of
this Agreement.
(ii) Each Blocked Account is an account owned by LENDER and holding funds
of LENDER and not funds of BORROWER and against which BORROWER has rights only
to the extent that funds in any such account exceeds the Liabilities after this
Agreement has been terminated and such Liabilities have been paid in full.
(iii) Each Blocked Account is one of the Deposit Accounts described in
Article III of this Agreement.
(2) BORROWER agrees to and shall forthwith deposit all Collateral Proceeds
into a Blocked Account.
(3) BORROWER agrees to and shall direct its Account Debtors and other third
parties to remit all Collateral Proceeds directly to one or more Lockboxes (if
required by LENDER or elected by BORROWER), Blocked Accounts and/or such other
place designated by LENDER. As it relates to each Lockbox, BORROWER hereby
authorizes LENDER to, transfer or cause the transfer of (on a daily basis or
other frequency determined by LENDER) all amounts from each aforementioned
Lockbox into one or more of the aforementioned Blocked Accounts.
(4) BORROWER agrees to and shall forthwith transfer, assign, endorse,
deliver and turn over to LENDER for LENDER's deposit into any such Blocked
Account and/or such other place designated by LENDER all Collateral Proceeds
which, despite BORROWER's aforementioned direction to its Account Debtors and
other third parties, are received by BORROWER.
(5) BORROWER shall in no case commingle any of the Collateral Proceeds with
any other property of BORROWER or any other person or entity, but shall keep
such Collateral Proceeds segregated, held in trust for LENDER as LENDER's
exclusive property and immediately transfer, assign, endorse, deliver and/or
turn such Collateral Proceeds over to LENDER in the identical form received
(excluding endorsements necessary for collection for the benefit of LENDER) to a
Lockbox (if required by LENDER or elected by BORROWER), Blocked Account and/or
such other place designated by LENDER.
(6) BORROWER hereby authorizes LENDER to effect the repayment of the
Advances Outstanding on the Revolving Loan, the payment of interest thereon and
the other Liabilities on a continuing and continual basis, either daily or on
another frequency determined by LENDER, by LENDER's transfer, withdrawal or
"sweep" of all funds on deposit in such Blocked Accounts. Funds deposited by
BORROWER in a Blocked Account prior to 2 p.m. on any Business Day will normally
be transferred, withdrawn or "swept" by LENDER on the immediately following
Business Day and funds deposited by BORROWER in a Blocked Account at or after 2
p.m. on any Business Day will normally be transferred, withdrawn or "swept" by
LENDER on the second Business Day following said deposit. LENDER will apply the
funds so transferred, withdrawn or "swept" by LENDER to the repayment of
Advances Outstanding on the Revolving Loan on the applicable Business Day on
which LENDER's aforesaid transfer, withdrawal or "sweep" occurs.
(7) If notwithstanding the application of funds in the Blocked Accounts as
set forth above, BORROWER at any time is not in compliance with the Lending
Formula, BORROWER must, immediately upon the earlier of BORROWER's knowledge
that non-compliance exists or notice from LENDER to do so, bring the Revolving
Loan into compliance with the Lending Formula and BORROWER will be able to draw
under the Revolving Loan only to the extent that such borrowings would be in
compliance with the Lending Formula. In the event that BORROWER fails to so
bring balances Outstanding under the Revolving Loan into compliance with the
Lending Formula, such failure shall be an Event of Default hereunder and LENDER
shall have all rights which arise therefrom.
(8) BORROWER recognizes that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or constituting proceeds of
Collateral (other than payment via wire transfer or electronic depository check)
may not be collectible by LENDER on the date received. In consideration of
LENDER's agreement to conditionally afford BORROWER credit as of the Business
Day on which LENDER receives those items of payment, BORROWER agrees that, in
computing interest and the charges imposed under this Agreement, all items of
payment received by LENDER shall be deemed applied by LENDER on account of the
Liabilities (subject to final payment of such items) two Business Days after the
applicable Business Day on which LENDER transfers, withdraws or "sweeps" funds
from the corresponding Blocked Account. LENDER is not, however, required to give
BORROWER credit for the amount of any item of payment which is unsatisfactory to
LENDER and LENDER may charge BORROWER for the amount of any item of payment
which is returned unpaid to LENDER.
(c) Nothing in this Section 2.5 is intended to limit the rights of LENDER
under Section 2.4(c).
(d) Unless BORROWER is otherwise given notice by LENDER in accordance with
this Agreement, all payments shall be made at the location that LENDER
designates by written notice to BORROWER given in accordance with this
Agreement.
2.6 PAYMENT OF REVOLVING LOAN INTEREST.
(a) (1) BORROWER shall pay to LENDER per annum interest on the unpaid
principal amount of each Advance made by such LENDER for the period commencing
on the date of such Advance until such Advance shall be paid in full.
(2) Subject to the other provisions of this Section 2.6, interest
shall be charged on the Advances Outstanding under the Revolving Loan at (A) a
per annum rate (the "Prime Based Rate" as more fully defined below)
based on the fluctuating Prime Rate or (B) at BORROWER's option (the "LIBOR
Option") to be exercised in the manner set forth below, a per annum rate (the
"LIBOR Based Rate" as more fully defined below) based on LIBOR (as defined
below). In no event, however, shall interest ever be calculated at a rate
higher than the maximum rate allowed by law.
(b) (1) The Prime Based Rate (the "Prime Based Rate") shall equal the Prime
Rate, floating, plus one-half of one percent, provided, however, that
notwithstanding the foregoing, the following shall apply:
(A) if BORROWER complies with and maintains Performance Benchmark #1
and so long as no Event of Default has occurred, then effective upon
LENDER's determination that BORROWER has so complied with
Performance Benchmark #1 but only during the term of such
compliance, the Prime Based Rate shall equal the Prime Rate,
floating, plus four-tenths of one percent,
(B) if BORROWER complies with and maintains Performance Benchmark #2
and so long as no Event of Default has occurred, then effective upon
LENDER's determination that BORROWER has so complied with
Performance Benchmark #2 but only during the term of such
compliance, the Prime Based Rate shall equal the Prime Rate,
floating, plus one-quarter of one percent;
(C) if BORROWER complies with and maintains Performance Benchmark #3
and so long as no Event of Default has occurred, then effective upon
LENDER's determination that BORROWER has so complied with
Performance Benchmark #3 but only during the term of such
compliance, the Prime Based Rate shall equal the Prime Rate,
floating;
(D) in all events on and after the occurrence and continuance of an
Event of Default, per annum interest shall be charged on the
Advances Outstanding under the Revolving Loan at the Default Rate.
(2) If the interest rate is determined at a Prime Based Rate, then in the
event there should be a change in the Prime Rate, the rate of interest on the
Revolving Loan shall be changed effective as of the effective date of each such
change in the Prime Rate, as established by LENDER, without prior notice to
BORROWER. Any change in the Prime Rate shall not affect or alter any other terms
or conditions of this Agreement. LENDER will use its best efforts to provide
BORROWER with notice of the amount of the Prime Rate or the interest rate or
rates being charged to BORROWER as part of the periodic statements of account
which LENDER provides to BORROWER hereunder but LENDER's failure to provide such
notice shall not result in any liability to LENDER or affect the rights or
remedies of LENDER hereunder or the obligations of BORROWER hereunder.
(c) The LIBOR Based Rate (the "LIBOR Based Rate") shall be a rate per annum
equal to 225 basis points in excess of LIBOR (as defined below) with respect to
the applicable LIBOR Based Interest Period (as also defined below), it being
understood that each determination of a LIBOR Based Rate shall be made by LENDER
in its sole and absolute discretion and shall be conclusive and binding upon
BORROWER, absent manifest error. Notwithstanding the foregoing, the following
shall apply:
(1) if BORROWER complies with and maintains Performance Benchmark
#1 and so long as no Event of Default has occurred, then effective
upon LENDER's determination that BORROWER has so complied with
Performance Benchmark #1 but only during the term of such
compliance, the LIBOR Based Rate shall be a rate per annum equal
to 220 basis points in excess of LIBOR (as defined below) with
respect to the applicable LIBOR Based Interest Period (as also
defined below); and
(2) if BORROWER complies with and maintains Performance Benchmark
#2 and so long as no Event of Default has occurred, then effective
upon LENDER's determination that BORROWER has so complied with
Performance Benchmark #2 but only during the term of such
compliance, the LIBOR Based Rate shall be a rate per annum equal
to 210 basis points in excess of LIBOR (as defined below) with
respect to the applicable LIBOR Based Interest Period (as also
defined below); and
(3) if BORROWER complies with and maintains Performance Benchmark
#3 and so long as no Event of Default has occurred, then effective
upon LENDER's determination that BORROWER has so complied with
Performance Benchmark #3 but only during the term of such
compliance, the LIBOR Based Rate shall be a rate per annum equal
to 200 basis points in excess of LIBOR (as defined below) with
respect to the applicable LIBOR Based Interest Period (as also
defined below); and
(4) in all events on and after the occurrence and continuance of
an Event of Default, per annum interest shall be charged on the
Advances Outstanding under the Revolving Loan at the Default Rate.
(d) (1) The determination whether BORROWER has met and complied with
Performance Benchmark #1 and/or Performance Benchmark #2 and/or Performance
Benchmark #3 for purposes of obtaining the interest rate reduction allowed by
this Section will be made quarterly (on a rolling four-quarter basis) and
determined by reference to the annual and quarterly-to-date financial statements
which BORROWER is required to submit under this Agreement and by using GAAP and
will be made by LENDER within 30 Business Days after LENDER's receipt of all
necessary financial statements and other information from BORROWER and, if
BORROWER meets and complies with Performance Benchmark #1 and/or Performance
Benchmark #2 and/or Performance Benchmark #3, will be effective commencing at
the end of such 30 Business Days' review period unless BORROWER is otherwise
notified by LENDER in writing.
(2) The determination whether BORROWER remains in compliance with
Performance Benchmark #1 and/or Performance Benchmark #2 and/or Performance
Benchmark #3 for purposes of continuing the interest rate reduction allowed by
this Section will also be made quarterly (on a rolling four-quarter basis) and
determined by reference to the annual and quarterly-to-date financial statements
which BORROWER is required to submit under this Agreement and by using GAAP and
will be made by LENDER within 30 Business Days after LENDER's receipt of all
necessary financial statements and other information from BORROWER, provided,
however, that nothing in the foregoing shall prevent LENDER from discontinuing
such interest rate reduction prior to LENDER's receipt of any of the
aforementioned financial statements of BORROWER or prior to the end of such 30
Business Days' review period in the event LENDER obtains actual knowledge that
BORROWER is not in compliance with Performance Benchmark #1 and/or Performance
Benchmark #2 and/or Performance Benchmark #3 and nothing in the foregoing shall
prohibit LENDER from discontinuing such interest rate reduction after the
expiration of any 30 Business Day period referenced above.
(e) For purposes of the determination of any LIBOR Based Rate, the
following terms shall have the following meanings:
(1) (A) "LIBOR" means, as applicable to any LIBOR Based Interest
Period, the rate per annum (rounded upward, if necessary, to the
nearest 1/32 of one percent) as determined on the basis of the
offered rates for deposits in U.S. dollars, for a period of time
comparable to such LIBOR Based Interest Period which appears on
the Telerate page 3750 as of 11:00 a.m. London time on the day
that is two London Banking Days preceding the first day of such
LIBOR Based Interest period; provided, however, if the rate
described above does not appear on the Telerate System on any
applicable interest determination date, then LIBOR shall be the
rate (rounded upwards as described above, if necessary) for
deposits in dollars for a period substantially equal to the
interest period on the Reuters Page "LIBO" (or such other page as
may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day
that is two London Banking Days prior to the beginning of such
interest period.
(B) If both the Telerate and Reuters system are unavailable, then
the rate for that date will be determined on the basis of the
offered rates for deposits in U.S. dollars for a period of time
comparable to such LIBOR Based Interest Period which are offered
by four major banks in the London interbank market at
approximately 11:00 a.m. London time, on the day that is two
London Banking Days preceding the first day of such LIBOR Based
Interest Period as selected by LENDER. The principal London office
of each of the four major London banks will be requested to
provide a quotation of its U.S. dollar deposit offered rate. If at
least two such quotations are provided, the rate for that date
will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the rate for that date will
be determined on the basis of the rates quoted for loans in U.S.
dollars to leading European banks for a period of time comparable
to such LIBOR Based Interest Period offered by major banks in New
York City at approximately 11:00 a.m. New York City time, on the
day that is two London Banking Days preceding the first day of
such LIBOR Based Interest Period. In the event that LENDER is
unable to obtain any such quotation as provided above, it will be
deemed that LIBOR pursuant to a LIBOR Based Interest Period cannot
be determined.
(C) In the event that the Board of Governors of the Federal
Reserve System shall impose a LIBOR Reserve Percentage with
respect to LIBOR deposits of LENDER then for any period during
which such LIBOR Reserve Percentage shall apply, LIBOR shall be
equal to the amount determined above divided by an amount equal to
1 minus the LIBOR Reserve Percentage.
(2) "LIBOR Based Interest Period" shall mean the period commencing on
the date so specified in BORROWER's notice to LENDER of any election
to exercise the LIBOR Option and ending on the date specified in such
notice, which ending date (A) shall be either 1 month, 2 months, 3
months or 6 months after the commencement of the LIBOR Based Interest
Period, and (B) shall in no event extend beyond the Maturity Date. No
LIBOR Based Interest Period shall commence other than on a London
Banking Day. If any LIBOR Based Interest Period shall end on a day
which is not a London Banking Day, such LIBOR Based Interest Period
shall be extended to the next succeeding London Banking Day.
Notwithstanding the foregoing, if BORROWER properly elects the
Extended Maturity Date, for the principal portion of the Revolving
Loan subject to the Master Agreement each LIBOR Based Interest Period
must be 1 month.
(3) "LIBOR Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed
by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a
member bank of the Federal Reserve System in New York City with
deposits exceeding one billion dollars in respect of Eurocurrency
liabilities (as defined in Regulation D of the Board of Governors of
the Federal Reserve System) (or in respect of any other category of
liabilities which includes deposits by reference to which the interest
rate on loans covered by a LIBOR Based Rate is determined or any
category of extensions of credit or other assets which includes loans
by a non-United States office of LENDER to United States residents).
The LIBOR Based Rate shall be adjusted automatically on and as of the
effective date of any change in the LIBOR Reserve Percentage.
(4) "London Banking Day" shall mean a day which is not a Saturday,
Sunday or day on which banks in London are required or permitted to
close.
(5) "Principal Balance" means, at any time, the portion or portions of
the Advances Outstanding under the Revolving Loan as to which BORROWER
has elected to have interest determined or to be determined, as
applicable, at a LIBOR Based Rate and includes all amounts that are to
be borrowed at a LIBOR Based Rate, whether or not BORROWER actually
borrows such amounts.
(6) "Roll Over Date" shall mean the day immediately following the last
day of a LIBOR Based Interest Period.
(f) If BORROWER wishes to exercise the LIBOR Option, BORROWER shall give
LENDER notice in writing or by telex or by facsimile (receipt of which must be
confirmed electronically or telephonically) of any election to exercise the
LIBOR Option at least two London Banking Days prior to the commencement of a
LIBOR Based Interest Period, which notice shall specify (1) the Principal
Balance with respect to which BORROWER is making such election, and (2) in
conformity with the definition of "LIBOR Based Interest Period" set forth above,
the date upon which such LIBOR Based Interest Period is to commence and (3) its
duration. LENDER shall, as soon as practical prior to or on the date of the
commencement of the LIBOR Based Interest Period, determine and quote to BORROWER
a LIBOR Based Rate with respect to the Principal Balance specified in such
notice, and notify BORROWER of the date and time by which BORROWER must accept
the quoted LIBOR Based Rate. If BORROWER rejects the quoted LIBOR Based Rate, or
if BORROWER does not inform LENDER of its acceptance of the quoted LIBOR Based
Rate by the date and time specified by LENDER, time being of the essence, the
Prime Based Rate shall apply, or continue to apply to the specified Principal
Balance. If BORROWER accepts the quoted LIBOR Based Rate by the date and time
specified by LENDER, the quoted LIBOR Based Rate shall be applicable to the
Principal Balance during the LIBOR Based Interest Period specified by BORROWER
in such notice. A quoted LIBOR Based Rate may be accepted by BORROWER either
orally or in writing, provided that any such oral acceptance shall be
immediately confirmed by BORROWER in writing or by telex or by facsimile
(receipt of which must be confirmed electronically or telephonically). The
interest rate applicable to the Principal Balance, with respect to which
BORROWER has accepted a quoted LIBOR Based Rate, shall revert from the LIBOR
Based Rate applicable thereto to the Prime Based Rate as of the Roll Over Date
applicable thereto. LENDER shall be under no duty or obligation to notify
BORROWER that the interest rate on the Principal Balance is about to revert from
a LIBOR Based Rate to the Prime Based Rate.
(g) The LIBOR Option may only be exercised by BORROWER if the portion of
the Revolving Loan to be affected by the LIBOR Option would bear interest at the
Prime Based Rate on the date of commencement of the applicable LIBOR Based
Interest Period, but for the exercise by BORROWER of the LIBOR Option, and only
if the following conditions are met:
(1) No Event of Default has occurred and is continuing.
(2) The LIBOR Based Interest Period must commence on a London
Banking Day.
(3) The LIBOR Based Interest Period shall extend either 1 month, 2
months, 3 months or 6 months after the commencement of the LIBOR
Based Interest Period. Notwithstanding the foregoing, if BORROWER
properly elects the Extended Maturity Date, for the principal
portion of the Revolving Loan subject to the Master Agreement,
each LIBOR Based Interest Period must be 1 month.
(4) The LIBOR Based Interest Period shall in no event extend
beyond the termination date or any extended termination date of
the Revolving Loan.
(5) If any LIBOR Based Interest Period shall end on a day which is
not a London Banking Day, such LIBOR Based Interest Period shall
be extended to the next succeeding London Banking Day.
(6) The LIBOR Option must be exercised for a minimum of $1,000,000
and integral multiples of $100,000 thereafter. Notwithstanding the
foregoing, if BORROWER properly elects the Extended Maturity Date,
for the principal portion of the Revolving Loan subject to the
Master Agreement, the LIBOR Option will be deemed to have been
exercised for the amount of the forward starting swap.
(7) No more than $15,000,000 of the total Advances Outstanding
under the Revolving Loan may be the subject of interest being
determined at a LIBOR Based Rate or LIBOR Based Rates at any one
time. Notwithstanding the foregoing, if BORROWER properly elects
the Extended Maturity Date, for the principal portion of the
Revolving Loan subject to the Master Agreement, the LIBOR Option
will be deemed to have been exercised for the amount of the
forward starting swap and BORROWER will remain entitled to
exercise the LIBOR Option from time to time with respect to the
difference between $15,000,000 and the principal portion of the
Revolving Loan subject to the Master Agreement.
(8) The exercise of the LIBOR Option will not result in more than
3 separate LIBOR subcontracts in the collective aggregate being in
existence between BORROWER and LENDER at any one time.
Notwithstanding the foregoing, if BORROWER properly elects the
Extended Maturity Date, there may only be 2 additional separate
LIBOR subcontract at any one time.
(h) In the event, and on each occasion, that on or before the date upon
which a LIBOR Based Interest Period is to commence, LENDER shall have in its
sole discretion exercised in good faith using reasonable commercial judgment
made a determination (which determination shall be conclusive and binding upon
BORROWER) that a LIBOR Based Rate cannot be determined or that the current LIBOR
Based Rate will not adequately and fairly reflect the cost to LENDER of making
or maintaining any Principal Balance of any such LIBOR Based Loan, LENDER shall
so notify BORROWER and the Principal Balance with respect to which BORROWER has
exercised the LIBOR Option, shall, as applicable, bear interest or continue to
bear interest at the Prime Based Rate.
(i) In all events, interest shall be payable monthly on an accrued basis on
the last day of each and every calendar month and shall be calculated on the
basis of a year consisting of 360 days and paid for actual days elapsed.
(j) (1) On and after the occurrence of an Event of Default hereunder or
after the Maturity Date, all Outstanding Advances shall, unless otherwise agreed
by LENDER, bear interest at the Default Rate.
(2) In addition, interest on the Revolving Loan will be calculated at
the Default Rate prior to the declaration of an Event of Default in the event
BORROWER does not supply or cause to be delivered to LENDER any information
required by this Agreement or any of the Loan Documents by the dates such
information is due (including any grace period allowed by this Agreement).
(3) It is nonetheless understood that LENDER's acceptance of payment
at the Default Rate does not otherwise prevent LENDER from otherwise declaring
an Event of Default as a result of BORROWER's failure to perform or observe any
of the foregoing.
(k) All agreements between BORROWER and LENDER are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason of acceleration
of maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to LENDER for the use or the forbearance of the
indebtedness evidenced hereby exceed the maximum permissible under applicable
law. As used herein, the term "applicable law" shall mean the law in effect as
of the date hereof provided, however, that in the event there is a change in the
law which results in a higher permissible rate of interest, then this Agreement
shall be governed by such new law as of its effective date. In this regard, it
is expressly agreed that it is the intent of BORROWER and LENDER in the
execution, delivery and acceptance of this Agreement to contract in strict
compliance with the laws of the State of New Jersey from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision
hereof or of any of the Loan Documents at the time of performance of such
provision shall be due, shall involve transcending the limit of such validity
prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
circumstances whatsoever LENDER should ever receive as interest an amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between BORROWER and LENDER.
2.7 PAYMENT OF LATE CHARGES. Any payment of interest received more than 10
days after the payment's due date, if accepted by LENDER, will be subject to a
late charge of 5% of the total interest installment. Nothing in the foregoing is
intended to mean that LENDER will accept any payment after the payment's due
date (after any applicable "grace" period). Nothing in the foregoing is intended
to mean that LENDER's acceptance of any payment more than 10 days after the
payment's due date, other than acceptance of payment of all sums outstanding
under the Revolving Loan, is a cure of any default.
2.8 AUTHORIZATION TO CHARGE ACCOUNTS. BORROWER hereby authorizes LENDER to
charge and effect payment as of each due date of all interest and other amounts
(including principal) due under the Revolving Loan and this Agreement by
increasing the principal balance of the Revolving Loan as though an Advance were
taken by BORROWER against the Revolving Loan in the amount of any payment
effected by LENDER. The foregoing is defined as the "Authorization to Charge".
2.9 TERMINATION BY BORROWER OR LENDER AND PREMIUMS DUE ON PREPAYMENT.
(a) Generally. The Revolving Loan relationship shall continue in full force
and effect until the Maturity Date (unless the term of this Agreement or
LENDER's Revolving Loan relationship with BORROWER is sooner accelerated or
terminated or modified as provided herein).
(b) Termination by LENDER. LENDER may terminate this Agreement on written
notice to BORROWER on or after the occurrence of an Event of Default or as
otherwise allowed by this Agreement.
(c) Termination by BORROWER. BORROWER may, at its option and upon at least
thirty (30) days prior written notice to LENDER, terminate this Agreement;
provided, however, no such termination shall be effective until BORROWER has
paid all of the Liabilities in immediately available funds. Any notice of
termination given by BORROWER shall be irrevocable unless LENDER otherwise
agrees in writing, and LENDER shall have no obligation to make any Advances or
other financial accommodations on or after the termination date stated in such
notice. BORROWER may elect to terminate this Agreement in its entirety only. In
the event that interest on any portion or portions of the Revolving Loan is
being determined at a LIBOR Based Rate, such portion or portions may be prepaid
at any time but such prepayment must be made for the entirety of the portion for
which LENDER has entered into contracts relating to LIBOR pricing. Partial
prepayments of any such portion or portions are not allowed. In the event of any
such prepayment, the provisions of Section 2.10 shall apply.
(d) Termination Charges. At the effective date of termination of this
Agreement for any reason (and whether by LENDER or by BORROWER), BORROWER shall
pay to LENDER (in addition to the then outstanding principal, accrued interest
and other charges owing under the terms of this Agreement and any of the other
Loan Documents and in addition to any amounts payable under Section 2.10) as a
premium or liquidated damages for the loss of the bargain and not as a penalty,
the following, as applicable:
(1) When Extended Maturity Date Is Not Applicable:
(A) If BORROWER has not selected the Extended Maturity Date and
termination occurs during the period commencing on the date hereof
and ending on the third anniversary of the date hereof, BORROWER
shall pay a prepayment premium equal to $250,000 (i.e., 1% of the
face amount of the Revolving Loan).
(2) When Extended Maturity Date Is Applicable:
(A) If BORROWER has selected the Extended Maturity Date and
termination occurs during the period commencing on the date hereof
and ending on the third anniversary of the date hereof, BORROWER
shall pay a prepayment premium equal to $250,000 (i.e., 1% of the
face amount of the Revolving Loan).
(B) If BORROWER has selected the Extended Maturity Date and
termination occurs during the period commencing on the day
immediately following the third anniversary of the date hereof and
ending on the fourth anniversary of the date hereof, BORROWER
shall pay a prepayment premium equal to $187,500 (i.e., 3/4% of
the face amount of the Revolving Loan).
(C) If BORROWER has selected the Extended Maturity Date and
termination occurs during the period commencing on the day
immediately following the fourth anniversary of the date hereof
and ending on the fifth anniversary of the date hereof, BORROWER
shall pay a prepayment premium equal to $125,000 (i.e., 1/2% of
the face amount of the Revolving Loan).
(e) Effect of Termination. All of the Liabilities shall be immediately due
and payable upon the termination date stated in any notice of termination of
this Agreement. All undertakings, agreements, covenants, warranties and
representations of BORROWER contained in the Loan Documents shall survive any
such termination and LENDER shall retain its security interest and liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until BORROWER has indefeasibly paid the
Liabilities to LENDER in full, in immediately available funds, together with the
applicable termination charge, if any. Notwithstanding the payment in full of
the Liabilities, LENDER shall not be required to terminate its security
interests and liens in the Collateral unless, with respect to any loss or damage
LENDER may incur as a result of dishonored checks or other items of payment
received by LENDER from BORROWER or any Account Debtor and applied to the
Liabilities, LENDER shall, at its option, (i) have received a written agreement,
executed by BORROWER and by any person whose loans or other Advances to BORROWER
are used in whole or in part to satisfy the Liabilities, indemnifying LENDER
from any such loss or damage; or (ii) have retained any monetary reserves or
security interest and liens on the Collateral for such period of time as LENDER,
in its reasonable discretion, may deem necessary to protect LENDER from any such
loss or damage.
(f) Yield Maintenance Provisions Survive. In the event that interest on any
portion or portions of the Revolving Loan is being determined at a LIBOR Based
Rate, such portion or portions may be prepaid at any time but such prepayment
must be made for the entirety of the portion for which LENDER has entered into
contracts relating to LIBOR pricing. Partial prepayments of any such portion or
portions are not allowed. In the event of any such prepayment, the provisions of
Section 2.10 shall apply.
(g) Rights of LENDER Also Continue. Despite any modification or termination
of the Revolving Loan relationship, whether by BORROWER or by LENDER, LENDER's
rights under this Agreement shall continue to remain in full force and effect
(as modified in the case of any modification and despite any acceleration in the
case of any acceleration and despite any termination in the case of any
termination) until all Liabilities are paid in full.
2.10 YIELD MAINTENANCE AND INDEMNIFICATION RELATING TO LIBOR BASED
INTEREST.
(a) BORROWER hereby agrees to indemnify LENDER against any loss or expense
which LENDER may sustain or incur as a consequence of (1) any failure by
BORROWER to borrow all or any portion of any Principal Balance (relating to
Advances Outstanding under the Revolving Loan as to which BORROWER has elected
to have interest determined or to be determined, as applicable, at a LIBOR Based
Rate and as more fully defined above) or (2) the receipt or recovery by LENDER
of all or any part of any Principal Balance prior to the maturity thereof
whether by voluntary or involuntary prepayment, acceleration or otherwise.
(b) Without limiting the effect of the foregoing, the amount to be paid by
BORROWER to LENDER in order to indemnify LENDER for any loss occasioned by any
of the events described in the preceding provisions of this Section, and as
liquidated damages therefor, shall be equal to the following amount:
The current rate for United States Treasury securities (Bills on
a discounted basis shall be converted to a bond equivalent) with
a maturity closest to the maturity date of the LIBOR Based
Interest Period chosen pursuant to the LIBOR Option and as to
which the prepayment is made shall be subtracted from the "cost
of funds" component of the LIBOR Based Rate in effect at the
time of the prepayment. If the result is zero or a negative
number, there shall be no yield maintenance fee. If the result
is a positive number, then the resulting percentage shall be
multiplied by the amount of the Principal Balance being prepaid.
The resulting amount shall be divided by 360 and multiplied by
the number of days remaining in the term of the LIBOR Based
Interest Period chosen pursuant to the LIBOR Option as to which
the prepayment is made. Said amount shall be reduced to present
value calculated by using the number of days remaining in the
designated term and using the above referenced United States
Treasury security rate and the number of days remaining in the
term of the LIBOR Based Interest Period chosen pursuant to the
LIBOR Option as to which the prepayment is made. The resulting
amount shall be the yield maintenance fee due to LENDER upon any
prepayment of any Principal Balance. Such yield maintenance fee
shall be paid, if due under the formula set forth above, upon
the receipt or recovery by LENDER of all or any part of any
Principal Balance prior to the maturity thereof whether by
voluntary or involuntary prepayment, acceleration or otherwise.
(c) A certificate as to any additional amounts payable pursuant to this
Section setting forth the basis and method of determining such amounts shall be
conclusive, absent manifest error, as to the determination by LENDER set forth
therein if made reasonably and in good faith. BORROWER shall pay any amounts so
certified to it by LENDER within 10 days of receipt of any such certificate.
(d) The indemnities provided for herein shall survive payment in full of
the principal amount of the Revolving Loan and the interest due thereon.
(e) Nothing in the foregoing shall in any way limit any obligations of
BORROWER under any Master Agreement.
2.11 EVIDENCE OF REVOLVING LOAN INDEBTEDNESS.
(a) The Revolving Loan is evidenced by BORROWER's certain master promissory
revolving note dated even date herewith and made payable to the order of LENDER.
The amounts due under such note shall be payable as provided in this Agreement.
(b) LENDER is hereby authorized by BORROWER to record on LENDER's records
all advances made by LENDER to BORROWER under the Revolving Loan and all
interest and other amounts due thereon and all payments made on account of
principal and/or interest and/or such other amounts. The aggregate unpaid
principal and/or interest and/or other amounts entered and shown on LENDER's
records shall further evidence the principal and/or interest and/or other
amounts owing and unpaid on the Revolving Loan. LENDER may from time to time
render a statement of the aforementioned records. LENDER will use good efforts
to render such statement monthly. If BORROWER fails to object to any such
statement within sixty (60) days after it is received by BORROWER, such
statement shall be deemed to be an account stated and binding upon BORROWER,
provided, however, that nothing in the foregoing shall prevent LENDER or
BORROWER from correcting manifest errors in such statements. Notwithstanding the
foregoing, the following shall apply:
(1) any failure by LENDER to enter on its records the date and amount of
any advance or interest or other amount due on the Revolving Loan or LENDER's
failure to render any such statement shall not, however, limit or otherwise
affect the obligations of BORROWER under this Agreement or under the Revolving
Loan to repay the principal amount of the advances, re-advances, borrowings and
re-borrowings made by LENDER to BORROWER under the Revolving Loan, together with
all interest accruing and other amounts due thereon.
(2) LENDER's failure to enter on its records the date and amount of any
payment made by BORROWER shall not, however, limit or otherwise affect the right
of BORROWER under the Revolving Loan to demonstrate its payment of any Advance
or any interest accruing and other amounts due thereon.
(c) The foregoing note (and all extensions, modifications [including
without limitation modifications increasing or decreasing the amount of the
Revolving Loan], refinancings, renewals, substitutions, replacements and/or
redatings thereof) and the records of LENDER indicating Advances made hereunder,
accrued interest and other charges due thereon, and payments made by BORROWER on
account of such Advances, interest and charges is referred to as the "Revolving
Note" in this Agreement.
2.12 NOTICES RELATING TO ADVANCES.
(a) Subject to any special notice requirements relating to BORROWER's
exercise of any LIBOR Option, BORROWER shall give LENDER written notice of each
borrowing of each Advance (in each case, a "Borrowing Notice"). Each such
written notice shall be irrevocable and shall be effective only if received by
LENDER, subject to any special notice requirements relating to BORROWER's
exercise of any LIBOR Option, not later than 11 a.m., New York City time, on the
date that is one Business Day prior to the date of borrowing.
(b) Each such notice of borrowing shall specify the amount to be borrowed
or prepaid, the date of borrowing (which shall be a Business Day).
(c) Notwithstanding the foregoing, as it relates to any borrowing of an
Advance, LENDER may in its discretion rely on and act on oral requests made by
BORROWER and the making of any requested Advance shall conclusively establish
BORROWER's obligation to repay such Advance in accordance with this Agreement.
(d) Also notwithstanding the foregoing, unless payment is otherwise timely
made by BORROWER, the becoming due of any Advance or other obligation required
to be paid under this Agreement or any Loan Document shall be deemed irrevocably
to be a request by BORROWER for an Advance on the due date of, and in the amount
required to pay, such Advance or other obligation which has become due. In
addition, the presentation by BORROWER for payment by LENDER of any check or
other item of payment drawn on any demand deposit account of BORROWER at LENDER
shall be deemed irrevocably to be a request by BORROWER for an Advance in the
amount of such check or other item of payment, provided, however, that BORROWER
understands and agrees that LENDER has no obligation to honor drafts presented
against any demand deposit account having insufficient balances even if BORROWER
has the ability to borrow under the Revolving Loan.
2.13 APPLICATION OF PAYMENTS.
(a) Prior to the occurrence of an Event of Default, payments received by
LENDER as payments due on the Revolving Loan shall be applied against amounts
owing under the Revolving Loan and this Agreement, in the following order unless
otherwise determined by LENDER in its discretion: first to expenses of LENDER,
then to interest and then to principal.
(b) On and after the occurrence of an Event of Default, LENDER may apply
all payments and other sums of money received by it from or on account of
BORROWER towards the satisfaction of those Liabilities which LENDER in its sole
discretion deems fit.
2.14 OBLIGATIONS ABSOLUTE. The obligations of BORROWER under this Agreement
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, and such obligations shall not be affected, modified or impaired
upon the happening from time to time of any event, including without limitation
any of the following, whether or not with notice to, or consent of, BORROWER:
(a) LENDER's taking or not taking any of the actions referred to in the
Loan Documents;
(b) LENDER's release (whether with or without consideration), impairment,
failure to perfect a security interest in, exchange, surrender, substitution or
modification of (1) any Collateral or (2) any other collateral or security given
by BORROWER or (3) any collateral or security given by GUARANTOR or (4) any
Proceeds of the foregoing;
(c) any failure, omission or delay on the part of LENDER to enforce, assert
or exercise any right, power or remedy conferred on it in the Loan Documents or
any other action or acts on the part of LENDER;
(d) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets, marshaling of assets and
liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or
readjustment, or other similar proceedings which affect GUARANTOR or any of its
assets;
(e) LENDER's compromise, settlement, release (whether with or without
consideration), discharge, change, modification, amendment (whether material or
otherwise) or termination of any or all of the obligations, duties, covenants or
agreements of GUARANTOR under any of the Loan Documents;
(f) the default or failure of BORROWER or GUARANTOR fully to perform any of
the obligations set forth in the Loan Documents;
(g) LENDER's inability to recover payment from any person or entity under
the Loan Documents; or
(h) the existence of any claim, setoff, defense or other rights which
BORROWER or GUARANTOR may have at any time against any person whether in
connection with this Agreement, the other Loan Documents or any unrelated
transactions.
2.15 FEES.
(a) Commitment Fee: BORROWER shall pay LENDER a Commitment Fee of $16,776
(payable in monthly installments of $466 on the first day of each and every
calendar month beginning July 1, 2003 and continuing until paid in full),
provided, however, that if BORROWER elects the Extended Maturity Date, the
Commitment Fee shall be $35,400 (payable in monthly installments of $590 on the
first day of each and every calendar month beginning July 1, 2003 and continuing
until paid in full). The aforementioned Commitment Fee shall be considered
earned ratably over the term of the Revolving Loan.
(b) Unused Revolving Loan Facility Fee: In the event that average daily
usage under the Revolving Loan during any calendar month or part thereof falls
below the maximum amount which may be borrowed under the Revolving Loan,
BORROWER shall pay LENDER an unused Revolving Loan fee on the short fall
determined at a rate equal to 1/4 of one percent per annum. Following the end of
each calendar month, LENDER will xxxx BORROWER for the unused Revolving Loan
facility fee, if any, then due and BORROWER shall pay the fee within 10 days
after the receipt of such xxxx.
(c) Collateral Management Fee: BORROWER shall pay LENDER a Collateral
Management Fee as more fully set forth in Article V.
(d) Verification Fee: BORROWER shall pay LENDER an Accounts Verification
Fee as more fully set forth in Article V. On the date hereof, there is no
Verification Fee.
(e) Field Examination Fee: BORROWER shall pay LENDER a Field Examination
Fees as more fully set forth in Article V.
2.16 ADDITIONAL COSTS; CAPITAL REQUIREMENTS.
(a) In the event that any existing or future law or regulation, guideline
or interpretation thereof, by any court or administrative or governmental
authority charged with the administration thereof, or compliance by LENDER with
any request or directive (whether or not having the force of law) of any such
authority shall impose, modify or deem applicable or result in the application
of, any capital maintenance, capital ratio or similar requirement against loan
commitments or other obligations entered into by LENDER hereunder, and the
result of any event referred to above is to impose upon LENDER or increase any
capital requirement applicable as a result of the making or maintenance of
LENDER's commitment hereunder or otherwise (which imposition of capital
requirements may be determined by LENDER's reasonable allocation of the
aggregate of such capital increases or impositions), then, upon demand made by
LENDER as promptly as practicable after it obtains knowledge that such law,
regulation, guideline, interpretation, request or directive exists and
determines to make such demand, BORROWER shall immediately pay to LENDER from
time to time as specified by LENDER additional commitment fees which shall be
sufficient to compensate LENDER for such imposition of or increase in capital
requirements together with interest on each such amount from the date demanded
until payment in full thereof at the Default Rate. A certificate setting forth
in reasonable detail the amount necessary to compensate LENDER as a result of an
imposition of or increase in capital requirements submitted by LENDER to
BORROWER shall be conclusive, absent manifest error, as to the amount thereof.
For purposes of this Section, all references to "LENDER" shall be deemed to
include any participant in LENDER's commitment hereunder, provided, however,
that the foregoing shall not require BORROWER to pay more under this Section
because of the existence of such participants than BORROWER would pay to LENDER
if there were no participants.
(b) In the event that any Regulatory Change shall: (1) change the basis of
taxation of any amounts payable to LENDER under this Agreement or the Revolving
Note (other than taxes imposed on the overall net income of LENDER for any such
Advances by the United States of America or the jurisdiction in which LENDER has
its principal office); or (2) impose or modify any reserve, Federal Deposit
Insurance Corporation premium or assessment, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, LENDER; or (3) impose any other
conditions affecting this Agreement in respect of Advances or any such
extensions of credit, assets, deposits or liabilities; and the result of any
event referred to in clause (1), (2) or (3) above shall be to increase LENDER's
costs of making or maintaining any Advances including, without limitation, its
commitment hereunder, or to reduce any amount receivable by LENDER hereunder in
respect of its commitment hereunder (such increases in costs and reductions in
amounts receivable are hereinafter referred to as "Additional Costs"), then, in
each case, upon demand made by LENDER as promptly as practicable after it
obtains knowledge that such a Regulatory Change exists and determines to make
such demand (a copy of which demand shall be delivered to LENDER), BORROWER
shall pay to LENDER from time to time as specified by LENDER, additional
commitment fees or other amounts which shall be sufficient to compensate LENDER
for such increased cost or reduction in amounts receivable by LENDER from the
date of such change, together with interest on each such amount from the date
demanded until payment in full thereof at the Prime Based Rate and, if not paid
within 30 days after demand, then with interest at the Default Rate. All
references to any "LENDER" shall be deemed to include any participant in
LENDER's commitment hereunder, provided, however, that the foregoing shall not
require BORROWER to pay more under this Section because of the existence of such
participants than BORROWER would pay to LENDER if there were no participants.
(c) Determinations by LENDER for purposes of this Section of the effect of
any Regulatory Change on its costs of making or maintaining Advances or on
amounts receivable by it in respect of Advances, and of the additional amounts
required to compensate LENDER in respect of any Additional Costs, shall be set
forth in writing in reasonable detail and shall be conclusive, absent manifest
error.
(d) In the event that LENDER demands compensation under this Section, then
without limiting or reducing the obligations of BORROWER hereunder, LENDER shall
take reasonable steps to mitigate the circumstances resulting in such demand,
provided, however, that LENDER shall not be required to take such steps if, in
its opinion, such steps (1) would be inconsistent with LENDER's internal
policies, (2) would or might have an adverse effect upon LENDER's business,
operations, or financial condition or (3) would result in any cost, liability or
exposure to LENDER.
ARTICLE III
COLLATERAL
3.1 CROSS COLLATERALIZATION. BORROWER agrees that payment and performance
of all Liabilities shall be secured by each and all of the following: (a) all
Collateral hereinafter set forth in this Article III, (b) all Collateral now or
hereafter given by BORROWER to LENDER and (c) all products and Proceeds of the
foregoing.
3.2 ACCESSIONS. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all Accessions, as defined herein, presently owned by
BORROWER or hereafter existing, created or acquired by it.
3.3 ACCOUNTS RECEIVABLE. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants to
LENDER a first security interest in all Accounts, as defined herein, presently
owned by BORROWER or hereafter existing, created or acquired by it.
3.4 BOOKS AND RECORDS. To secure the payment and performance of all
Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants to
LENDER a first security interest in all of BORROWER's Books and Records, as
defined herein, presently owned by BORROWER or hereafter existing, created or
acquired by it.
3.5 CHATTEL PAPER. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all of BORROWER's Chattel Paper, as defined herein, whether
presently owned by BORROWER or hereafter acquired by it, including but not
limited to all such Chattel Paper, and now or hereafter left in the possession
of LENDER for any purpose.
3.6 COMMERCIAL TORT CLAIMS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants to
LENDER a first security interest in all of BORROWER's Commercial Tort Claims, as
defined herein, presently owned by BORROWER or hereafter acquired by it.
3.7 CONSIGNMENTS. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all of BORROWER's Consignments, as defined herein,
presently owned by BORROWER or hereafter acquired by it, including without
limitation, (a) BORROWER's rights to the underlying Goods in any Consignment
where Goods of BORROWER are delivered to a merchant for the purpose of sale and
the merchant (1) deals in Goods of that kind under a name other than that of
BORROWER; (2) is not an auctioneer; and (3) is not generally known by its
creditors to be substantially engaged in selling the Goods of others and (b)
BORROWER's rights to the underlying Goods in any Consignment where Goods of a
third party are delivered to BORROWER for the purpose of sale.
3.8 CONTRACT RIGHTS. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all Contract Rights, as defined herein, presently owned by
BORROWER or hereafter acquired by it.
3.9 DEPOSIT ACCOUNTS. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby assigns to LENDER and
hereby grants to LENDER a first security interest in each and all the following:
(1) the balance of all Deposit Accounts, now or hereafter
existing, of BORROWER with LENDER or any LENDER's Affiliate
(including Fleet National Bank) or in transit to any of them; and
(2) all money, instruments, securities, documents, credits,
claims, and other property of BORROWER, now or hereafter or for
any purpose (including safe-keeping or pledge or security for any
of the Liabilities) in the possession, custody, safekeeping or
control of LENDER or any LENDER's Affiliate (including Fleet
National Bank) or in transit to any of them; and
(3) any sum now or hereafter owed by LENDER or any LENDER's
Affiliate (including Fleet National Bank) in any capacity to
BORROWER whether due or not; and
(4) all additions, substitutions, replacements, and increments to
the foregoing property, as well as proceeds of all of the
foregoing property in whatever form, including cash, negotiable
instruments and other instruments for the payment of money.
3.10 EQUIPMENT. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all of BORROWER's Equipment, as defined herein, whether
presently owned by BORROWER or hereafter acquired by it, and wherever located.
3.11 GENERAL INTANGIBLES. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants to
LENDER a first security interest in all of BORROWER's General Intangibles, as
defined herein, whether presently owned by BORROWER or hereafter acquired by it.
3.12 GOODS. To secure payment and performance of all Liabilities, BORROWER
hereby creates in favor of LENDER and hereby grants to LENDER a first security
interest in all of BORROWER's Goods, as defined herein, whether presently owned
by BORROWER or hereafter acquired by it.
3.13 INSTRUMENTS. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all of BORROWER's Instruments as defined herein, whether
presently owned by BORROWER or hereafter acquired by it, including but not
limited to all such Instruments now or hereafter left in the possession of
LENDER for any purpose, including but not limited for the purpose of collection.
3.14 INVENTORY. To secure payment and performance of all Liabilities,
BORROWER hereby creates in favor of LENDER and hereby grants to LENDER a first
security interest in all of BORROWER's Inventory, as defined herein, whether
presently owned by BORROWER or hereafter acquired by it, and wherever located.
3.15 ALL OTHER BUSINESS ASSETS. (a) To secure payment and performance of
all Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants a
first security interest in all of BORROWER's other business assets, whether
presently owned by BORROWER or hereafter acquired by it, including without
limitation the following categories of assets as defined in Revised Article 9:
Inventory, Equipment (and any Accessions thereto), Instruments (including
promissory notes), Documents, Accounts (including Health-Care-Insurance
Receivables), Chattel Paper (whether tangible or electronic), Deposit Accounts,
Letter-of-Credit Rights (whether or not the letter of credit is evidenced by a
writing), Commercial Tort Claims, Securities and all other Investment Property,
General Intangibles (including payment intangibles and software), Supporting
Obligations, and any and all proceeds of any thereof, wherever located, whether
now owned and hereafter acquired. (b) If BORROWER shall at any time, whether or
not the aforesaid Revised Article 9 is in effect in any jurisdiction, acquire a
Commercial Tort Claim, as defined in said Revised Article 9, BORROWER shall
immediately notify LENDER in a writing signed by BORROWER of the brief details
thereof and grant to LENDER in such writing a security interest therein and in
the proceeds thereof, with such writing to be in form and substance satisfactory
to LENDER.
3.16 PRODUCTS AND PROCEEDS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of LENDER and hereby grants to
LENDER a security interest in Proceeds and in all products of the Collateral.
ARTICLE IV
REPRESENTATIONS
In order to induce LENDER to enter into this Agreement and to perform its
obligations hereunder, BORROWER makes the following representations to LENDER,
each and all of which shall survive the execution and delivery of this Agreement
for the duration of the term, or the extended or renewed term or terms of, this
Agreement and each and all of which shall be deemed to be reconfirmed and
restated at and as of the date of BORROWER's submission of the certifications
required by Section 5.6(c) and Section 5.6(d) of this Agreement:
4.1 (a) BORROWER is a corporation of the State of Delaware with its
principal place of business at 000 Xxxxxx Xxxx, X.X. Xxx 0000, Xxxx Xxxxxxx,
Xxxxxx Xxxxxx, Xxx Xxxxxx 00000.
(b) BORROWER's correct legal name is "FIVE STAR GROUP, INC."
(c) (1) On the date hereof, BORROWER uses no trade marks or trade names
except the trade xxxx and trade name "Five Star Products".
(2) BORROWER will not use any other trade name without first giving LENDER
prior notice thereof.
(d) (1) On the date hereof, BORROWER owns no patents, trade names (except
as set forth above) or trade marks.
(2) BORROWER will advise LENDER of any patents, trade names or trade marks
which it acquires and, if requested by LENDER, will provide LENDER with a
security interest therein.
(e) BORROWER is engaged in the business of the wholesale distribution of
home decorating, hardware and finishing products and business directly related
thereto.
(f) The stock of BORROWER is wholly owned by GUARANTOR.
(g) BORROWER has no Subsidiaries.
4.2 BORROWER is in good standing under the laws of the State of Delaware,
the state of its incorporation.
4.3 BORROWER is qualified to do business and is in good standing in the
States of Connecticut, New Jersey, Massachusetts, New York and Maryland and in
each jurisdiction where the nature of its business requires it to be so
qualified except where the failure to so qualify would not have a Materially
Adverse Effect on the business, properties or financial condition of BORROWER.
4.4 BORROWER has the corporate power to execute, deliver and carry out this
Agreement and its Board of Directors has duly authorized and approved the terms
described herein and the taking of any and all action contemplated herein.
4.5 BORROWER will use proceeds of the Revolving Loan only for working
capital purposes and no other.
4.6 On the date hereof, the Collateral given by BORROWER is located only at
the Collateral Locations.
4.7 BORROWER has full power and authority to execute, deliver and perform
this Agreement, the Revolving Note and all of the other Loan Documents to which
it is party and to perform and observe the terms and provisions hereof and
thereof.
4.8 This Agreement is a legal, valid and binding agreement of BORROWER
enforceable against BORROWER in accordance with its terms and the Revolving Note
and all of the other Loan Documents to which it is a party are similarly valid,
binding and enforceable against BORROWER in accordance with their respective
terms except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, relating to or affecting the enforcement of creditors' rights
generally and except that the remedy of specific performance and other equitable
remedies are subject to judicial discretion.
4.9 No consent or approval of any trustee or holder of any indebtedness or
obligation of BORROWER is necessary in connection with the execution and
delivery of this Agreement or the Revolving Note or any of the other Loan
Documents to which it is a party or any transaction contemplated hereby or
thereby.
4.10 No consent, permission, authorization, order or license of any
governmental authority is necessary in connection with the execution and
delivery of this Agreement or the Revolving Note or any of the other Loan
Documents to which it is a party or any transaction contemplated hereby or
thereby except where the failure to obtain any such consent, permission,
authorization, order or license would not create a Materially Adverse Effect on
the business, properties or financial condition of BORROWER.
4.11 There is no provision of any indenture or material agreement, written
or oral, to which to the best of BORROWER's knowledge, BORROWER is a party or
under which it is obligated which would be contravened in any material respect
by the execution and delivery of this Agreement or the Revolving Note or any of
the other Loan Documents to which it is a party or by the performance of any
material provision, condition, covenant or other term hereof or thereof except
where such contravention would not have a Materially Adverse Effect on the
business, properties or financial condition of BORROWER.
4.12 To the best of BORROWER's knowledge, there is no statute, rule or
regulation, or any judgment, decree or order of any court or agency binding on
BORROWER which would be contravened in any Materially Adverse Effect by the
execution and delivery of this Agreement or the Revolving Note or any of the
other Loan Documents to which it is a party or by the performance of any
material provision, condition, covenant or other term hereof or thereof except
where such contravention would not have a Materially Adverse Effect on the
business, properties or financial condition of BORROWER.
4.13 On the date of this Agreement, BORROWER has good and marketable title
to all of its properties and assets, real, personal and mixed, as reflected on
the most recent balance sheet of BORROWER, and none of said properties or assets
is subject to any mortgage, pledge, lien, security interest, encumbrance, charge
or title retention or other security agreement or arrangement of any character
whatsoever except for Permitted Liens and except as set forth on the
Certification as to Liens and except where the existence of such lien would not
otherwise violate Section 7.4 or Section 7.5 hereof and would also not have a
Materially Adverse Effect on the business, properties or financial condition of
BORROWER.
4.14 (a) BORROWER has timely filed all returns and information and other
reports required of it under all Federal, State, local and foreign tax laws to
which it is subject, except where failure to file would not have a Materially
Adverse Effect on the business, properties or financial condition of BORROWER;
(b) all such returns and reports are true, correct and complete in all
material respects;
(c) there are not now in effect any extensions of time in which to assess
additional taxes against BORROWER;
(d) BORROWER has paid or made adequate provision for the full payment of
all fees, taxes, interest and penalties which have been incurred or are due and
payable by it or which have been asserted or proposed to be asserted against it,
except for those taxes being contested in good faith and by appropriate
proceedings diligently pursued and for which BORROWER has established cash
reserves to the satisfaction of LENDER;
(e) the liability for taxes shown on the most current financial statements
of BORROWER submitted to LENDER is sufficient for the payment of all material
Federal, State, local and foreign taxes attributable or with respect to all
periods, or portions thereof, prior to the date of such financial statements
remaining unpaid as of such date and any interest thereon to such date; and
(f) BORROWER is not now being audited by any tax authority nor are there
pending any unresolved issues arising from prior audits, except as set forth in
the most current financial statements of BORROWER submitted to LENDER.
4.15 No material action or proceeding is now pending or, to the knowledge
of BORROWER is threatened, against BORROWER at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of any federal,
state or local government or of any agency or subdivision thereof, or before any
arbitrator or panel of arbitrators, other than claims covered by insurance that
could reasonably be expected to have a Materially Adverse Effect on the
business, properties or financial condition of BORROWER.
4.16 (a) There are no collective bargaining agreements or other labor
contracts covering BORROWER other than the Agreement between Five Star Group,
Inc. and Local No. 11 affiliated with International Brotherhood of Teamsters
effective December 16, 2000 through December 20, 2003.
(b) Except as set forth in subsection (a) above, no such collective
bargaining agreement or other labor contract will expire during the term of this
Agreement.
(c) To the best of BORROWER's knowledge, no union or other labor
organization is seeking to organize, or to be recognized as bargaining
representative for, a bargaining unit of employees of BORROWER.
(d) To the best of BORROWER's knowledge, there is no pending or, threatened
strike, work stoppage, material unfair labor practice claim or charge,
arbitration or other material labor dispute against or affecting BORROWER or its
employees which would have a Materially Adverse Effect on the business,
properties or financial condition of the BORROWER.
(e) There has not been, during the five year period prior to the date
hereof, a strike, work stoppage, material unfair labor practice claim or charge,
arbitration or other material labor dispute against or affecting BORROWER or any
of its employees.
(f) There are no actions, suits, charges, demands, claims, counterclaims or
proceedings pending or, to the best of BORROWER's knowledge, threatened against
BORROWER, by or on behalf of, or with, its employees, other than employee
grievances arising in the ordinary course of business that are not, in the
aggregate, material.
4.17 No event has occurred and is continuing which would constitute an
Event of Default as defined in Article VII or which, upon a lapse of time and
notice, if applicable, would become such an Event of Default and no borrowing by
BORROWER under this Agreement constitutes an event of default under any
agreement to which BORROWER is a party.
4.18 All financial statements of BORROWER and all written information and
other written data furnished by BORROWER to LENDER are complete and correct in
all material respects, and such financial statements have been prepared in
accordance with GAAP and fairly represent the financial condition of BORROWER as
of such date subject to year-end audit adjustments in the case of interim
financial statements. Since such date there has been no material adverse change
in BORROWER's financial condition sufficient to impair its ability to repay all
of the Liabilities except for those taxes being contested in good faith and by
appropriate proceedings diligently pursued and for which BORROWER has
established reserves to the satisfaction of LENDER. BORROWER does not have any
material contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate, except as disclosed
in such statements, information and data.
4.19 (a) Neither BORROWER nor any employee benefit plan maintained by
BORROWER is in violation of any of the provisions of the Employee Retirement
Income Security Act of 1974, 29 U.S.C. ss.1001 et seq., as from time to time
amended ("ERISA") or any regulations issued thereunder by the United States
Treasury Department, the Department of Labor and the Pension Benefit Guaranty
Corporation, and no prohibited transaction (within the meaning of Title I of
ERISA or the Internal Revenue Code of 1986, as amended (the "Code")) has
occurred and is continuing with respect to any such plan, in each instance where
such violation or prohibited transaction or any liabilities resulting directly
or indirectly therefrom individually or in the aggregate could reasonably be
expected to have a Materially Adverse Effect on the business, results of
operations, prospects, financial condition or any material asset of BORROWER or
on the ability of BORROWER to execute this Agreement or consummate any of the
transactions contemplated hereby. For purposes of this Agreement, the term
"employee benefit plan" means any plan of a type described in Section 3(3) of
ERISA in respect of which BORROWER is an "employer" as defined in Section 3(5)
of ERISA (herein called the "Benefit Plans" or individually the "Benefit Plan").
(b) With respect to each such Benefit Plan and any trusts created
thereunder:
(1) all reports, forms and other information required to be filed with any
government agency or to be distributed or made available to any Benefit Plan
participant or beneficiary of any Benefit Plan have been filed, distributed or
made available;
(2) all Benefit Plans have been amended to the extent currently required by
the applicable provisions of ERISA and the Code;
(3) BORROWER has made all contributions required to be made with respect to
each Benefit Plan;
(4) with respect to each group health plan maintained by BORROWER, the
requirements of Sections 601 through 608 of ERISA have been complied with;
(5) no Benefit Plan and no trust thereunder has been terminated;
(6) there has been no "reportable event", as defined in Section 4043 of
ERISA, or any "accumulated funding deficiency";
(7) BORROWER has not incurred any liability to the Pension Benefit Guaranty
Corporation.
(c) Neither BORROWER nor any officer, director or other employee of
BORROWER, nor any "party in interest" or "disqualified person", as such terms
are defined in Section 3 of ERISA and Section 4975 of the Code, has, with
respect to any Benefit Plan, engaged in or been a party to any "prohibited
transaction", as such term is defined in Section 4975 of the Code or Section 406
of ERISA, in connection with which BORROWER or any officer, director or other
employee of BORROWER, or any Benefit Plan, could reasonably be expected to,
directly or indirectly, be subject to either a penalty, assessed pursuant to
Section 502(i) of ERISA, or a tax imposed by Section 4975 of the Code.
4.20 BORROWER is not 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 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 the Revolving Loan will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of such
Board of Governors.
4.21 BORROWER is indebted to SELLER under the Subordinated Seller Note in
the principal amount of $4,500,000.
ARTICLE V
POSITIVE COVENANTS
BORROWER covenants and agrees that, until the full and final payment of the
Liabilities, unless LENDER waives compliance in writing:
5.1 Payment of Liabilities.
(a) BORROWER will repay the Revolving Loan, in accordance with the terms of
the Revolving Note and this Agreement.
(b) Unless otherwise provided herein, BORROWER will repay LENDER's
customary service charges associated with any accounts maintained at LENDER.
(c) Unless otherwise provided herein, BORROWER will repay the customary
service charges associated with any accounts or services maintained at any
LENDER's Affiliate.
(d) BORROWER will repay all other Liabilities in accordance with the terms
thereof and any note and/or notes and/or records of LENDER evidencing the same.
5.2 Preservation of Existence and Prohibition against Dissolution, Mergers,
Acquisitions, Formation of Subsidiaries. BORROWER will (a) preserve and maintain
its corporate existence (provided, however, that nothing in the foregoing shall
prohibit GP Strategies Corporation and/or any of its affiliates and/or any of
its officers or directors from increasing its ownership interest in GUARANTOR,
BORROWER's parent), (b) maintain all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business except if no
Materially Adverse Effect results from the loss of any such rights, privileges
and franchises and (c) conduct its business in an orderly and regular manner.
5.3 Preservation of Assets . BORROWER will maintain, preserve and keep its
properties and assets or cause the same to be maintained, preserved and kept, in
good repair, working order and condition excepting reasonable wear and tear;
make or cause to be made all necessary and proper repairs, replacements and
renewals thereto as shall from time to time be necessary; and make or cause to
be made all necessary and proper substitutions, additions, modifications and
improvements as may be necessary to preserve (a) the value of its properties and
assets, (b) their usefulness to BORROWER and (c) their fitness for their
intended purposes, provided that nothing in this Section shall prevent BORROWER
from discontinuing the operation and maintenance of any of its properties and
disposing of same if in the judgment of BORROWER such is desirable in the
conduct of its business and such discontinuance and disposition do not in the
aggregate have a Materially Adverse Effect on BORROWER.
5.4 Payment of Taxes.
(a) (1) BORROWER will pay as they become due, all taxes (or will provide
adequate reserves therefor), assessments, levies and other governmental charges,
by whatever name called, that may at any time be lawfully assessed or levied
against or with respect to BORROWER, the Collateral or any other property
acquired by BORROWER in substitution for, as a renewal or replacement of, or
modification, improvement or addition to the Collateral (including, but not by
way of limitation, any tax, assessment or other governmental charge which, if
not paid, will become a lien or charge upon the Collateral).
(2) BORROWER will also pay all utilities and other charges incurred in the
operation, maintenance, use and upkeep of the Collateral or any part thereof.
(b) (1) If any lien shall be claimed which in LENDER's opinion might
possibly create a valid obligation having priority over the rights granted to it
herein, LENDER may, on prior notice to BORROWER, pay such taxes, assessments,
charges or claims, and the amount thereof, together with interest at the Default
Rate, shall be added to the Liabilities hereby secured.
(2) By its execution of this Agreement, BORROWER authorizes LENDER to
reimburse itself for any of its expenses associated with the above in the manner
set forth in the Authorization to Charge.
5.5 Cooperation and Further Assurances.
(a) At any time or from time to time when in the reasonable opinion of
LENDER or its counsel it shall be necessary or desirable, BORROWER will execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered any
supplement hereto or other mortgage, document, instrument, agreement, UCC-1
Financing Statement, UCC-3 Financing Statement, invoice, xxxx of lading,
shipping document and receipt or other writing as may reasonably be required for
perfecting the liens and security interests granted to LENDER hereunder,
correcting any inadequate or incorrect description of the Collateral or carrying
out the intention of or facilitating the performance of any term, covenant or
condition of this Agreement.
(b) In addition to the foregoing, LENDER may at any time and from time to
time, file financing statements, continuation statements and amendments that
describe the Collateral as all assets of BORROWER, or include words of similar
effect, and which contain any other information required by Revised Article 9
for the sufficiency, or filing office acceptance, of any financing statement,
continuation statement or amendment, including whether BORROWER is an
organization, the type of organization, and any organization identification
number issued to BORROWER. BORROWER agrees to furnish any such information to
LENDER promptly upon request. Any such financing statements, continuation
statements or amendments may be signed by LENDER on behalf of BORROWER, and may
be filed at any time in any jurisdiction, whether or not Revised Article 9 is
then in effect in that jurisdiction.
(c) BORROWER shall at any time and from time to time, whether or not
Revised Article 9 is in effect in any particular jurisdiction, take such steps
as LENDER may reasonably request for LENDER (1) to obtain an acknowledgment, in
form and substance satisfactory to LENDER, from any bailee having possession of
any of the Collateral that said bailee holds such Collateral for LENDER, (2) to
obtain "control" of any Investment Property, Deposit Accounts, Letter-of-Credit
Rights or Electronic Chattel Paper (as such terms are defined in Revised Article
9 with corresponding provisions in Revised Article 9, Sections 9-104, 9-105,
9-106 and 9-107 relating to what constitutes "control" for such items of
Collateral), with any agreements establishing control to be in form and
substance satisfactory to LENDER, and (3) to otherwise to insure the continued
perfection and priority of LENDER's security interest in any of the Collateral
and of the preservation of its rights therein, whether in anticipation of and/or
following the effectiveness of Revised Article 9.
(d) Nothing contained in this Section shall be construed to narrow the
scope of LENDER's security interest in any of the Collateral, or the perfection
or priority thereof, or to impair or otherwise limit any of the rights, powers,
privileges or remedies of LENDER hereunder.
5.6 Reporting Requirements.
(a) BORROWER shall maintain books and records in such detail, form and
scope as being currently maintained by BORROWER.
(b) In addition, BORROWER shall supply to LENDER on forms supplied by
LENDER or otherwise reasonably acceptable to LENDER, the information set forth
in the subsections below, it being understood that in the event that BORROWER
does not supply or cause to be delivered to LENDER the information set forth
below within 10 calendar days after BORROWER receives notice from LENDER that
such information is past due, interest on the Revolving Loan will be calculated
at the Default Rate during the time that BORROWER is not in compliance, it being
further understood that LENDER's acceptance of payment at the Default Rate does
not otherwise prevent LENDER from otherwise declaring an Event of Default as a
result thereof:
(1) At Least Weekly Collateral Reporting: Not in limitation of the
foregoing or of the right of LENDER to request other information in the exercise
of its reasonable commercial judgment, BORROWER shall submit at the time of each
request for an advance under the Revolving Loan but in no event less frequently
than weekly the information contained in the Borrowing Base Certificate, such
certificate to be submitted no later than Wednesday after the end of the
immediately preceding week and such information to include each of the following
to the extent not specifically provided for in the Borrowing Base Certificate:
(A) all deposit tickets (including collections in the form of cash
or checks);
(B) immediately upon their occurrences, reports and records of
merchandise returns or disputes, discounts, advertising
allowances, contraoffsets or any other offsets, volume discounts,
rebate arrangements, sales of samples, "xxxx and hold"
transactions, and any other factor which would dilute the value or
reduce the amount of any Account Receivable.
(2) Monthly Collateral Reporting: Also not in limitation of the foregoing
or of the right of LENDER to reasonably request other information in the
exercise of its reasonable commercial judgment, BORROWER shall submit on a
monthly basis the following information, to be submitted no later than 20 days
after the end of each calendar month: (A) detailed invoice date Accounts
Receivable aging, which detail individual Account Debtors' names, addresses,
amounts owed and days outstanding;
(B) aging schedules of accounts payable;
(C) Reconciliation Certificate, in the form attached hereto as
Exhibit "D"; and
(D) Collateral Update Certificate, in the form attached hereto as
Exhibit "C", including monthly Inventory reports showing the
amount of Inventory in stock and the location and cost thereof.
(c) Quarterly Financial Statements: Also not in limitation of the foregoing
or of the right of LENDER to reasonably request other information in the
exercise of its reasonable commercial judgment, BORROWER shall, so long as any
of the Liabilities remains outstanding (unless LENDER otherwise consents in
writing), deliver to LENDER as soon as available and in any event within 50 days
after the end of each fiscal quarter of BORROWER, each of the following:
(1) financial statements prepared internally by management substantially in
the same form (except for notes to the financial statements) as required for
GUARANTOR's consolidated annual financial statements with BORROWER and NPD
Trading (USA), Inc. (GUARANTOR's other subsidiary) and showing on a consolidated
basis the assets and liabilities of GUARANTOR, BORROWER and the aforementioned
NPD Trading (USA), Inc., at the end of said fiscal quarter and the results of
their consolidated operations during said fiscal quarter, prepared in accordance
with GAAP, all in reasonable detail and in each case duly certified in the form
attached hereto as Exhibit "E" by the principal financial officer of BORROWER as
having been prepared in accordance with GAAP and being correct and complete in
all material respects subject only to year end adjustments, it being understood
that, to the extent that GUARANTOR's quarterly report on Form 10-Q contains any
of the foregoing items, LENDER will accept GUARANTOR's report on Form 10-Q in
lieu of such items;
(2) a certificate of said officer in the form attached hereto as Exhibit
"F" (i) stating that such officer does not have any knowledge that an Event of
Default (or an event which, with notice or the lapse of time or both, would
constitute an Event of Default) exists or, if an Event of Default (or such other
event) does exist, a statement as to the nature thereof and the actions which
BORROWER proposes to take with respect thereto, and (ii) showing calculations in
reasonable detail of BORROWER's compliance at and as of the end of each such
fiscal quarter, with each financial ratio and requirement of Article V and
Article VI of this Agreement.
(d) Annual Financial Statements: Not in limitation of the foregoing or of
the right of LENDER to reasonably request other information in the exercise of
its reasonable commercial judgment, BORROWER shall, so long as any of the
Liabilities remains outstanding (unless LENDER otherwise consents in writing),
deliver to LENDER as soon as available and in any event within 105 days after
the end of each fiscal year of BORROWER, each of the following:
(1) an annual audit report for such year for GUARANTOR, including (A) on a
consolidated basis for BORROWER and the aforementioned NPD Trading (USA), Inc.,
their balance sheet and statements of operations, their cash flows and changes
in stockholders' equity for such fiscal year, setting forth in comparative form
the corresponding figures for the preceding fiscal year, prepared in accordance
with GAAP and all in reasonable detail and in each case duly certified by
independent certified public accountants of recognized standing acceptable to
LENDER, and (B) on a consolidating basis for GUARANTOR, BORROWER and the
aforementioned NPD Trading (USA), Inc., their balance sheet and statement of
operations, all in reasonable detail and duly certified in the form attached
hereto as Exhibit "E" by the principal financial officer of BORROWER as having
been prepared in accordance with GAAP and being correct and complete in all
material respects, it being understood that, to the extent that GUARANTOR's
annual report on Form 10-K contains any of the foregoing items, LENDER will
accept GUARANTOR's report on Form 10-K in lieu of such items;
(2) a copy of the management letter, if any, issued by such accounting firm
to BORROWER; and
(3) a certificate of said accounting firm stating that, in the course of
auditing and reporting on the financial statements of BORROWER for such fiscal
year, they obtained no knowledge that BORROWER failed to comply with the terms,
covenants, provisions or conditions of Article V or Article VI hereof insofar as
such Articles relate to accounting matters or, if such accountants shall have
obtained knowledge of such failure, they shall disclose the failure in such
statement; and
(4) a certificate of the chief financial officer of BORROWER in the form
attached hereto as Exhibit "F" (A) stating that such officer does not have any
knowledge that an Event of Default (or an event which, with notice or the lapse
of time or both, would constitute an Event of Default) exists, or, if an Event
of Default (or such other event) does exist, a statement of the nature thereof
and the actions which BORROWER proposes to take with respect thereto and (B)
showing calculations in reasonable detail of BORROWER's compliance at and as of
the end of each such fiscal year with each financial ratio and requirement of
Article V and Article VI of this Agreement.
(e) Annual Tax Returns: BORROWER hereby covenants to furnish to LENDER, no
later than September 20 of each year, a true copy of the tax return of BORROWER
as filed with the Internal Revenue Service.
(f) Annual Projections: Not in limitation of the foregoing or of the right
of LENDER to request other information, BORROWER shall, so long as any of the
Liabilities remains outstanding (unless LENDER otherwise consents in writing),
deliver to LENDER as soon as available and in any event within 60 days prior to
the end of each of its fiscal years, annual projections for the immediately
upcoming fiscal year, prepared on an annual basis, and including balance sheet,
profit and loss and cash flow and in form acceptable to LENDER.
(g) Notice of Default: BORROWER hereby covenants to furnish to LENDER as
soon as possible and in any event within three days after it becomes aware of
the occurrence of each Event of Default (or each event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default) the
written statement of the chief financial officer of BORROWER setting forth
details of such Event of Default (or such other event) and the action which
BORROWER proposes to take with respect thereto.
(h) Notice of Adverse Condition: BORROWER hereby covenants to furnish to
LENDER as soon as possible the written statement of the chief financial officer
of BORROWER setting forth details of any action, event or condition of any
nature of which BORROWER is aware, which may reasonably be expected to have a
Materially Adverse Effect upon the business, assets or financial condition of
BORROWER or the value of the Collateral or the liens and security interests
granted to LENDER herein and the action which BORROWER proposes to take with
respect thereto.
(i) Notice of Litigation: BORROWER will notify LENDER in writing within a
reasonable time (which shall in no event exceed ten business days after
BORROWER's knowledge) of the commencement or threat of any litigation against
BORROWER which, if determined adversely to it, would result in its dissolution
or liquidation, prevent or materially impair it from conducting its business
substantially as now conducted, prevent or materially impair BORROWER from
repaying the Revolving Loan and the other Liabilities or prevent or materially
impair BORROWER from otherwise faithfully performing its obligations under this
Agreement or result in a material adverse change in BORROWER's business or
financial condition or affairs or creditworthiness. Without intending to limit
the generality of the foregoing, any litigation which seeks monetary damages
(whether compensatory or punitive) from BORROWER in an aggregate amount in
excess of $150,000.00 which is not covered by insurance shall be deemed to
constitute litigation of a character which must be reported to LENDER.
(j) Other Information: BORROWER will promptly after a written request
therefor provide LENDER with: (1) such other information regarding the
Collateral (including, without limitation, Accounts Receivable and Inventory) or
any Collateral Proceeds and the business, affairs and condition of BORROWER
(including, without limitation, projections) as LENDER may reasonably request
from time to time, and (2) such other financial data or information evidencing
compliance with the requirements of this Agreement, the Revolving Note and the
other Loan Documents, as LENDER may reasonably request from time to time.
5.7 Compliance with Laws. BORROWER will at all times comply with, or cause
to be complied with, all laws, statutes, rules, regulations, orders and
directions of any governmental authority having jurisdiction over it and its
business except for non-compliance that would not have singly or in the
aggregate have a Materially Adverse Effect on BORROWER.
5.8 Insurance. (a) BORROWER shall maintain insurance coverage as follows:
(1) Casualty Insurance: At BORROWER's expense, an original policy or
policies of insurance issued by financially sound and reputable insurer or
insurers satisfactory to LENDER (in the exercise of its reasonable commercial
judgment) insuring BORROWER's machinery, equipment, fixtures and personal
property against such perils and on such terms and in such amounts as is
customarily maintained by similar businesses. Without limiting the generality of
the foregoing, said insurance shall in no event be less than that amount
necessary to prevent BORROWER and LENDER from being deemed co-insurers under
applicable law (and in no event less than the replacement value of the property
insured) and shall insure against the hazards of fire, extended coverage,
vandalism, malicious mischief and sprinkler leakage and shall name LENDER as
mortgagee and loss payee, as its interests may appear. Such policy shall contain
a 30 day notice of cancellation and non-renewal provision.
(2) Liability Insurance: At BORROWER's expense, an original policy or
policies of liability insurance issued by financially sound and reputable
insurer or insurers satisfactory to LENDER (in the exercise of its reasonable
commercial judgment) and in amounts not less than $1,000,000/$3,000,000. Such
policy shall name LENDER as an additional insured, as its interests may appear,
and shall contain a 30 day notice of cancellation and non-renewal provision.
(b) Certificates evidencing the coverage afforded under BORROWER's policies
of insurance and, if requested, copies of all policies are to be delivered to
LENDER.
(c) If BORROWER fails to take the action called for herein, LENDER may, in
its discretion upon 10 days prior notice to BORROWER or such shorter period as
may be necessary to prevent a gap in insurance protection and coverage, obtain
insurance covering LENDER's interest in the Collateral and the amount of the
premium for said insurance, together with per annum interest at the Default
Rate, shall be added to the Liabilities and the repayment thereof shall be
secured by the Collateral.
(d) All rights to insurance proceeds are hereby assigned to LENDER to the
extent of the unpaid Liabilities.
(e) Unless otherwise agreed in writing, LENDER shall have the sole right,
in its own name or in BORROWER's name, to file claims under any insurance
policies, to receive and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.
(f) BORROWER shall have no claim against insurance proceeds until all of
the Liabilities are paid in full. LENDER shall not be responsible for any
failure to collect any insurance proceeds, regardless of the cause of such
failure. Nothing herein shall in any way affect LENDER's lien against the
Collateral or the liability of any person responsible for the payment of the
balance of the Liabilities.
(g) In the event the Collateral or any part thereof shall be damaged or
destroyed, LENDER, at its election, may (1) apply the insurance proceeds or any
part thereof to the payment of the Liabilities, whether the indebtedness be
matured or not, (2) use the same or any part thereof to fulfill any of the
covenants contained herein or in the other Loan Documents as LENDER may
determine, (3) use the same or any part thereof to replace or restore the
Collateral to the extent satisfactory to LENDER, or (4) release the same to
BORROWER.
(h) BORROWER agrees that in the event that the Collateral or any part
thereof shall be damaged or partially or totally destroyed there shall be no
abatement or reduction in the amounts payable hereunder and BORROWER shall
continue to be obligated to make such payments.
(i) Any monies released by LENDER to BORROWER or paid or applied on the
cost of replacement or restoration shall in no event be deemed a payment on any
of the Liabilities.
(j) Anything to the contrary herein contained notwithstanding, any proceeds
paid over to LENDER and not used for replacement or restoration shall be applied
to pay accrued interest and any other sums then due and owing to LENDER, and any
excess shall be paid over to BORROWER.
5.9 No Disposal of Collateral. (a) BORROWER will safeguard, protect and
hold all the Collateral for LENDER's account and make no disposition thereof
except in the regular course of business as hereinafter provided in this
Section.
(b) Until LENDER shall have given written notice to BORROWER that an Event
of Default has occurred and is continuing, any Collateral which may from time to
time remain in possession or control of BORROWER or any third party may be sold
and shipped to customers in the ordinary course of business, on open account and
on terms not exceeding the terms currently extended. LENDER shall have the right
to withdraw this permission at any time by written notice to BORROWER after an
Event of Default has occurred and is continuing, in which event no further
disposition shall be made of the Collateral without LENDER's written approval.
(c) The rights given BORROWER in subsection (b) above are expressly
conditioned upon BORROWER's forthwith transferring, assigning, endorsing,
delivering and turning over to LENDER all Collateral Proceeds, or causing all
such Collateral Proceeds to be forthwith transferred, assigned, endorsed,
delivered and turned over to LENDER, by deposit into one or more Lockboxes,
Blocked Accounts and/or such other place designated by LENDER (all as more fully
set forth in Section 2.5 above).
(d) Upon the sale, lease, transfer, exchange, or other disposition of the
Collateral, the security interests and liens created and provided for herein
shall without break in continuity and without further formality or act continue
in and attach to the instruments for the payment of money, Accounts Receivable,
Contract Rights, documents of title, shipping documents, Chattel Paper and all
other cash and non-cash Proceeds of such sale, lease, transfer, exchange or
disposition, including Collateral returned or rejected by customers or
repossessed by LENDER. As to any such sale, lease, transfer, exchange or
disposition, LENDER shall have all of the rights of an unpaid seller, including
stoppage in transit, replevin and reclamation.
5.10 LENDER's Power to Endorse Checks and Drafts. For purposes of
implementing this Agreement and also for purposes of paying and satisfying the
Liabilities, BORROWER hereby designates LENDER or LENDER's representative as its
attorney-in-fact with power to endorse its name upon any acceptances, cash
equivalents, checks, drafts, money orders, notes, instruments for the payment of
money and other evidences of payment or Collateral that may come into LENDER's
possession. BORROWER also designates LENDER or LENDER's representative as its
attorney-in-fact to sign BORROWER's name on any invoice or xxxx of lading
relating to any of the Accounts Receivable, drafts against Account Debtors, and
assignments and verifications of Accounts Receivable to any Account Debtor and
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. This power is
coupled with an interest and is irrevocable while any of the Liabilities remains
unpaid. As it relates for to action taken by LENDER or LENDER's representative
while acting as the aforesaid attorney-in-fact, neither LENDER nor LENDER's
representative shall itself, nor shall its respective directors, managers,
officers, employees or agents, be liable or responsible, directly or indirectly,
to the other for any action taken, or omitted to be taken by it in good faith,
or for the consequences of any oversight or error of judgment on its part
occurring in good faith, unless the taking of, or omitting to take, such action,
or such oversight or error in judgment by such party or its directors, managers,
officers, employees or agents, constitutes gross negligence or willful
misconduct.
5.11 Verification of Accounts Receivable.
(a) LENDER shall have the right at BORROWER's expense but no more
frequently than quarterly (unless an Event of Default has occurred and is
continuing) to obtain verifications from Account Debtors relating to the amount
and validity of any Account Receivable.
(b) Unless an Event of Default has occurred, there shall be no verification
expense. If an Event of Default has occurred, there shall be no limit on
LENDER's right to reimbursement.
(c) By its execution of this Agreement, BORROWER authorizes LENDER to
reimburse itself for any of its expenses associated with the above in the manner
set forth in the Authorization to Charge.
(d) Any verifications prepared or conducted by BORROWER or its accountants
shall be supplied to LENDER.
5.12 Permitted Access to Inspect Collateral and Records.
(a) LENDER shall have full access during normal business hours to, and the
right, through its officers, agents, attorneys or accountants and at BORROWER's
expense to: examine, check, inspect and make abstracts and copies from
BORROWER's books, accounts, orders, records, audits, correspondence, and all
other papers; confirm and verify all Accounts Receivable and the other
Collateral; enter upon BORROWER's premises during business hours and from time
to time, for the purpose of examining BORROWER's records concerning the
Collateral and for inspecting the Collateral and any and all records. So long as
no Event of Default has occurred and is continuing, LENDER's access shall be
upon reasonable request and upon prior notice to BORROWER, provided, however,
that nothing in the foregoing shall operate to limit or diminish LENDER's right
to examine BORROWER's records concerning the Collateral and for inspecting the
Collateral and any and all records relating thereto.
(b) BORROWER will reimburse LENDER for all of its examination fees incurred
by LENDER pursuant to the exercise of its rights under this Section.
(c) Unless an Event of Default has occurred, the reimbursement set forth in
subsection (b) above shall be paid at the rate of $833.34 per month, payable on
the first day of each and every calendar month beginning July 1, 2003, with a
maximum of $10,000 being paid in any one calendar year. If an Event of Default
has occurred, there shall be no limit on LENDER's right to reimbursement.
(d) By its execution of this Agreement, BORROWER authorizes LENDER to
reimburse itself for any of its expenses associated with the above in the manner
set forth in the Authorization to Charge.
5.13 Collateral Management Fee.
(a) In order to compensate LENDER for its expenses in monitoring, reviewing
and analyzing BORROWER's records, financial statements and Collateral, BORROWER
will pay LENDER a Collateral Management Fee of $3,500 a month, payable on the
first day of each and every calendar month beginning July 1, 2003. (b) By its
execution of this Agreement, BORROWER authorizes LENDER to reimburse itself for
any of its expenses associated with the above in the manner set forth in the
Authorization to Charge.
5.14 Operating Accounts. BORROWER will maintain its primary operating
account(s) at any entity (including Fleet National Bank) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, LENDER or any entity under the control of
FleetBoston Financial Corporation (or any successor thereto), it being
understood and agreed that all such accounts are agreed to be Deposit Accounts
for purposes of this Agreement and shall be subject to a Blocked Account
agreement to the extent required by LENDER.
5.15 Disclosure of Certain Information. Upon request by LENDER, BORROWER
agrees to authorize and direct all accountants and auditors employed by it at
any time during the term of this Agreement to exhibit and deliver to LENDER
copies of any of its financial statements, trial balances or other accounting
records of any sort in their possession, and to disclose to LENDER any
information they may have concerning its financial status and business
operations.
5.16 Warranties relating to Accounts Receivable and Inventory. (a) Except
as may otherwise be specifically provided as to a particular Account, invoice or
other writing, BORROWER warrants that as to each Account against which LENDER
has made or is making an Advance that each such Account is an Eligible
Receivable. (b) Except as may otherwise be specifically provided as to
particular Inventory, BORROWER warrants that as to all Inventory against which
LENDER has made or is making an Advance that such Inventory is Eligible
Inventory.
5.17 If any of the Accounts Receivable includes a charge for any tax
payable to any governmental tax authority, LENDER is hereby authorized in
LENDER's reasonable discretion, to pay the amount thereof to the proper taxing
authority for BORROWER's account and to charge the amount of such tax against a
specially designated demand deposit account of BORROWER at LENDER or, in the
absence of such designation or in the event that there are insufficient funds in
such designated account, then to any demand deposit account of BORROWER at
LENDER as of each due date. In the event that there are insufficient funds in
any such account on any applicable payment due date, then LENDER is hereby
authorized to effect payment by charge against the Revolving Loan by increasing
the principal balance of the Revolving Loan as though an Advance were taken by
BORROWER against the Revolving Loan in the amount of any payment effected by
LENDER. BORROWER shall notify LENDER if any Accounts Receivable include any tax
due to any such taxing authority, and in the absence of notice to LENDER, LENDER
shall have the right to retain the full proceeds of such Accounts Receivable,
and shall not be liable for any taxes that may be due from BORROWER by reason of
the sale and delivery creating such Accounts Receivable.
5.18 Subordination Agreement. BORROWER will obtain the Subordination
Agreement required by this Agreement so as to postpone the payment of the
"Claims" specified in the Subordination Agreement to the extent specified
therein.
5.19 Minimum Tangible Net Worth.
(a) As at March 31, 2003 and continuing at all times thereafter, BORROWER
shall maintain its Tangible Net Worth at a minimum of $6,000,000.
(b) For purposes of this covenant, "Tangible Net Worth" shall be determined
by the following formula:
the sum on a consolidated basis of the par value of the
capital stock of GUARANTOR, BORROWER and NPD Trading (USA),
Inc. +/-surplus/deficit (excluding any surplus or deficit
representing the cumulative income statement component of any
change in valuation arising under the Master Agreement) + debt
whose payment is subordinated to the prior payment of the
Liabilities (the category "Other Comprehensive Income or Loss"
to the extent that it relates to any value created by the
Master Agreement to be excluded from this calculation)
less
the sum on a consolidated basis of treasury stock of
GUARANTOR, BORROWER and NPD Trading (USA), Inc. + unamortized
debt discount and expense + book value of good will
(excluding, however, any negative good will) + book value of
trademarks + book value of tradenames + book value of patents
+ deferred charges + intangible assets + all indebtedness due
from BORROWER's officers or shareholders (provided, however,
that the effect of negative goodwill on the income statement
and balance sheet of GUARANTOR, BORROWER and NPD Trading
(USA), Inc. shall be excluded)
(c) Compliance with this Section will be tested annually and quarterly by
reference to GUARANTOR's annual and quarterly financial statements required to
be submitted pursuant to Section 5.6 above and by using GAAP.
(d) Although compliance with this Section will be tested annually and
quarterly as aforesaid, nothing in the foregoing shall prevent LENDER from
determining that this covenant has been violated prior to LENDER's receipt of
any of the aforementioned financial statements in the event LENDER obtains
actual knowledge that BORROWER is not in compliance with this covenant.
5.20 Total Debt to Tangible Net Worth.
(a) As at December 31, 2002, and as at each fiscal year end thereafter,
BORROWER shall maintain the ratio of its Total Debt to its Tangible Net Worth at
no more than 6.0 to 1.0.
(b) For purposes of this covenant, "Total Debt" shall include all debt owed
by BORROWER, including all debt owed by BORROWER to LENDER but excluding any
debt whose payment has been subordinated to the prior payment of
the Liabilities. For purposes of this covenant, Tangible Net Worth shall have
the meaning given that term in Section 5.19(b) above.
(c) Compliance with this Section will be tested annually by reference to
GUARANTOR's annual consolidated financial statements required to be submitted
pursuant to Section 5.6 above and by using GAAP.
(d) Although compliance with this Section will be tested annually as
aforesaid, nothing in the foregoing shall prevent LENDER from determining that
this covenant has been violated prior to LENDER's receipt of any of the
aforementioned financial statements in the event LENDER obtains actual knowledge
that BORROWER is not in compliance with this covenant.
5.21 Fixed Charge Coverage:
(a) As at March 31, 2003 and continuing at all times thereafter, BORROWER
must maintain its "Fixed Charge Coverage" at a ratio greater than 1.1 to 1.0.
(b) Compliance with this Section will be tested quarterly and annually,
using a rolling 12 month basis, by reference to BORROWER's annual and quarterly
financial statements required to be submitted pursuant to Section 5.6 above and
by using GAAP.
(c) (1) For purposes of this covenant, "Fixed Charge Coverage" means the
following ratio:
BORROWER's earnings before interest, taxes, depreciation and amortization
and before the income statement component of any change in valuation
arising under the Master Agreement
LESS BORROWER's"Unfunded Capital Expenditures"
LESS cash payment of income tax liabilities
LESS cash distributions to stockholders
LESS all scheduled principal payments paid as allowed by the Subordinated
Seller Note (at the present time there being no scheduled payments allowed by
the Subordinated Seller Note)
--divided by--
interest expense PLUS the current maturities of
long term debt as reported in BORROWER's annual financial statements
for its fiscal year immediately preceding the applicable test period
PLUS current maturities of Capital Lease Obligations as reported in BORROWER's
annual financial statements for its fiscal year immediately preceding the
applicable test period
(2) For purposes of this covenant, "Unfunded Capital Expenditures" means
BORROWER's Capital Expenditures minus any loans and/or leases incurred in
financing any such Capital Expenditures.
(3) For purposes of this covenant, "Capital Expenditures" means any
expenditures (including deposits, and Capitalized Lease Obligations based upon
the present value of all future payments) for assets which the purchaser
contemplates will be used or usable in fiscal years subsequent to the year of
acquisition, all computed in accordance with GAAP.
(4) For purposes of this covenant, a "Capitalized Lease Obligation" means
an obligation to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real and/or personal property which
obligation is required to be classified and accounted for as a capital lease on
a balance sheet prepared in accordance with GAAP, and for purposes hereof the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with GAAP.
(d) Although compliance with this Section will be tested quarterly and
annually as aforesaid, nothing in the foregoing shall prevent LENDER from
determining that this covenant has been violated prior to LENDER's receipt of
any of the aforementioned financial statements in the event LENDER obtains
actual knowledge that BORROWER is not in compliance with this covenant.
5.22 Performance Benchmarks.
(a) (1) LENDER agrees that BORROWER shall be entitled to the reduced rate
of interest set forth in Section 2.6 above in the event that BORROWER achieves
and maintains certain performance benchmarks relating to BORROWER's"Fixed Charge
Coverage" (as defined in this Article V), such performance benchmarks being
referred to, as applicable, as "Performance Benchmark #1" and "Performance
Benchmark #2" and "Performance Benchmark #3" in this Agreement.
(2) For purposes of determining BORROWER's "Fixed Charge Coverage", such
"Fixed Charge Coverage" shall be determined in accordance with the definition
set forth in the "Fixed Charge Coverage" covenant of this Article V.
(b) (1) In order for BORROWER to meet Performance Benchmark #1, BORROWER's
Fixed Charge Coverage must, as at the end of BORROWER's applicable fiscal
quarter for the 12 months ending such fiscal quarter, be greater than 1.25 to
1.0.
(2) In order for BORROWER to meet Performance Benchmark #2, BORROWER's
Fixed Charge Coverage must, as at the end of BORROWER's applicable fiscal
quarter for the 12 months ending such fiscal quarter, be greater than 1.35 to
1.0.
(3) In order for BORROWER to meet Performance Benchmark #3, BORROWER's
Fixed Charge Coverage must, as at the end of BORROWER's applicable fiscal
quarter for the 12 months ending such fiscal quarter, be greater than 1.40 to
1.0.
(c) The determination whether BORROWER has satisfied Performance Benchmark
#1 or Performance Benchmark #2 or Performance Benchmark #3 for purposes of
obtaining the interest rate reduction allowed by Section 2.6 above will be made
as set forth in said Section 2.6.
(d) The determination whether BORROWER remains in compliance with
Performance Benchmark #1 and Performance Benchmark #2 and Performance Benchmark
#3 for purposes of continuing the interest rate reduction allowed by Section 2.6
above will be made as set forth in Section 2.6.
(e) In the event that BORROWER qualifies for the aforementioned interest
rate reduction, BORROWER must continue to satisfy the requisite Performance
Benchmark #1 and Performance Benchmark #2 and Performance Benchmark #3 at all
times or the interest rate reduction will be lost effective upon the earlier to
occur of LENDER's receipt of any financial statements indicating non-compliance
or LENDER's receipt of actual knowledge that BORROWER is not in compliance with
the requisite Performance Benchmark. In the event that BORROWER loses its
entitlement to an interest rate reduction as aforesaid, BORROWER will not be
entitled to again seek to qualify for an interest rate reduction until LENDER's
receipt of BORROWER's next quarterly financial statements.
5.23 Inventory Appraisals: On a frequency requested by LENDER but in no
event more frequently than once a year unless an Event of Default has occurred,
BORROWER shall provide LENDER at BORROWER's expense such an appraisal of
BORROWER's Inventory prepared on a "walk-through" basis (provided no Event of
Default has occurred, otherwise based on an appraisal quality specified by
LENDER) and otherwise in form and substance satisfactory to LENDER.
5.24 Landlord's Consents. BORROWER will obtain the Landlord's Consents for
the Collateral Locations and any others which LENDER using its reasonable
commercial judgment deems necessary or desirable, provided, however, that in the
event that despite BORROWER's best efforts BORROWER is unable to deliver to
LENDER any Landlord's Consent required hereunder, LENDER will forbear from
requiring such Landlord's Consent upon the condition that BORROWER shall, from
time to time upon the reasonable request of LENDER (such request to be deemed
reasonable if, so long as no Event of Default has occurred and is continuing,
made no more than twice a year), report to LENDER all rent payments made by
BORROWER to the owner or owners of the Collateral Locations, it being understood
that BORROWER's failure to provide LENDER with proof of any such rent payment
within 15 days of LENDER's request therefor will be sufficient evidence that an
Event of Default has occurred hereunder. During any period of time that BORROWER
fails to provide LENDER with proof of its rent payment as aforesaid and not in
limitation of any other right of LENDER hereunder, LENDER may reserve from
BORROWER's availability to borrow under the Revolving Loan the amount of rental
which became due and owing from the date of the last proof submission by
BORROWER.
ARTICLE VI
NEGATIVE COVENANTSNEGATIVE COVENANTS
BORROWER covenants and agrees, that until the full and final payment of the
Liabilities, unless LENDER waives compliance in writing:
6.1 Change in Location: BORROWER will not (a) change the location of its
chief executive office or where its books and records are maintained or (b)
change the names currently used by it for billing or other business purposes or
(c) change or add to any Collateral Locations unless in each case above (i)
BORROWER shall have given LENDER 30 days written notice of such change and (ii)
LENDER shall have received such instruments or documents as LENDER may
reasonably request so that such change will not impair or negatively affect the
security interests granted to LENDER hereunder.
6.2 Changes in Business: Except as permitted by the proviso set forth in
Section 5.2 hereof, BORROWER will not (a) make any material change in its
business or in the nature of its operation, or (b) liquidate or dissolve itself
(or suffer any liquidation or dissolution) or (c) convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, assets or business except
sales of Inventory or other Collateral in the ordinary course of business and
for a fair consideration or (d) dispose of any shares of stock or any
indebtedness, whether now owned or hereafter acquired (provided, however, that
nothing in the foregoing shall prohibit GP Strategies Corporation and/or any of
its affiliates and/or any of its officers or directors from increasing its
ownership interest in GUARANTOR, BORROWER's parent), or (e) discount, sell,
pledge, hypothecate or otherwise dispose of Accounts Receivable.
6.3 Dissolution, Mergers, Acquisitions, Formation of Subsidiaries: BORROWER
will (a) not dissolve or otherwise dispose of all or a substantial part of its
assets, (b) not consolidate with or merge into another corporation or entity
permit one or more other corporations or entities to consolidate with or merge
into it (whether or not BORROWER or any Subsidiary is the surviving entity)
except that GUARANTOR may merge with and into BORROWER so long as BORROWER is
the survivor, (c) not acquire all or substantially all of the assets or any of
the capital stock of any corporation or other entity and (d) not form or create
or acquire any Subsidiary.
6.4 Liens: Except for Permitted Liens or as disclosed in the Certification
as to Liens, BORROWER will not suffer to exist any lien, encumbrance, mortgage
or security interest on property on which a lien has been given to LENDER
pursuant to this Agreement or any of the other Loan Documents.
6.5 Indebtedness: BORROWER will not create, incur, permit to exist or have
outstanding any indebtedness, except:
(a) indebtedness of BORROWER to LENDER under this Agreement and the
Revolving Note;
(b) accrued taxes, assessments and governmental charges not yet due and
payable, non-interest bearing accounts payable and accrued liabilities, and
non-interest bearing deferred liabilities other than for borrowed money (e.g.,
deferred compensation and deferred taxes), in each case incurred and continuing
in the ordinary course of business;
(c) indebtedness secured by any purchase money security interests to the
extent this Agreement may expressly allow any such purchase money security
interest and Capitalized Lease Obligations (as defined below in this Article),
in each case incurred only if, after giving effect thereto, the limit on Capital
Expenditures set forth in this Article would not be breached;
(d) debt under the Subordination Agreement.
6.6 Guaranties: (a) BORROWER will not assume, endorse, be or become liable
for, or guarantee, the obligations of any person or entity, except by the
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business.
(b) For the purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or otherwise, to purchase,
repurchase or otherwise acquire indebtedness of any other person or entity, or
to purchase, sell or lease, as lessee or lessor, property or services, in any
such case primarily for the purpose of enabling another person to make payment
of any indebtedness, or to make any payment (whether as an advance, capital
contribution, purchase of an equity interest or otherwise) to assure a minimum
equity, asset base, working capital or other balance sheet or financial
condition, in connection with the indebtedness of another person or entity, or
to supply funds to or in any manner invest in another person or entity in
connection with the indebtedness of such person or entity.
6.7 ERISA:
(a) BORROWER will not permit the occurrence of any Termination Event under
ERISA, or the occurrence of a termination or partial termination of a Defined
Contribution Plan which would result in a liability to BORROWER or any
Subsidiary in excess of $150,000.
(b) BORROWER will not engage, or permit BORROWER or any Subsidiary to
engage, in any prohibited transaction under Section 406 of ERISA or Section 4975
of the Internal Revenue Code, for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Internal Revenue Code
is imposed in excess of $150,000.
(c) BORROWER will not engage or permit BORROWER or any Subsidiary to
engage, in any breach of fiduciary duty under Part 4 of Title I of ERISA; or
(d) BORROWER will not permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability to
BORROWER or any Subsidiary individually or together with all similar liabilities
and increases, is material to BORROWER or any Subsidiary; or
(e) BORROWER will not fail, or permit BORROWER or any Subsidiary to fail,
to establish, maintain and operate each Employee Benefit Plan in compliance in
all material respects with the provisions of ERISA, the Internal Revenue Code
and all other applicable laws and the regulations and interpretations thereof.
6.8 Compromise of Claims: BORROWER will not compromise, settle or adjust
any claims which are part of or which affect the Collateral except in the
ordinary course of business.
6.9 Bank Accounts: BORROWER will not establish any deposit or other bank
account with any financial institution unless such account is approved in
writing by LENDER.
6.10 Subordinated Debt:
(a) BORROWER will not amend or change, or consent to any amendment or
change, with respect to, the Subordination Agreement or any other document
evidencing or securing the debt subordinated thereby.
(b) BORROWER will not directly or indirectly, make any principal payment or
distribution of or on account of any debt subordinated by the Subordinated Debt
except to the extent expressly allowed therein.
6.11 Loans and Investments: BORROWER will not make loans or advances or
make or suffer to exist, any investment in any person or entity, including,
without limitation, any loans to or investments in GUARANTOR and/or NPD Trading
(USA), Inc., or any shareholder, director, officer or employee of BORROWER,
GUARANTOR and NPD Trading (USA), Inc., provided however, that notwithstanding
the foregoing, BORROWER may make investments in:
(a) obligations issued or guaranteed by the
United States of America;
(b) certificates of deposit, bankers acceptances
and other "money market instruments" issued
by any bank or trust company organized under
the laws of the United States of America or
any State thereof and having capital and
surplus in an aggregate amount of not less
than $100,000,000;
(c) open market commercial paper bearing the
highest credit rating issued by Standard &
Poor's Corporation or by another nationally
recognized credit rating agency;
(d) repurchase agreements entered into with any
bank or trust company organized under the
laws of the United States of America or any
State thereof and having capital and surplus
in an aggregate amount of not less than
$100,000,000 relating to United States of
America government obligations; and
(e) shares of "money market funds", each having
net assets of not less than $100,000,000;
in each case maturing or being due or payable in full not more than 365
days after BORROWER's acquisition thereof.
6.12 Fiscal Year: BORROWER will not change its fiscal year without the
prior written consent of LENDER, which consent shall not be unreasonably
withheld.
6.13 Amendment of Corporate Documents: BORROWER will not modify, amend,
supplement or terminate, or agree to modify, amend, supplement or terminate, its
certificate of incorporation or by-laws except for amendments that would not
adversely affect any Liabilities, any Collateral, any rights or remedies of
LENDER hereunder or the ability of BORROWER to perform its obligations, or
conduct its business as previously conducted.
6.14 No Year-to-Date Net Loss in Excess of $300,000:
(a) BORROWER will not suffer a year-to-date Net Loss of $300,000 or more in
any fiscal year.
(b) LENDER will determine compliance with this Section on a quarterly basis
(commencing with the fiscal quarter ending March 31, 2003) using the
consolidated financial information required to be submitted by BORROWER under
this Agreement and by using GAAP.
(c) Although compliance with this Section will be tested quarterly as
aforesaid, nothing in the foregoing shall prevent LENDER from determining that
this covenant has been violated prior to LENDER's receipt of any of the
aforementioned financial statements in the event LENDER obtains actual knowledge
that BORROWER is not in compliance with this covenant.
6.15 Losses in Any Two Consecutive Fiscal Quarters:
(a) BORROWER will not suffer a Net Loss for any two consecutive fiscal
quarters.
(b) LENDER will determine compliance with this Section on a quarterly basis
(commencing with the fiscal quarter ending March 31, 2003) using the
consolidated financial information required to be submitted by BORROWER under
this Agreement and by using GAAP.
(c) Although compliance with this Section will be tested quarterly as
aforesaid, nothing in the foregoing shall prevent LENDER from determining that
this covenant has been violated prior to LENDER's receipt of any of the
aforementioned financial statements in the event LENDER obtains actual knowledge
that BORROWER is not in compliance with this covenant. 6.16 Capital
Expenditures:
(a) BORROWER will not incur Capital Expenditures in an amount exceeding
$500,000 in any fiscal year.
(b) For purposes of this covenant, the term "Capital Expenditures" shall
have the meaning given that term in Section 5.21.
(c) LENDER will determine compliance with this Section on an annual basis
(commencing with the fiscal year ending December 31, 2002) using the
consolidated financial information required to be submitted by BORROWER under
this Agreement and by using GAAP.
(d) Although compliance with this Section will be tested annually as
aforesaid, nothing in the foregoing shall prevent LENDER from determining that
this covenant has been violated prior to LENDER's receipt of any of the
aforementioned financial statements in the event LENDER obtains actual knowledge
that BORROWER is not in compliance with this covenant.
6.17 Margin Securities: BORROWER will not own, purchase or acquire (or
enter into any contract to purchase or acquire) any "margin security" as defined
by any regulation of the Board of Governors as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, LENDER is to have received an opinion of
counsel satisfactory to LENDER to the effect that such purchase or acquisition
will not cause this Agreement to violate Regulations G or U or any other
regulation of the Board of Governors then in effect.
ARTICLE VII
EVENTS OF DEFAULT
Regardless of the terms of any of the other Loan Documents,
the occurrence of any of the following events shall be deemed an event of
default (an "Event of Default") hereunder:
7.1 (a) BORROWER shall fail to pay on its due date any interest or
principal or premium due on the Revolving Loan or the Revolving Note; (b)
BORROWER shall fail to pay within 10 days of its due date any other payment due
under this Agreement;
7.2 BORROWER shall fail to perform or observe any covenant of BORROWER
contained in Section 5.6, Section 5.18, Section 5.19, Section 5.20 or Section
5.21 or Article VI of this Agreement;
7.3 (a) any representation or warranty herein or in any of the other Loan
Documents or in connection with any transaction contemplated hereby or thereby
shall prove to have been false or misleading in any material respect when made;
(b) to the extent that any aforementioned representation is made to the
best of the information, knowledge or belief of BORROWER but the underlying
representation is nonetheless false or misleading in any material respect, an
Event of Default will be deemed to have occurred hereunder if BORROWER fails to
make correct the underlying representation 30 Business Days after notice from
LENDER to do so;
7.4 (a) LENDER shall fail to have a legal, valid and binding first lien on
the Accounts Receivable and Inventory; (b) Except for Permitted Liens and except
as may be set forth on the Certification as to Liens, LENDER shall fail to have
a legal, valid and binding first lien on any of the other Collateral;
7.5 (a) any consensual lien or encumbrance or any security interest,
perfected or otherwise, other than the security interests specifically provided
for or permitted hereunder, shall be created in the Collateral;
(b) any non-consensual lien, including but not limited to any judgment
against BORROWER or GUARANTOR, becomes an encumbrance against BORROWER's
Accounts or Inventory and BORROWER does not remove or discharge such lien within
10 days after notice from LENDER to do so;
(c) any non-consensual lien, including but not limited to any judgment
against BORROWER or GUARANTOR in any amount in excess of $50,000 becomes an
encumbrance against any of the other Collateral and BORROWER does not remove or
discharge such lien within 30 days after notice from LENDER to do so;
7.6 BORROWER or GUARANTOR shall admit in writing an inability to pay debts
as they come due or shall file any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors;
7.7 an involuntary petition shall be filed under any bankruptcy or
insolvency statute against BORROWER or GUARANTOR and such petition is not
discharged or stayed within 60 days from the date of the filing of the petition;
7.8 a receiver or trustee shall be appointed to take possession of the
properties of BORROWER or GUARANTOR;
7.9 BORROWER or GUARANTOR ceases all or substantially all of its
operations;
7.10 any default shall occur under any other loan agreement involving
either the borrowing of money or the advance of credit to which BORROWER or
GUARANTOR may be a party as borrower or guarantor and such default results in
the acceleration of the money owing under such other loan agreement;
7.11 BORROWER or GUARANTOR shall breach, violate or default under, any
term, condition, provision, representation or warranty contained in this
Agreement not specifically referred to in this Article VII and such breach,
default or violation is not cured within the earlier of (a) the time period
given by this Agreement for cure or (b) in the absence of this Agreement's
giving any such time period for cure, 30 Business Days after notice from LENDER
to do so;
7.12 any breach, default or violation shall occur under any of the terms,
conditions, representations, warranties or covenants contained in any of the
other Loan Documents and such breach, default or violation is not cured within
the earlier of (a) the time period given by any such other Loan Document for
cure or (b) in the absence of any such other Loan Document's giving any such
time period for cure, 30 Business Days after notice from LENDER to do so;
7.13 any of the Loan Documents (or any provision thereof) is claimed by
BORROWER or by GUARANTOR to be invalid or unenforceable;
7.14 BORROWER or GUARANTOR shall fail to obtain and deliver to LENDER any
mortgage, financing statement, subordination agreement or any other
documentation required to be signed or obtained as part of this Agreement or
shall have failed to take any action requested by LENDER to perfect or protect
the security interests provided for herein and such failure is not cured within
the earlier of (a) the time period given by this Agreement for cure or (b) in
the absence of this Agreement's giving any such time period for cure, 30
Business Days after notice from LENDER to do so;
7.15 GUARANTOR disclaims liability or seeks to terminate liability under
the Guaranty or GUARANTOR breaches any covenant, condition, warranty,
representation or other provision of the Guaranty;
7.16 BORROWER obtains any loan secured by Accounts Receivable or Inventory
from any source other than LENDER;
7.17 if BORROWER is not in compliance with the Lending Formula and BORROWER
fails to come into compliance with such Lending Formula immediately after
BORROWER receives notice that it is required to do so;
7.18 BORROWER shall fail to timely remit payment to any of the landlords of
any of the Collateral Locations or any default shall occur under any lease at
such location;
7.19 any other event occurs or condition exists which, in the opinion of
LENDER, constitutes a Materially Adverse Effect in the business condition or
financial status of BORROWER or which, in the opinion of LENDER, impairs the
ability of BORROWER to discharge its obligations hereunder or which causes
LENDER to deem itself insecure;
7.20 any other event occurs or condition exists which, in the opinion of
LENDER, constitutes a Materially Adverse Effect in the business condition or
financial status of GUARANTOR or which, in the opinion of LENDER, impairs the
ability of GUARANTOR to discharge its obligations under the Guaranty or which
causes LENDER to deem itself insecure.
ARTICLE VIII
REMEDIES
8.1 Upon the occurrence and continuance of an Event of Default, LENDER may
do any or all of the following at the same time or at different times:
(a) LENDER may, by written notice to BORROWER, declare the entire principal
amount of the Revolving Loan, or the unpaid balance thereof, together with all
accrued interest and all other lawful and proper charges thereon, immediately
due and payable whereupon all such sums shall become immediately due and payable
with interest thereafter at the Default Rate, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
BORROWER.
(b) LENDER may, by written notice to BORROWER, declare all other
Liabilities, together with all accrued interest and all other lawful and proper
charges thereon, to be forthwith due and payable with interest thereafter at the
Default Rate, whereupon all such sums shall become immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by BORROWER.
(c) LENDER may proceed with or without judicial process to take possession
of all or any part of the Collateral not already in the possession of LENDER.
BORROWER agrees that upon receipt of notice of LENDER's intention to take
possession of all or any part of said Collateral, BORROWER will do everything
reasonably necessary to make same available to LENDER.
(d) LENDER may assign, transfer and deliver at any time or from time to
time, in accordance with the Uniform Commercial Code, the whole or any portion
of any Collateral which is subject to the Uniform Commercial Code or any rights
or interests therein; and without limiting the scope of LENDER's rights
thereunder, sell such Collateral at a public or private sale, or in any other
manner, at such price or prices as LENDER may deem best, and either for cash or
credit, or for future delivery, at the option of LENDER, in bulk or in parcels
and with or without having such Collateral at the sale or other disposition.
LENDER shall have the right to be the purchaser at any public sale. Any
notification of a sale or other disposition of the Collateral or of any other
action by LENDER required to be given by LENDER to BORROWER will be sufficient
if given not less than ten (10) days prior to the day on which such sale or
other disposition will be made and in the manner set forth in Section 9.1; such
notification shall be deemed reasonable notice. In the event of a sale of such
Collateral, or any other disposition thereof, LENDER shall apply all proceeds
first to all costs and expenses of disposition, including attorneys' fees, and
then to the Liabilities of BORROWER to LENDER.
(e) LENDER may immediately, and without notice or other action, set-off and
apply against the Liabilities (1) any and all deposits, Deposit Accounts (as
defined in the UCC) and all other items described in Section 3.9 hereof and/or
(2) any sum owed by LENDER in any capacity to BORROWER whether due or not. ANY
AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE REVOLVING LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO THE FOREGOING, ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED. LENDER may do the foregoing even though some
or all of the Liabilities may be unmatured and regardless of the adequacy of any
other Collateral securing the Liabilities. LENDER shall be deemed to have
exercised such right of set-off and to have made a charge against any such sum
immediately upon the occurrence of such Event of Default, even though the actual
book entries may be made at some time subsequent thereto.
(f) LENDER may send notice of assignment and/or notice of LENDER's security
interest to any and all Account Debtors or any third party holding or otherwise
concerned with any of the Collateral, and thereafter, LENDER shall have the sole
right to collect the Accounts Receivable and/or take possession of the
Collateral. Any and all of LENDER's reasonable collection expenses, including
but not limited to stationery and postage, telephone and telegraph, secretarial
and clerical expenses and the salaries of any collection agencies or attorneys
utilized, shall be added to the Liabilities and charged against a specially
designated demand deposit account of BORROWER at LENDER or, in the absence of
such designation or in the event that there are insufficient funds in such
designated account, then to any demand deposit account of BORROWER at LENDER as
of each due date.
(g) LENDER may without notice to or consent from BORROWER, xxx upon or
otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise, upon any terms, any of the Accounts Receivable or any
securities, instruments or insurance applicable thereto and/or release the
Account Debtor thereon. LENDER is authorized and empowered to accept the return
of the Goods represented by any of the Accounts Receivable, without notice to or
consent by BORROWER all without discharging or in any way affecting BORROWER's
liability hereunder. LENDER does not, by anything herein or in any assignment or
otherwise, assume any obligations of BORROWER under any Account, contract or
agreement assigned to LENDER, and LENDER shall not be responsible in any way for
the performance by BORROWER of any of the terms and conditions thereof.
(h) LENDER may notify the Post Office authorities to change the address for
delivery of mail addressed to BORROWER to such address as LENDER may designate.
(i) LENDER may add to the Liabilities LENDER's reasonable expenses to
obtain or enforce payment of any Liabilities hereunder and the enforcement or
liquidation of any debt hereunder shall include reasonable attorneys' fees, plus
other legal expenses incurred by LENDER.
8.2 LENDER is hereby further granted a license or other right to use,
without charge at all times on and after the occurrence and continuance of an
Event of Default, BORROWER's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and BORROWER's rights under all licenses
and franchise agreements are to inure to LENDER's benefit.
8.3 BORROWER shall remain liable for any deficiency resulting from a sale,
lease, foreclosure or other disposal of the Collateral and shall pay any such
deficiency forthwith on demand, together with per annum interest at the Default
Rate.
8.4 The rights of LENDER under this Article are in addition to all other
remedies, statutory and otherwise, which are available to it at law or in equity
or otherwise and whether or not under the terms of any of the other Loan
Documents. ARTICLE IX
MISCELLANEOUS
9.1 COMMUNICATIONS AND NOTICES:
(a) Any communications between the parties hereto or notices provided
herein to be given may be given by mailing the same, certified mail, return
receipt requested, postage prepaid or by confirmed facsimile transmission or
hand delivery or by an overnight delivery service, as follows:
(1) to LENDER at:
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Account Officer for Five Star Group, Inc.;
(2) to BORROWER at the address first
above given for BORROWER in this
Agreement;
(3) to such other addresses as any party
may in writing hereafter indicate by
notice given in conformity with this
Section.
(b) Notices sent by certified mail shall be deemed received when accepted.
Notices sent by confirmed facsimile transmission or hand delivery shall be
deemed received when delivered to the address and/or person designated in this
Section. Notices sent by overnight delivery service shall be deemed received
upon delivery.
9.2 LENDER MAY PAY, SATISFY, DISCHARGE OR BOND CERTAIN OF BORROWER'S
OBLIGATIONS: In the event that BORROWER shall default in the performance of any
of the provisions of this Agreement or in the event that BORROWER shall fail to
pay any tax, assessment, government charge or levy, except as the same are being
contested in good faith by appropriate proceedings, or shall fail to discharge
any lien, encumbrance or security interest prohibited hereby, or shall fail to
comply with any other obligation of BORROWER to LENDER hereunder, LENDER may,
but shall not be required to, pay, satisfy, discharge or bond the same for the
account of BORROWER and all moneys so paid out shall be an obligation of
BORROWER hereunder, repayable on demand, together with per annum interest at the
Default Rate.
9.3 PLEDGE TO FEDERAL RESERVE: LENDER may at any time pledge all or any
portion of its rights under the Loan Documents including the Revolving Note to
any of the twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement
thereof shall release LENDER from its obligations under any of the Loan
Documents.
9.4 PAYMENTS IN LAWFUL MONEY OF THE UNITED STATES: All payments shall be in
lawful money of the United States in immediately available funds unless
otherwise provided in this Agreement.
9.5 SUCCESSORS AND ASSIGNS: This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that BORROWER shall not assign this Agreement or any of its
rights, duties or obligations hereunder without the prior written consent of
LENDER and any purported assignment or delegation without such consent shall be
void.
9.6 LENDER'S RIGHTS NOT IMPAIRED BY DELAY IN EXERCISING RIGHTS: No delay or
omission to exercise any right, power or remedy accruing to LENDER upon any
breach or default (whether such breach or default is now or hereafter occurring)
of BORROWER under this Agreement, the Revolving Note or any of the other Loan
Documents shall (a) impair any such right, power or remedy of LENDER, (b) be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or (c) be construed to be a waiver of or an acquiescence in any similar
breach or default thereafter occurring. Any waiver, permit, consent or approval
of any kind or character on the part of LENDER of any breach or default under
this Agreement, the Revolving Note or any of the other Loan Documents, or any
waiver on the part of LENDER of any provision or condition of this Agreement or
any of such other Loan Documents, must be in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement, the Revolving Note or any of the other Loan Documents, or by law
or otherwise afforded to of LENDER shall be cumulative and not alternative.
9.7 LENDER'S COSTS AND EXPENSES:
(a) BORROWER will pay the reasonable fees and the reasonable out-of-pocket
expenses incurred by LENDER in connection with (1) the preparation of this
Agreement and other related documents, whether or not the transactions hereby
contemplated shall be consummated, (2) the making of the Revolving Loan
hereunder and (3) the determination and/or enforcement of the rights of LENDER
in connection with such documents and/or with the Revolving Loan. Such
out-of-pocket expenses include but are not limited to, charges for the
examination of title, inspections and drawings of paper, recording and filing
fees, and all reasonable attorneys' fees, including the fees and disbursements
of LENDER's counsel.
(b) Whenever any attorney is used to provide advice to LENDER regarding
LENDER's relationship with BORROWER or whenever any attorney is used to collect
any obligation or to determine, preserve or enforce any right of LENDER against
BORROWER or against the Collateral under this Agreement, the Revolving Note or
any of the other Loan Documents, whether by suit or other means, BORROWER agrees
to pay the reasonable attorney's fees and other costs and expenses incurred by
LENDER. BORROWER also agrees to pay LENDER's attorneys a reasonable fee and
costs and expenses for enforcing against third parties any other rights of
LENDER pertaining hereto including LENDER's defending against any claim
pertaining to the Collateral, provided, however, that BORROWER shall not be
obligated to pay for more than one attorney representing LENDER except during
such period of time as an Event of Default may have occurred and is continuing.
(c) Any payment required of BORROWER hereunder shall be made within 10 days
of LENDER's request that BORROWER do so. In the event that BORROWER fails to do
so, BORROWER by its execution of this Agreement authorizes LENDER to reimburse
itself for any of its fees, costs and expenses associated with the above in the
manner set forth in the Authorization to Charge. BORROWER's failure to make any
such payment or LENDER's inability to charge against or add to the Revolving
Loan shall be an Event of Default hereunder. (d) Until paid by BORROWER, all of
the expenses set forth in this Section above shall bear interest at the Default
Rate and all such amounts shall be added to the Revolving Loan and shall be
secured by the Collateral.
9.8 NO WAIVER OF LENDER'S RIGHT OF SET-OFF: Nothing in this Agreement shall
be deemed any waiver or prohibition of LENDER's right of set-off.
9.9 GOVERNING LAW: This Agreement and each of the other Loan Documents
shall be governed by, and construed under, the laws of the State of New Jersey.
9.10 FORUM FOR LITIGATION: BORROWER agrees that, in addition to any other
available forum, any suit, action or proceeding against it arising under or
growing out of, or relating to this Agreement or any note or other instrument or
agreement required hereunder, or any other instrument executed by BORROWER for
the benefit of LENDER, may be instituted in any Federal court in the State of
New Jersey or any State court in the State of New Jersey or in any other court
having jurisdiction, and BORROWER hereby waives any objection which it might
have now or hereafter to the laying of the venue of any such suit, action or
proceeding, and irrevocably submits to the jurisdiction of any such court in any
suit, action or proceeding and waives any claim or defense of inconvenient
forum.
9.11 AGREEMENT MUST BE SIGNED BY LENDER: This Agreement shall not be
effective against LENDER unless signed by an officer of LENDER.
9.12 ENTIRE UNDERSTANDING: This Agreement contains the entire understanding
of the parties and any promises or representations not herein contained shall
have no force and effect, unless in writing, duly signed by the party to be
charged.
9.13 MODIFICATIONS: As it relates to LENDER, neither this Agreement nor any
portion or provision hereof may be changed, modified, amended, waived,
supplemented, discharged, canceled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by
LENDER.
9.14 CONTINUATION OF SECURITY INTERESTS: The security interests, liens, and
rights granted to LENDER hereunder shall continue in full force and effect
notwithstanding the fact that BORROWER's account may, from time to time, be
temporarily in a credit position.
9.15 SURVIVAL OF REPRESENTATIONS: All representations, warranties,
covenants, waivers and agreements contained herein shall survive execution
hereof, unless otherwise provided.
9.16 SEVERABILITY: The provisions of this Agreement are severable, and if
any clause or provision hereof shall be held invalid or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained in this
Agreement is independent and compliance by BORROWER with any of them shall not
excuse non-compliance by BORROWER with any other. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default if such action is taken or
condition exists.
9.17 ACTIONS OF LENDER: Any requirement in this Agreement that LENDER act
reasonably or any requirement in this Agreement that LENDER show materiality
shall be broadly and liberally construed in favor of LENDER bearing in mind the
need of LENDER to protect its security interests and to realize upon the
Collateral.
9.18 RESTATEMENT OF PRIOR AGREEMENTS:
(a) This Agreement and the other Loan Documents restate and amend the
obligations of BORROWER under the "Prior Agreements", such Prior Agreements
consisting of that certain November 1, 2001 Loan and Security Agreement by and
among, among others, BORROWER and LENDER (then known as Summit Business Capital
Corp. and acting at that time in its individual capacity as a lender and in its
representative capacity for certain named co-lenders) and the Loan Documents
referred to therein, as from time to time amended.
(b) This Agreement and the other Loan Documents are intended to restate,
amend, substitute for and replace in their entirety the Prior Agreements.
(c) All sums outstanding on the date hereof under the Prior Agreements
shall be and hereby are restated and recast, without more, as an Advance under
the Revolving Loan.
(d) BORROWER stipulates and agrees that all sums now owing under the Prior
Agreements are due and payable to LENDER without defense, setoff, recoupment or
counterclaim or charge of any type or nature, whether asserted or unasserted.
9.19 INCONSISTENCIES: In the event of any inconsistency between this
Agreement and any of the other Loan Documents affording LENDER rights and
remedies, such inconsistency shall be resolved by an interpretation which
expands such rights rather than limits such rights.
9.20 CONFIRMATORY SEARCHES: BORROWER understands that LENDER may order
confirmatory searches after the date of this Agreement in order to verify that
all UCC-1 Financing Statements have been filed and that LENDER holds the lien
priorities against the Collateral as required by this Agreement. BORROWER agrees
to pay all of LENDER's expenses, including reasonable attorneys' fees, incurred
in procuring and reviewing such searches. By its execution of this Agreement,
BORROWER authorizes LENDER to reimburse itself for any of its expenses
associated with the above in the manner set forth in the Authorization to
Charge.
9.21 LENDER NOT BORROWER'S AGENT: Nothing herein contained shall be
construed to constitute LENDER as BORROWER's agent for any purpose whatsoever.
In addition, LENDER shall not be responsible or liable for (a) any acts of
omission or commission, (b) any error of judgment, (c) any mistake of fact, (d)
any shortage, discrepancy, impairment, damage, loss or destruction of any part
of the Collateral wherever the same may be located and regardless of the cause
thereof or (e) any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts Receivable or any
instrument received in payment thereof or for any damage resulting therefrom.
9.22 LOST LOAN DOCUMENTS: Upon receipt of an affidavit of an officer of
LENDER as to the loss, theft, destruction or mutilation of the Revolving Note or
any other security document which is not of public record, BORROWER will issue,
in lieu thereof, a replacement Revolving Note or other security document in the
same principal amount thereof and otherwise of like tenor.
9.23 COUNTERPARTS: This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be as
effective as delivery of a manually executed counterpart of this Agreement.
9.24 WAIVER OF JURY TRIAL: BORROWER AND LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND MAKE THE REVOLVING LOAN.
IN WITNESS WHEREOF, BORROWER and LENDER have caused this Loan and Security
Agreement to be executed by their respective duly authorized officers on the
date and year first above written.
WITNESS: FIVE STAR GROUP, INC.
By:
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Xxxxx Xxxxxxx, Executive Vice President
FLEET CAPITAL CORPORATION
By:
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Xxxxx X. Xxxxxx, Vice President
Address: 000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
