LOAN AND SECURITY AGREEMENT
by and among
X. XXXXX, INC.
ALLOU DISTRIBUTORS, INC.
DIRECT FRAGRANCE, INC.
STANFORD PERSONAL CARE MANUFACTURING, INC.,
as Borrowers
and
ALLOU HEALTH & BEAUTY CARE, INC.
ALLOU PERSONAL CARE CORP.
HBA NATIONAL SALES CORP.
HBA DISTRIBUTORS, INC.
RONA BEAUTY SUPPLIES, INC.
PASTEL COSMETIC & BEAUTY AIDS, INC.
TRANS WORLD GROCERS, INC.
XXXX XXXXXX PERSONAL CARE CORP.
CORE MARKETING, INC.,
as Guarantors
CONGRESS FINANCIAL CORPORATION,
as Agent and Arranger
CITIBANK, N.A.,
as Documentation Agent and Co-Arranger
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: September 4, 2001
TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS.....................................................................................1
SECTION 2. CREDIT FACILITIES..............................................................................24
2.1 Loans..........................................................................................24
2.2 Letter of Credit Accommodations................................................................25
2.3 Commitments....................................................................................29
SECTION 3. INTEREST AND FEES..............................................................................29
3.1 Interest.......................................................................................29
3.2 Fees...........................................................................................30
3.3 Changes in Laws and Increased Costs of Loans...................................................31
SECTION 4. CONDITIONS PRECEDENT...........................................................................32
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations......................32
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations..........................35
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST......................................................36
5.1 Grant of Security Interest.....................................................................36
5.2 Perfection of Security Interest................................................................37
SECTION 6. COLLECTION AND ADMINISTRATION..................................................................41
6.1 Borrowers' Loan Accounts.......................................................................41
6.2 Statements.....................................................................................41
6.3 Collection of Accounts.........................................................................41
6.4 Payments.......................................................................................42
6.5 Mandatory Prepayments..........................................................................43
6.6 Authorization to Make Loans....................................................................44
6.7 Use of Proceeds................................................................................44
6.8 Appointment of Agent for Requesting Loans and Receipts of Loans and
Statements.....................................................................................45
6.9 Pro Rata Treatment.............................................................................45
6.10 Sharing of Payments, Etc.......................................................................46
6.11 Settlement Procedures..........................................................................47
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................................................49
7.1 Collateral Reporting...........................................................................49
7.2 Accounts Covenants.............................................................................50
7.3 Inventory Covenants............................................................................51
7.4 Equipment and Real Property Covenants..........................................................52
(i)
7.5 Power of Attorney..............................................................................52
7.6 Right to Cure..................................................................................53
7.7 Access to Premises.............................................................................53
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................................54
8.1 Corporate Existence, Power and Authority. ....................................................54
8.3 Financial Statements; No Material Adverse Change...............................................55
8.4 Priority of Liens; Title to Properties.........................................................55
8.5 Tax Returns....................................................................................55
8.6 Litigation.....................................................................................56
8.7 Compliance with Other Agreements and Applicable Laws...........................................56
8.8 Environmental Compliance.......................................................................56
8.9 Employee Benefits..............................................................................57
8.10 Bank Accounts..................................................................................58
8.11 Intellectual Property..........................................................................58
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.............................................59
8.13 Labor Disputes.................................................................................59
8.14 Restrictions on Subsidiaries...................................................................60
8.15 Material Contracts.............................................................................60
8.16 Payable Practices..............................................................................60
8.17 Accuracy and Completeness of Information.......................................................60
8.18 Survival of Warranties; Cumulative.............................................................60
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................................................61
9.1 Maintenance of Existence. ....................................................................61
9.2 New Collateral Locations.......................................................................61
9.3 Compliance with Laws, Regulations, Etc.........................................................61
9.4 Payment of Taxes and Claims....................................................................62
9.5 Insurance......................................................................................63
9.6 Financial Statements and Other Information.....................................................63
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc........................................65
9.8 Encumbrances...................................................................................67
9.9 Indebtedness...................................................................................68
9.10 Loans, Investments, Etc........................................................................72
9.11 Dividends and Redemptions......................................................................74
9.12 Transactions with Affiliates...................................................................75
9.13 Compliance with ERISA. .......................................................................75
9.14 End of Fiscal Years; Fiscal Quarters...........................................................75
9.15 Change in Business.............................................................................76
9.16 Limitation of Restrictions Affecting Subsidiaries..............................................76
9.18 License Agreements.............................................................................77
9.20 Costs and Expenses.............................................................................78
9.21 Minimum Excess Availability....................................................................78
(ii)
9.22 Further Assurances.............................................................................78
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.................................................................79
10.1 Events of Default..............................................................................79
10.2 Remedies.......................................................................................81
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW ...........................................85
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver..........................85
11.2 Waiver of Notices..............................................................................87
11.3 Amendments and Waivers. ......................................................................87
11.4 Waiver of Counterclaims........................................................................88
11.5 Indemnification................................................................................88
SECTION 12. THE AGENT...........................................................................................89
12.1 Appointment, Powers and Immunities.............................................................89
12.2 Reliance by Agent..............................................................................90
12.3 Events of Default..............................................................................90
12.4 Congress in its Individual Capacity............................................................91
12.5 Indemnification................................................................................91
12.6 Non-Reliance on Agent and Other Lenders........................................................91
12.7 Failure to Act.................................................................................92
12.8 Additional Loans...............................................................................92
12.9 Concerning the Collateral and the Related Financing Agreements.................................92
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders..........................................................................92
12.11 Collateral Matters...............................................................................93
12.12 Agency for Perfection............................................................................95
12.13 Resignation of Agent..............................................................................95
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS...............................................................95
13.1 Term...........................................................................................95
13.2 Interpretative Provisions......................................................................97
13.3 Notices........................................................................................99
13.4 Partial Invalidity.............................................................................99
13.5 Confidentiality................................................................................99
13.6 Successors....................................................................................101
13.7 Assignments; Participations...................................................................101
13.8 Entire Agreement..............................................................................104
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Compliance Certificate
Schedule 1.48 Existing Lenders
Schedule 1.49 Existing Letters of Credit
Schedule 1.81 Permitted Holders
Schedule 8.4 Existing Liens
Schedule 8.6 Litigation
Schedule 8.8 Environmental Matters
Schedule 8.10 Bank Accounts
Schedule 8.11 Licensed Intellectual Property
Schedule 8.12 Subsidiaries or Affiliates
Schedule 8.13 Labor Matters
Schedule 8.15 Material Contracts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans and Advances
Schedule 9.17 EBITDA Schedule
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated August 31, 2001 is entered into
by and among X. Xxxxx, Inc., a New York corporation ("Xxxxx"), Allou
Distributors, Inc., a New York corporation ("Distributors"), Direct Fragrances,
Inc., a New York corporation ("Direct ") and Stanford Personal Care
Manufactures, Inc., a Delaware corporation ("Stanford", and together with Xxxxx,
Distributors and Direct, each individually a "Borrower" and collectively,
"Borrowers"), Allou Health & Beauty Care, Inc., a Delaware corporation
("Parent"), Allou Personal Care Corporation, a Delaware corporation ("Personal
Care"), HBA National Sales Corp., a New York corporation ("HBA Sales"), HBA
Distributors, Inc., a New York corporation ("HBA Distributors"), Rona Beauty
Supplies, Inc., a New York corporation ("Rona"), Pastel Cosmetic & Beauty Aids,
Inc., a New York corporation ("Pastel"), Trans World Grocers, Inc., a New York
corporation ("Trans World"), Xxxx Xxxxxx Personal Care Corp., a Delaware
corporation ("Xxxx Xxxxxx") and Core Marketing, Inc., a New York corporation
("Core", and together with Parent, Personal Care, HBA Sales, HBA Distributors,
Rona, Pastel, Trans World, Xxxx Xxxxxx and Core, each individually a "Guarantor"
and collectively, "Guarantors"), the financial institutions from time to time
parties hereto as lenders, whether by execution of this Agreement or an
Assignment and Acceptance (each individually, a "Lender" and collectively,
"Lenders") and Congress Financial Corporation, a Delaware corporation, in its
capacity as agent and arranger for Lenders (in such capacity, "Agent") and
Citibank, N.A., a national banking association, in its capacity as co-arranger
and documentation agent for Lenders (in such capacity, "Co-Arranger").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
enter into financing arrangements with Borrowers pursuant to which Lenders may
make loans and provide other financial accommodations to Borrowers; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all
present and future rights of such Borrower and Guarantor to payment of a
monetary obligation, whether or not earned by performance, which is not
evidenced by chattel paper or an instrument, (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 secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.2 "Adjusted Current Ratio" shall mean, as to any Person, at any time,
on a consolidated basis for such Person and its Subsidiaries, the ratio of (a)
the Current Assets of such Person and its Subsidiaries to (b) the Current
Liabilities of such Person and its Subsidiaries plus, in the case of Parent and
its Subsidiaries, the then outstanding principal amount of the Loans.
1.3 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one- sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.4 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements,
prepaid assets (including prepaid inventory) and other intangible assets),
calculating the book value of inventory for this purpose on a first-in-first-out
basis, after deducting from such book values all appropriate reserves in
accordance with GAAP (including all reserves for doubtful receivables,
obsolescence, depreciation and amortization) and (b) the aggregate amount of the
Indebtedness and other liabilities of such Person and its Subsidiaries
(including tax and other proper accruals).
1.5 "Affiliates" shall mean, with respect to a specified Person, a
partnership, corporation or any other Person which directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds five (5%)
percent or more of any class of Voting Stock of such Person or other equity
interests in such Person, (b) any Person of which such Person beneficially owns
or holds five (5%) percent or more of any class of Voting Stock or in which such
Person beneficially owns or holds five (5%) percent or more of the equity
interests and (c) any director or executive officer of such Person. For the
purposes of this definition, the term "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly
2
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting Stock or by
contract or otherwise.
1.6 "Agent" shall mean Congress Financial Corporation, in its capacity
as agent on behalf of Lenders pursuant to the terms hereof and any replacement
or successor agent hereunder.
1.7 "Agent Payment Account" shall mean account no. 322-001293 of Agent
at The Chase Manhattan Bank or such other account of Agent as Agent may from
time to time designate to Parent as the Agent Payment Account for purposes of
this Agreement and the other Financing Agreements.
1.8 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.7
hereof.
1.9 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.10 "Borrowing Base" shall mean, at any time, as to each Borrower, the
amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) eighty-five (85%) percent of
the Net Amount of the Eligible Accounts of such Borrower, plus (B) the lesser of
(1) the Inventory Loan Limit for such Borrower or (2) sixty (60%) percent
multiplied by Value of the Eligible Inventory of such Borrower or (3) eighty
(80%) percent of the Net Recovery Percentage of the Inventory of such Borrower
multiplied by the Value of the Eligible Inventory of such Borrower, or
(ii) the Loan Limit for such Borrower,
minus
-----
(b) Reserves attributable to such Borrower.
For purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Loans to the extent Agent is in effect
basing the issuance of the Letter of Credit Accommodations on the Value of the
Eligible Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so
treated for purposes of the sublimit, the outstanding Loans and Reserves shall
be attributed first to any components of the lending formulas set forth above
that are not subject to such sublimit, before being attributed to the components
of the lending formulas subject to such sublimit. The amounts of Eligible
Inventory of any Borrower shall, at Agent's option, be determined based on the
lesser of the amount of Inventory set forth in the general ledger of such
Borrower or the perpetual inventory record maintained by such Borrower.
3
1.11 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York, or the State of North Carolina, and a day on
which Agent is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.12 "Capital Expenditures" shall mean, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets
(including, without limitation, acquisition of fixed assets, leasehold
improvements, Capital Leases and installment purchases of machinery and
equipment) which are not, in accordance with GAAP, treated as expense items for
such Person in the year made or incurred or as a prepaid expense applicable to a
future year or years.
1.13 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.14 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.15 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America of any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of one hundred eighty (180) days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx Companies,
Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial institution having combined capital and surplus and undivided profits
of not less than $250,000,000; (e) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit to the United States of America, in each case maturing within
ninety (90) days or less from the date of acquisition; provided, that, the terms
of such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
4
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.
1.16 "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of any Borrower or Guarantor to any Person or group (as such term is used
in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of
any Borrower or Parent or the adoption of a plan by the stockholders of any
Borrower or Guarantor relating to the dissolution or liquidation of such
Borrower or Guarantor (other than in connection with any dissolution permitted
under Section 9.7 hereof); (c) the acquisition by any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act), except for one or more
Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any
Borrower or Guarantor; (d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of any Borrower or Guarantor (together with any new directors who have
been appointed by any Permitted Holder, or whose nomination for election by the
stockholders of such Borrower or Guarantor, as the case may be, was approved by
a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of any
Borrower or Guarantor then still in office; (e) the failure of the Permitted
Holders to own directly or indirectly more than forty-five (45%) percent of the
voting power of the total outstanding Voting Stock of Parent; or (f) the failure
of Parent to own directly or indirectly one hundred (100%) percent of the voting
power of the total outstanding Voting Stock of any Borrower or other Guarantor.
1.17 "Citibank" shall mean Citibank, N.A., a national banking
association, and its successors and assigns.
1.18 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.19 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.20 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance reasonably satisfactory to Agent, from any lessor of
premises to any Borrower or Guarantor, or any other person to whom any
Collateral is consigned or who has custody, control or possession of any such
Collateral (including any processor) or is otherwise the owner or operator of
any premises on which any of such Collateral is located, pursuant to which such
lessor, consignee, processor or other person, inter alia, acknowledges the first
priority security interest of Agent in such Collateral, agrees to waive any and
all claims such lessor, consignee, processor or other person may, at any time,
have against such Collateral, whether for processing, storage or otherwise, and
agrees to permit Agent access to, and the right to remain on, the premises of
such lessor, consignee, processor or other person so as to exercise Agent's
rights and remedies and
5
otherwise deal with such Collateral and in the case of any person who at any
time has custody, control or possession of any bills of lading or other
documents of title, agrees to hold such bills of lading or other documents as
bailee for and for the benefit of Agent and to follow all instructions of Agent
with respect thereto.
1.21 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.7 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
1.22 "Congress" shall mean Congress Financial Corporation, a Delaware
corporation, in its individual capacity, and its successors and assigns.
1.23 "Consolidated Net Income" shall mean, with respect to any Person
for any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein (i) any extraordinary and/or unusual and/or non-recurring gains
and (ii) any extraordinary and/or unusual and/or non-recurring non-cash charges)
after deducting all charges which should be deducted before arriving at the net
income (loss) for such period and, without duplication, after deducting the
Provision for Taxes for such period, all as determined in accordance with GAAP;
provided, that, (a) the net income of any Person that is not a wholly-owned
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid or
payable to such Person or a wholly-owned Subsidiary of such Person; (b) except
to the extent included pursuant to the foregoing clause, the net income of any
Person accrued prior to the date it becomes a wholly-owned Subsidiary of such
Person or is merged into or consolidated with such Person or any of its
wholly-owned Subsidiaries or that Person's assets are acquired by such Person or
by its wholly-owned Subsidiaries shall be excluded; and (c) the net income (if
positive) of any wholly-owned Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such wholly-owned Subsidiary to
such Person or to any other wholly-owned Subsidiary of such Person is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such wholly-owned Subsidiary shall be excluded. For the purposes
of this definition, net income excludes any gain, together with any related
Provision for Taxes for such gain, realized upon the sale or other disposition
of any assets that are not sold in the ordinary course of business (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
of any Capital Stock of such Person or a Subsidiary of such Person and any net
income realized as a result of changes in accounting principles or the
application thereof to such Person.
1.24 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1 and 2.2 hereof.
6
1.25 "Current Assets" shall mean, with respect to any Person, all
current assets of such Person as of any date of determination calculated in
accordance with GAAP, but excluding cash, cash equivalents and debts due from
Affiliates.
1.26 "Current Liabilities" shall mean, with respect to any Person, all
liabilities that should in accordance with GAAP be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand
or within one (1) year from any date of determination without any option on the
part of the obligor to extend or renew beyond such year, all accruals for
federal or other taxes based on or measured by income and payable within such
year, but excluding the then outstanding principal amount of the Loans.
1.27 "Debt Issuance" shall mean any Borrower or Guarantor or any of
their respective Subsidiaries at any time after the date hereof incurring any
Indebtedness permitted under Section 9.9(g) hereof or any other Indebtedness not
otherwise permitted under Section 9.9 hereof.
1.28 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.29 "Defaulting Lender" shall have the meaning set forth in Section
6.10 hereof.
1.30 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, the
Borrower or Guarantor with a deposit account at any bank and the bank at which
such deposit account is at any time maintained which provides that such bank
will comply with instructions originated by Agent directing disposition of the
funds in the deposit account without further consent by such Borrower or
Guarantor and such other terms and conditions as Agent may require, including as
to any such agreement with respect to any Blocked Account, providing that all
items received or deposited in the Blocked Accounts are the property of Agent,
that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the bank will wire, or otherwise transfer, in
immediately available funds, on a daily basis to the Agent Payment Account all
funds received or deposited into the Blocked Accounts.
1.31 "Dilution" shall mean for any period, the fraction, expressed as a
percentage, the numerator of which is the aggregate amount of non-cash
reductions in Accounts of any Borrower for such period and the denominator of
which is the aggregate dollar amount of the sales of such Borrower for such
period.
1.32 "Dilution Reserve" shall mean a Reserve in amounts established by
Agent to reflect that Dilution with respect to the Accounts of any Borrower as
calculated by Agent for any period is or is reasonably anticipated to be greater
than five (5%) percent.
1.33 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to: (a) the Consolidated Net Income of such Person and its
Subsidiaries for such period, plus (b) depreciation, amortization and other
non-cash charges (including, but not limited to, imputed
7
interest and deferred compensation) for such period (to the extent deducted in
the computation of Consolidated Net Income of such Person), all in accordance
with GAAP, plus (c) Interest Expense for such period (to the extent deducted in
the computation of Consolidated Net Income of such Person), plus (d) the
Provision of Taxes for such period (to the extent deducted in the computation of
Consolidated Net Income of such Person).
1.34 "Eligible Accounts" shall mean Accounts created by a Borrower
which are and continue to be acceptable to Agent based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than the lesser of sixty
(60) days after the original due date for them or ninety (90) days after the
date of the original invoice for them, except that for Accounts arising from the
sale and shipment of Inventory during the period commencing August 1 of each
year and ending October 31 of such year, as to those Accounts owing by X.X.
Xxxxxx, Wal-Mart and Sears Xxxxxxx & Co., such Accounts are not unpaid more than
the lesser of sixty (60) days after the original due date for them or one
hundred twenty (120) days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2 of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Agent's request, such Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Agent to perfect the security interests of
Agent in those Accounts of an account debtor with its chief executive office or
principal place of business in Canada in accordance with the applicable laws of
the Province of Canada in which such chief executive office or principal place
of business is located and take or cause to be taken such other and further
actions as Agent may request to enable Agent as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Agent's option, if the chief executive office and principal
place of business of the account debtor with respect to such Accounts is located
other than in the United States of America or Canada, then if either: (i) the
account debtor has delivered to such Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Agent and payable only in the
United States of America and in U.S. dollars, sufficient to cover such Account,
in form and substance satisfactory to Agent and if required by Agent, the
original of such letter of credit has been
8
delivered to Agent or Agent's agent and the issuer thereof, and such Borrower
has complied with the terms of Section 5.2(f) hereof with respect to the
assignment of the proceeds of such letter of credit to Agent or naming Agent as
transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is
subject to credit insurance payable to Agent issued by an insurer and on terms
and in an amount acceptable to Agent, or (iii) such Account is otherwise
acceptable in all respects to Agent (subject to such lending formula with
respect thereto as Agent may determine);
(f) such Accounts do not consist of progress xxxxxxxx (such that
the obligation of the account debtors with respect to such Accounts is
conditioned upon such Borrower's satisfactory completion of any further
performance under the agreement giving rise thereto), xxxx and hold invoices or
retainage invoices, except as to xxxx and hold invoices, if Agent shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Agent, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by such Borrower to
such account debtor or claimed owed by such account debtor may be deemed
Eligible Accounts),
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent;
(l) there are no proceedings or actions known to any Borrower or
Guarantor (or to Agent) which are threatened or pending against the account
debtors with respect to such Accounts which might evidence or result in any
material adverse change in any such account debtor's
9
financial condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(n) the aggregate amount of such Accounts owing by a single
account debtor (other than Wal-Mart, Sears Xxxxxxx & Co. and any other national
retail chain acceptable to Agent) do not constitute more than ten (10%) percent
of the aggregate amount of all otherwise Eligible Accounts, such Accounts owing
by Sears Xxxxxxx & Co. do not constitute more than twenty-five (25%) percent of
the aggregate amount of all otherwise Eligible Accounts, such Accounts owing by
Wal-Mart do not constitute more than thirty (30%) percent of the aggregate
amount of all otherwise Eligible Accounts and such Accounts by all other
national retail chains acceptable to Agent such as X.X. Penney do not constitute
more than twenty (20%) percent of the aggregate amount of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of the applicable
percentages may be deemed Eligible Accounts);
(o) such Accounts are not owed by an account debtor who has
Accounts unpaid more ninety (90) days after the original invoice date for them
which constitute more than fifty (50%) percent of the total Accounts of such
account debtor;
(p) such Accounts are owed by account debtors whose total
indebtedness to such Borrower does not exceed the credit limit with respect to
such account debtors as determined by such Borrower from time to time, to the
extent such credit limit as to any account debtor is established consistent with
the current practices of such Borrower as of the date hereof and such credit
limit is acceptable to Agent (but the portion of the Accounts not in excess of
such credit limit may be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy
at all times by Agent.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Agent in good
faith, after two (2) Business Days' prior notice by Agent to Parent, based on
either: (i) an event, condition or other circumstance arising after the date
hereof, or (ii) an event, condition or other circumstance existing on the date
hereof to the extent Agent has no written notice thereof from a Borrower prior
to the date hereof, in either case under clause (i) or (ii) which adversely
affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Agent. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.35 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods held for resale in the ordinary
course of the business of Borrower, in each case which are acceptable to Agent
based on the criteria set forth below. In general, Eligible Inventory shall not
include (a) spare parts for equipment; (b) raw materials (other than raw
materials of Stanford); (c) work-in-process; (d) packaging and shipping
materials; (e) supplies used
10
or consumed in such Borrower's business; (f) Inventory at premises other than
those owned and controlled by any Borrower, except any Inventory which would
otherwise be deemed Eligible Inventory at locations in the United States of
America which are not owned and operated by any Borrower may nevertheless be
considered Eligible Inventory: (i) as to locations which are leased by a
Borrower, if Agent shall have received a Collateral Access Agreement from the
owner and lessor of such location, duly authorized, executed and delivered by
such owner and lessor, and (ii) as to locations owned and operated by a third
person, if Agent shall have received a Collateral Access Agreement from such
owner and operator with respect to such location, duly authorized, executed and
delivered by such owner and operator and, in addition, if required by Agent: (A)
UCC financing statements between the owner and operator, as consignee or bailee
and such Borrower, as consignor or xxxxxx, in form and substance satisfactory to
Agent, which are duly assigned to Agent and (B) a written notice to any Agent to
the owner and operator of the first priority security interest in such Inventory
of Agent (except, that, in the event Agent does not receive a Collateral Access
Agreement as to any location leased by Borrower or any location owned and
operated by a third party, Agent may, at its option, consider such Inventory at
the location to be Eligible Inventory, provided, that, without limiting any
other rights and remedies of Agent with respect to the establishment of Reserves
or otherwise, Agent may at any time establish Reserves in respect of amounts at
any time payable by any Borrower or Guarantor to the owner, lessor or third
party operator of such location, as the case may be); (g) Inventory subject to a
security interest or lien in favor of any Person other than Agent except those
permitted in this Agreement; (h) xxxx and hold goods; (i) obsolete or slow
moving Inventory; (j) Inventory which is not subject to the first priority,
valid and perfected security interest of Agent; (k) returned, damaged and/or
defective Inventory; (l) Inventory within four (4) months prior to the
expiration date thereof and Inventory after the expiration date thereof; (m)
samples; (n) Inventory to be returned to vendors; and (o) Inventory purchased or
sold on consignment. The criteria for Eligible Inventory set forth above may
only be changed and any new criteria for Eligible Inventory may only be
established by Agent in good faith, after two (2) Business Days' prior notice by
Agent to Parent, based on either: (i) an event, condition or other circumstance
arising after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Inventory in the good faith determination of Agent. Any Inventory which is
not Eligible Inventory shall nevertheless be part of the Collateral.
1.36 "Eligible Transferee" shall mean (a) any Lender; (b) any Affiliate
of a Lender; and (c) any other commercial bank, financial institution or
"accredited investor" (as defined in Regulation D under the Securities Act of
1933) approved by Agent (which approval shall not be unreasonably withheld),
provided, that, neither any Borrower, any Guarantor nor any Affiliate of any
Borrower or Guarantor shall qualify as an Eligible Transferee.
1.37 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground
11
water, drinking water, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or to human health or
safety, (b) relating to the exposure to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal of Hazardous Materials, or
(c) relating to all laws with regard to recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state counterparts to such laws, including, but not limited to, the
Natural Resources and Environmental Protection Act, MCLA 324.101 et seq. and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
1.38 "Equipment" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
and computer hardware and software (whether owned or licensed), and including
embedded software, vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof.
1.39 "Equity Issuance" shall mean (a) any issuance or sale by any
Borrower or Guarantor or any of their Subsidiaries after the date hereof of (i)
any of its Capital Stock, including any warrants or options exercisable in
respect of its Capital Stock (other than any warrants or options issued to
directors, officers or employees of any Borrower or Guarantor or any of their
Subsidiaries pursuant to employee benefit plans established in the ordinary
course of business and any Capital Stock of any Borrower or Guarantor issued
upon the exercise of such warrants or options) or (ii) any other security or
instrument representing an equity interest (or the right to obtain any equity
interest) in any Borrower or Guarantor or any of their Subsidiaries or (b) the
receipt by any Borrower or Guarantor or any of their Subsidiaries after the date
hereof of any capital contribution (whether or not evidenced by any equity
security issued by the recipient of such contribution); provided, that, the term
Equity Issuance as used herein shall not include any such issuance or sale by
any Subsidiary of any Borrower or Guarantor to such Borrower or Guarantor or any
capital contribution by any Borrower or Guarantor or any wholly-owned Subsidiary
of any Borrower or Guarantor to any wholly-owned Subsidiary of such Borrower or
Guarantor.
1.40 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
12
1.41 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.42 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan for which the reporting has not been waived; (b) the adoption of any
amendment to a Plan that would require the provision of security pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the
filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (e) the occurrence of a "prohibited transaction" with respect to which any
Borrower, Guarantor or any of its or their respective Subsidiaries would be
liable; (f) a complete or partial withdrawal by any Borrower, Guarantor or any
ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or
the commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (i) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
any Borrower, Guarantor or any ERISA Affiliate in excess of $250,000 and (j) any
other event or condition with respect to a Plan including any Plan subject to
Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that
could reasonably be expected to result in liability of any Borrower in excess of
$250,000.
1.43 "Eurodollar Rate" shall mean with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower or Parent on behalf of such
Borrower and approved by Agent) on or about 9:00 a.m. (New York time) two (2)
Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount ofthe Eurodollar Rate Loans
requested by and available to such Borrower in accordance with this Agreement,
with a maturity of comparable duration to the Interest Period selected by or on
behalf of a Borrower.
1.44 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.45 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
13
1.46 "Excess Availability" shall mean, as to each Borrower, the amount,
as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i)
the Borrowing Base of such Borrower and (ii) the Maximum Credit less then
outstanding principal amount of the Loans and Letter of Credit Accommodations
made or provided to the other Borrowers, minus (b) the sum of: (i) the amount of
all then outstanding and unpaid Obligations of such Borrower (other than
Obligations of such Borrower arising pursuant to any guarantees in favor of
Agent and Lenders of the Obligations of the other Borrowers), plus (ii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations of such Borrower which are outstanding more than sixty (60) days
past the invoice date thereof in the case of trade payables and are past due as
of such time in the case of other obligations (other than trade payables or
other obligations being contested or disputed by such Borrower in good faith),
plus (iii) without duplication, the amount of checks issued by such Borrower to
pay trade payables and other obligations which are more than sixty (60) days
past the invoice date thereof in the case of trade payables and are past due as
of such time in the case of other obligations (other than trade payables or
other obligations being contested or disputed by such Borrower in good faith),
but not yet sent.
1.47 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.48 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.48 hereto (and including Fleet Capital Corporation in its capacity as
agent acting for such lenders) and their respective predecessors, successors and
assigns.
1.49 "Existing Letters of Credit" shall mean, collectively, the letters
of credit issued for the account of a Borrower or Guarantor or for which such
Borrower or Guarantor is otherwise liable listed on Schedule 1.49 hereto, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.50 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Guarantors and Agent, setting forth certain
fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.51 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements and other agreements, documents
and instruments now or at any time hereafter executed and/or delivered by any
Borrower or Obligor in connection with this Agreement.
1.52 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
if any change in generally accepted accounting principles after the date hereof
affects the calculation of compliance with the financial covenants in Section
9.17 hereof, Parent may, by notice to Agent, or
14
Agent may, by notice to Parent, require that such covenants thereafter be
calculated in accordance with generally accepted accounting principles as in
effect and applied by Parent, immediately before such change in generally
accepted accounting principles occurred. If such notice is given by Parent (or
if such notice is given by Agent then only upon Agent's request), the compliance
certificate delivered pursuant to Section 9.6 hereof after such change occurs
shall be accompanied by a calculation of such covenants showing how such
compliance with such covenants was calculated based on the generally accepted
accounting principles in effect prior to such change thereto and showing how
such calculations correlate to the financial statements of Parent using
generally accepted accounting principles as in effect after such change has
occurred.
1.53 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.54 "Guarantors" shall mean, collectively, the following (together
with their respective successors and assigns): (a) Allou Health & Beauty Care,
Inc., a Delaware corporation; (b) Allou Personal Care Corporation, a Delaware
corporation; (c) HBA National Sales Corp, a New York corporation, (d) HBA
Distributors, Inc., a New York corporation; (e) Rona Beauty Supplies, Inc., a
New York corporation; (f) Pastel & Cosmetic & Beauty Aids, Inc., a New York
corporation; (g) Trans World Grocers, Inc., a New York corporation; (h) Xxxx
Xxxxxx Personal Care Corp., a Delaware corporation; and (i) Core Marketing,
Inc., a New York corporation; each sometimes being referred to herein
individually as a "Guarantor".
1.55 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants, sewage, sludge, industrial slag,
solvents and/or any other similar substances, materials, or wastes and including
any other substances,materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.56 "Indebtedness" shall mean (without duplication), with respect to
any Person, any liability, whether or not contingent, (a) in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof) or evidenced by bonds, notes,
debentures or similar instruments; (b) representing the balance deferred and
unpaid of the purchase price of any property or services (except any such
balance that constitutes an account payable to a trade creditor (whether or not
an Affiliate) created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services that is not overdue by more than ninety (90) days, unless
the trade payable is being contested in good faith); (c) all obligations as
lessee under leases which have been, or should be, in accordance with GAAP
recorded as Capital Leases; (d) any contractual obligation, contingent or
otherwise, of such Person to pay or be liable for the payment of any
15
indebtedness described in this definition of another Person, including, without
limitation, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances or similar
documents or instruments issued for such Person's account (including any drafts
issued for the benefit of such Person for the purchase of goods or services);
and (g) all indebtedness of such Person in respect of indebtedness of another
Person for borrowed money or indebtedness of another Person otherwise described
in this definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time.
1.57 "Information Certificate" shall mean the Information Certificates
of Borrowers and Guarantors constituting Exhibit B hereto containing material
information with respect to Borrowers and Guarantors, their respective
businesses and assets provided by or on behalf of Borrowers and Guarantors to
Agent in connection with the preparation of this Agreement and the other
Financing Agreements and the financing arrangements provided for herein.
1.58 "Intellectual Property" shall mean, as to each Borrower and
Guarantor, such Borrower's and Guarantor's now owned and hereafter arising or
acquired: patents, patent rights, patent applications, copyrights, works which
are the subject matter of copyrights, copyright registrations, trademarks, trade
names, trade styles, trademark and service xxxx applications, and licenses and
rights to use any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing; all
rights to xxx for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; domain names
and domain name registration; and trade secret rights, copyright rights, rights
in works of authorship, and contract rights relating to software, in whatever
form created or maintained.
1.59 "Interest Expense" shall mean, for any period, as to any Person
and its Subsidiaries, as determined in accordance with GAAP, the total interest
expense, whether paid or accrued (including the interest component of Capital
Leases for such period), including, without limitation, all bank fees,
commissions, discounts and other fees and charges owed with respect to letters
of credit, banker's acceptances or similar instruments which, in accordance with
GAAP, are required to be accounted for as interest expense.
1.60 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2), or three (3) months duration as any
Borrower (or Parent on behalf of such Borrower) may elect, the exact duration to
be determined in accordance with the customary
16
practice in the applicable Eurodollar Rate market; provided, that, such Borrower
(or Parent on behalf of such Borrower) may not elect an Interest Period which
will end after the last day of the then-current term of this Agreement.
1.61 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to one-quarter
(1/4%) percent per annum in excess of the Prime Rate,
(ii) as to Eurodollar Rate Loans, a rate equal to two and
three-quarters (2 3/4 %) percent per annum in excess of the Adjusted Eurodollar
Rate (in each case, based on the Eurodollar Rate applicable for the Interest
Period selected by a Borrower, or by Parent on behalf of such Borrower, as in
effect three (3) Business Days after the date of receipt by Agent of the request
of or on behalf of such Borrower for such Eurodollar Rate Loans in accordance
with the terms hereof, whether such rate is higher or lower than any rate
previously quoted to any Borrower or Guarantor).
(b) Notwithstanding anything to the contrary contained in clause
(a) of this definition, the Interest Rate shall mean the rate of two and
one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to Prime
Rate Loans and the rate of four and three-quarters (4 3/4%) percent per annum in
excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Agent's
option, without notice, (i) either (A) for the period on and after the date of
termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (B)
for the period from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing as determined by
Agent and (ii) on the Loans to any Borrower at any time outstanding in excess of
the Borrowing Base of such Borrower (whether or not such excess(es) arise or are
made with or without Agent's knowledge or consent and whether made before or
after an Event of Default).
1.62 "Inventory" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter existing or acquired
goods, wherever located, which (a) are leased by such Borrower or Guarantor as
lessor; (b) are held by such Borrower for sale or lease or to be furnished under
a contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of spare parts for equipment, raw materials,
work in process, finished goods or materials used or consumed in its business.
1.63 "Inventory Loan Limit" shall mean, as to each Borrower, at any
time, the amount equal to $120,000,000 minus the then outstanding principal
amount of Loans to the other Borrowers (and including Letter of Credit
Accommodations to the extent provided in the definition of the term Borrowing
Base) based on Eligible Inventory.
1.64 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Agent, by and among Agent, any
Borrower or Guarantor (as the case
17
may be) and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of such
Borrower or Guarantor acknowledging that such securities intermediary, commodity
intermediary or other person has custody, control or possession of such
investment property on behalf of Agent, that it will comply with entitlement
orders originated by Agent with respect to such investment property, or other
instructions of Agent, or (as the case may be) apply any value distributed on
account of any commodity contract as directed by Agent, in each case, without
the further consent of such Borrower or Guarantor and including such other terms
and conditions as Agent may require.
1.65 "Lenders" shall mean the financial institutions who are
signatories hereto as Lenders and other persons made a party to this Agreement
as a Lender in accordance with Section 13.7 hereof, and their respective
successors and assigns; each sometimes being referred to herein individually as
a "Lender".
1.66 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent or any Lender for the account of
any Borrower or Guarantor or (b) with respect to which Agent or Lenders have
agreed to indemnify the issuer or guaranteed to the issuer the performance by
any Borrower or Guarantor of its obligations to such issuer; sometimes being
referred to herein individually as "Letter of Credit Accommodation".
1.67 "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.68 "Loan Limit" shall mean, as to each Borrower, at any time, the
amount equal to the Maximum Credit minus the then outstanding principal amount
of the Loans and Letter of Credit Accommodations provided to the other
Borrowers.
1.69 "Loans" shall mean the loans now or hereafter made by or on behalf
of any Lender or by Agent for the account of any Lender on a revolving basis
pursuant to the Credit Facility (involving advances, repayments and readvances)
as set forth in Section 2.1 hereof.
1.70 "Material Adverse Effect" shall mean a material adverse effect on
(a) the financial condition, business, performance or operations of Borrowers
(taken as a whole), or (b) the legality, validity or enforceability of this
Agreement or any of the other Financing Agreements; (c) the legality, validity,
enforceability, perfection or priority of the security interests and liens of
Agent upon the Collateral; (d) the Collateral or its value taken as a whole; (e)
the ability of Borrowers to repay the Obligations or of Borrowers (taken as a
whole) to perform their obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; or (f) the ability of Agent or
any Lender to enforce the Obligations or realize upon the Collateral or
otherwise with respect to the rights and remedies of Agent and Lenders under
this Agreement or any of the other Financing Agreements.
1.71 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of any Borrower or
Guarantor involving monetary liability of or to any Person in an amount in
excess of $500,000 in any fiscal year and (b) any other
18
contract or other agreement (other than the Financing Agreements), whether
written or oral, to which any Borrower or Guarantor is a party as to which the
breach, nonperformance, cancellation or failure to renew by any party thereto
would have a Material Adverse Effect.
1.72 "Maturity Date" shall the meaning set forth in Section 13.1
hereof.
1.73 "Maximum Credit" shall mean the amount of $200,000,000.
1.74 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate.
1.75 "Net Amount of Eligible Accounts" shall mean, as to any Borrower,
the gross amount of the Eligible Accounts of such Borrower less (a) sales,
excise or similar taxes included in the amount thereof and (b) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.
1.76 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
applicable original cost of the aggregate amount of the Inventory subject to
such appraisal.
1.77 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender and/or any of their Affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower
under the United States Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, or secured or unsecured.
1.78 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantors, Xxxxxx Xxxxxx, Xxxxxx Xxxxxx, and Xxxxx Xxxxxx, also
known as Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx,
respectively), other than Borrowers.
1.79 "Parent" shall mean Allou Health & Beauty Care, Inc., a Delaware
corporation, and its successors and assigns.
19
1.80 "Participant" shall mean any financial institution that acquires
and holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.7 of this Agreement governing participations.
1.81 "Permitted Holders" shall mean the persons listed on Schedule 1.81
hereto and their respective heirs, executors, guardians, administrators,
successors and assigns.
1.82 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter S status under the Code), limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.83 "Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) subject to Title IV of ERISA which any Borrower or Guarantor sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multiemployer Plan has made contributions at
any time during the immediately preceding six (6) plan years.
1.84 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.85 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.86 "Pro Rata Share" shall mean as to any Lender, the fraction
(expressed as a percentage) the numerator of which is such Lender's Commitment
and the denominator of which is the aggregate amount of all of the Commitments
of Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.87 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial, county
or local, and whether foreign or domestic, that are paid or payable by any
Person in respect of any period in accordance with GAAP.
1.88 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.89 "Receivables" shall mean: (a) all Accounts; (b) all amounts at any
time payable to any Borrower or Guarantor in respect of the sale or other
disposition by such Borrower or Guarantor
20
of any Account or other obligation for the payment of money; (c) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (d) all letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to any Borrower or Guarantor or otherwise in favor of or
delivered to any Borrower or Guarantor in connection with any Account; or (e)
all payment intangibles and other contract rights, chattel paper, instruments,
notes and other forms of obligations owing to any Borrower or Guarantor, whether
from the sale and lease of goods or other property, licensing of any property
(including Intellectual Property or other general intangibles), rendition of
services or from loans or advances by any Borrower or Guarantor or to or for the
benefit of any third person (including loans or advances to any Affiliates or
Subsidiaries of any Borrower or Guarantor) or otherwise associated with any
Accounts, Inventory or general intangibles of any Borrower or Guarantor
(including, without limitation, choses in action, causes of action, tax refunds,
tax refund claims, any funds which may become payable to any Borrower or
Guarantor in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to any Borrower or Guarantor from any
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).
1.90 "Records" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's present and future books of account of every
kind or nature, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any account debtor,
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of any Borrower or Guarantor with respect to the
foregoing maintained with or by any other person).
1.91 "Reference Bank" shall mean First Union National Bank, or such
other bank as Agent may from time to time designate.
1.92 "Register" shall have the meaning set forth in Section 13.7(b)
hereof.
1.93 "Required Lenders" shall mean, at any time, those Lenders whose
Pro Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of
the aggregate of the Commitments of all Lenders, or if the Commitments shall
have been terminated, Lenders to whom at least sixty-six and two-thirds (66
2/3%) percent of the then outstanding Obligations are owing.
1.94 "Reserves" shall mean as of any date of determination, such
amounts as Agent may from time to time establish in good faith and revise in
good faith reducing the amount of Loans and Letter of Credit Accommodations
which would otherwise be available to any Borrower under the lending formula(s)
provided for herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Agent in good faith, adversely affect, or would have a
reasonable likelihood of adversely affecting, either (i) the Collateral or any
other property which is security for the Obligations or its value or (ii) the
assets or business of any Borrower or Obligor or (iii) the
21
security interests and other rights of Agent or any Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Agent's good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or Guarantor to Agent is
or may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Agent
determines in good faith constitutes a Default or an Event of Default. The term
Reserves as used herein shall include in addition, and not in limitation,
Dilution Reserves. To the extent Agent may, in accordance with the terms hereof,
revise the lending formulas used to determine the Borrowing Base or establish
new criteria or revise existing criteria for Eligible Accounts or Eligible
Inventory so as to address any circumstances, condition, event or contingency in
an manner satisfactory to Agent, Agent shall not establish a Reserve for the
same purpose. The amount of any Reserve established by Agent shall have a
reasonable relationship to the event, condition or other matter which is the
basis for such reserve as determined by Agent in good faith.
1.95 "Senior Subordinated Note Purchase Agreement" shall mean the 12%
Senior Subordinated Note and Warrant Purchase Agreement, dated as of July 25,
2000, by and between Parent and RFE Investment Partners VI, L.P., as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.96 "Senior Subordinated Notes" shall mean, collectively, the 12%
Senior Subordinated Notes due July 25, 2005, issued by Parent in the aggregate
principal amount of $15,000,000 (or such other amount as Agent may agree)
pursuant to the Senior Subordinated Note Purchase Agreement, as such notes now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.97 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a
fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.98 "Special Agent Advances" shall have the meaning set forth in
Section 12.11 hereof.
1.99 "Subsidiary" or "subsidiary" shall mean, with respect to any
Person, any corporation, limited liability company, limited liability
partnership or other limited or general partnership, trust, association or other
business entity of which an aggregate of at least a majority of the outstanding
Capital Stock or other interests entitled to vote in the election of the board
of directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of
22
such corporation shall have or might have voting power by reason of the
happening of any contingency), managers, trustees or other controlling persons,
or an equivalent controlling interest therein, of such Person is, at the time,
directly or indirectly, owned by such Person and/or one or more subsidiaries of
such Person.
1.100 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise determine).
1.101 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
1.102 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
-----------------
2.1 Loans.
------
(a) Subject to and upon the terms and conditions contained
herein, each Lender severally (and not jointly) agrees to fund its Pro Rata
Share of Loans to each Borrower from time to time in amounts requested by such
Borrower (or Parent on behalf of such Borrower) up to the amount outstanding at
any time equal to the Borrowing Base of such Borrower at such time.
(b) Agent may, in good faith, from time to time, upon not less
than five (5) days prior notice to Parent, reduce the lending formula(s) with
respect to Eligible Inventory to the extent that Agent determines in good faith
that: (i) the number of days of the turnover of the Inventory for any period has
adversely changed or (ii) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased, including any decrease attributable to a
change in the nature, quality or mix of the Inventory. The amount of any
decrease in the lending formulas shall have a reasonable relationship to the
event, condition or circumstance which is the basis for
23
such decrease as determined by Agent in good faith. In determining whether to
reduce the lending formula(s), Agent may consider events, conditions,
contingencies or risks which are also considered in determining Eligible
Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Agent's discretion, with the consent of all
Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit, (ii) the aggregate principal amount of the Loans and Letter
of Credit Accommodations outstanding at any time to a Borrower shall not exceed
the Borrowing Base of such Borrower, (iii) the aggregate principal amount of the
Loans outstanding at any time to Borrowers based on the Eligible Inventory of
Borrowers shall not exceed $120,000,000, (iv) the aggregate principal amount of
Loans outstanding at any time to Stanford based on the Eligible Inventory of
Stanford consisting of raw materials shall not exceed $500,000, and (v) the
aggregate principal amount of Loans outstanding at any time to Stanford based on
the Eligible Inventory of Stanford consisting of finished goods shall not exceed
$400,000, except, that, during any period that Stanford has outstanding, bona
fide, authorized and valid purchase orders, in form and substance satisfactory
to Agent, which in the aggregate exceed $2,000,000 for not less than five (5)
consecutive Business Days from either or all of X.X. Xxxxxx, Sears Xxxxxxx & Co.
or Bodyworks, Inc., the aggregate principal amount of Loans outstanding at any
time to Stanford based on the Eligible Inventory of Stanford consisting of
finish goods shall not exceed $1,250,000 (provided, that, in order for such
higher limit to be effective, Agent shall have received true, correct and
complete copies of all such purchase orders).
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of a Borrower (or Parent on behalf of such Borrower),
Agent agrees, for the ratable risk of each Lender according to its Pro Rata
Share, to provide or arrange for Letter of Credit Accommodations for the account
of such Borrower containing terms and conditions acceptable to Agent and the
issuer thereof. Any payments made by or on behalf of Agent or any Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations provided to or for the benefit of a Borrower shall constitute
additional Loans to such Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations,
(i) subject to Section 2.2(b)(ii) below, Borrowers shall
pay to Agent, for the benefit of Lenders, a letter of credit fee payable in
arrears as of the first day of each month, at a rate determined as follows: (A)
if the purpose of such Letter of Credit Accommodations is to purchase Inventory
(and the conditions for drawing thereunder do not include the failure of a
Borrower to make any payment or fulfill any other obligation in connection with
such purchase), one and one-half (1 1/2%) percent per annum, on the daily
outstanding balance of such Letter of Credit Accommodations for the immediately
preceding month (or part thereof) and (B) in all other cases, two and
three-quarters (2 3/4%) percent per annum, on the daily outstanding balance of
all other Letter of Credit Accommodations for the immediately preceding month
(or part therefor),
24
(ii) notwithstanding anything to the contrary contained in
this Section 2.2(b), upon the request of Agent, at Agent's option or upon the
request of Agent at the written direction of Required Lenders, Borrowers shall
pay to Agent, for the benefit of Lenders, such letter of credit fee in respect
of the Letter of Credit Accommodation at a rate equal to two (2%) percent per
annum more than the rate otherwise payable in respect thereof pursuant to the
terms of this Section 2.2(b) for: (A) the period from and after the date of
termination hereof until Agent and Lenders have received full and final payment
of all Obligations (notwithstanding entry of a judgment against any Borrower)
and (B) the period from and after the date of the occurrence of an Event of
Default for so long as such Event of Default is continuing as determined by
Agent in good faith.
(iii) Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c) The Borrower requesting such Letter of Credit Accommodation
(or Parent on behalf of such Borrower) shall give Agent two (2) Business Days'
prior written of such Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. The Borrower
requesting the Letter of Credit Accommodation (or Parent on behalf of such
Borrower) shall attach to such notice the proposed form of the Letter of Credit
Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such
Letter of Credit Accommodation (or Parent on behalf of such Borrower) shall have
delivered to the proposed issuer of such Letter of Credit Accommodation at such
times and in such manner as such proposed issuer may require, an application, in
form and substance satisfactory to such proposed issuer and Agent, for the
issuance of the Letter of Credit Accommodation and such other documents as may
be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit Accommodation shall be satisfactory to Agent and such
proposed issuer, (ii) as of the date of issuance, no order of any court,
arbitrator or other Governmental Authority shall purport by its terms to enjoin
or restrain money center banks generally from issuing letters of credit of the
type and in the amount of the proposed Letter of Credit Accommodation, and no
law, rule or regulation applicable to money center banks generally and no
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over money center banks generally shall
prohibit, or request that the proposed issuer of such Letter of Credit
Accommodation refrain from, the issuance of letters of credit generally or the
issuance of such
25
Letters of Credit Accommodation; and (iii) the Excess Availability of the
Borrower requesting such Letter of Credit Accommodation, prior to giving effect
to any Reserves with respect to such Letter of Credit Accommodations, on the
date of the proposed issuance of any Letter of Credit Accommodations, shall be
equal to or greater than: (A) if the proposed Letter of Credit Accommodation is
for the purpose of purchasing Eligible Inventory and the documents of title with
respect thereto are consigned to the issuer, the sum of (1) the percentage equal
to one hundred (100%) percent minus the then applicable percentage with respect
to Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes,
duty and other amounts which Agent estimates in good faith must be paid in
connection with such Inventory upon arrival and for delivery to one of such
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Agent with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent's discretion, with the consent of all
Lenders, the amount of all outstanding Letter of Credit Accommodations and all
other commitments and obligations made or incurred by Agent or any Lender in
connection therewith shall not at any time exceed $15,000,000.
(f) Borrowers and Guarantors shall indemnify and hold Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation, except for
such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or wilful misconduct of Agent or any Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and Guarantor assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower's agent. Each Borrower and Guarantor assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby
releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor,
by any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation, except for the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(e) shall survive the payment of Obligations and the termination
of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers and Guarantors shall, at Agent's request,
instruct all suppliers,
26
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver them to Agent and/or subject to Agent's order, and
if they shall come into such Borrower's or Guarantor's possession, to deliver
them, upon Agent's request, to Agent in their original form. Borrower and
Guarantors shall also, at Agent's request, designate Agent as the consignee on
all bills of lading and other negotiable and non-negotiable documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes
and directs any issuer of a Letter of Credit Accommodation to name such Borrower
or Guarantor as the account party therein and to deliver to Agent all
instruments, documents and other writings and property received by issuer
pursuant to the Letter of Credit Accommodations and to accept and rely upon
Agent's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit Accommodations or the applications
therefor. Nothing contained herein shall be deemed or construed to grant any
Borrower or Guarantor any right or authority to pledge the credit of Agent or
any Lender in any manner. Agent and Lenders shall have no liability of any kind
with respect to any Letter of Credit Accommodation provided by an issuer other
than Agent or any Lender unless Agent has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with respect
to such Letter of Credit Accommodation. Borrowers and Guarantors shall be bound
by any reasonable interpretation made in good faith by Agent, or any other
issuer or correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of any Borrower or Guarantor. Agent shall have the sole and
exclusive right and authority to, and Borrowers and Guarantors shall not: (i) at
any time an Event of Default exists or has occurred and is continuing, (A)
approve or resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii) at all times (provided that if no Event of Default
has occurred, Agent shall not exercise any of the following unless agreed to by
or on behalf of any Borrower), (A) grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (B) agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral.
Agent may take such actions either in its own name or in any Borrower's name or
in any Guarantor's name.
(i) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or Guarantor to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower or Guarantor to Agent for the ratable benefit of Lenders. Any duties or
obligations undertaken by Agent to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Agent in favor of any issuer or correspondent to the extent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrowers and Guarantors to Agent for the ratable benefit of Lenders and to
apply in all re spects to Borrowers and Guarantors.
27
(j) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(k) Each Borrower is irrevocably and unconditionally obligated,
without presentment, demand or protest, to pay to Agent any amounts paid by an
issuer of a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that any Borrower fails to pay Agent on the
date of any payment under a Letter of Credit Accommodation in an amount equal to
the amount of such payment, Agent (to the extent it has actual notice thereof)
shall promptly notify each Lender of the unreimbursed amount of such payment and
each Lender agrees, upon one (1) Business Day's notice, to fund to Agent the
purchase of its participation in such Letter of Credit Accommodation in an
amount equal to its Pro Rata Share of the unpaid amount. The obligation of each
Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any
Event of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance. If such amount is not made
available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date
such amount was due until the date such amount is paid to Agent at the interest
rate then payable by any Borrower in respect of Loans that are Prime Rate Loans
as set forth in Section 3.1(a) hereof.
2.3 Commitments. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended in
accordance with the provisions hereof.
SECTION 3. INTEREST AND FEES
-----------------
3.1 Interest.
---------
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default
and for so long as the same is continuing or on and after the date of
termination hereof, in each case, shall be payable on demand.
(b) Each Borrower (or Parent on behalf of such Borrower) may
from time to time request Eurodollar Rate Loans or may request that Prime Rate
Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate
Loans continue for an additional Interest Period. Such request from a Borrower
(or Parent on behalf of such Borrower) shall specify the amount of the
Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to
Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans. Subject to
28
the terms and conditions contained herein, three (3) Business Days after receipt
by Agent of such a request from a Borrower (or Parent on behalf of such
Borrower), such Prime Rate Loans shall be converted to Eurodollar Rate Loans or
such Eurodollar Rate Loans shall continue, as the case may be, provided, that,
(i) no Default or Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination of
this Agreement, (iii) such Borrower (or Parent on behalf of such Borrower) shall
have complied with such customary procedures as are established by Agent and
specified by Agent to Parent from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans in the aggregate at any time requested by Borrowers shall not exceed the
amount equal to ninety-five (95%) percent of the lowest principal amount of the
Loans which it is anticipated will be outstanding during the applicable Interest
Period, in each case as determined by Agent in good faith (but with no
obligation of Agent or Lenders to make such Loans), and (vii) Agent and each
Lender shall have determined that the Interest Period or Adjusted Eurodollar
Rate is available to Agent and such Lender and can be readily determined as of
the date of the request for such Eurodollar Rate Loan by Borrower. Any request
by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate
Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans
shall be irrevocable. Notwithstanding anything to the contrary contained herein,
Agent and Lenders shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Agent and Lenders had purchased such deposits to fund the
Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Agent has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by
Agent to Parent, be subsequently converted to Prime Rate Loans in the event that
this Agreement shall terminate or not be renewed. Borrowers shall pay to Agent,
for the benefit of Lenders, upon demand by Agent (or Agent may, at its option,
charge any loan account of any Borrower) any amounts required to compensate any
Lender or Participant for any loss (including loss of anticipated profits), cost
or expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the
account of Lenders, monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate on Loans (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no event
shall charges constituting interest payable by Borrowers to Agent and Lenders
exceed the maximum amount or the rate permitted under any applicable law or
regulation,
29
and if any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.
3.2 Fees.
-----
(a) Borrowers shall pay to Agent, for the account of Lenders,
monthly an unused line fee at a rate equal to one-quarter (1/4%) percent per
annum calculated upon the amount by which $180,000,000 exceeds the average daily
principal balance of the outstanding Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
(b) Borrowers agree to pay to Agent the other fees and amounts
set forth in the Fee Letter in the amounts and at the times specified therein.
3.3 Changes in Laws and Increased Costs of Loans.
---------------------------------------------
(a) Notwithstanding anything to the contrary contained herein,
all Eurodollar Rate Loans shall, upon notice by Agent to Parent, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Agent, a Lender, Reference Bank or any Participant to make
or maintain Eurodollar Rate Loans or to comply with the terms hereof in
connection with the Eurodollar Rate Loans, or (B) shall result in the increase
in the costs to a Lender or Participant of making or maintaining any Eurodollar
Rate Loans by an amount deemed by Agent in good faith to be material, or (C)
reduce the amounts received or receivable by a Lender or Participant in respect
thereof, by an amount deemed by Agent in good faith to be material or (ii) the
cost to a Lender or Participant of making or maintaining any Eurodollar Rate
Loans shall otherwise increase by an amount deemed by Agent in good faith to be
material. Borrowers shall pay to Agent, for the benefit of the applicable
Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of any Borrower) any amounts required to compensate any Lender or
Participant for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A certificate of
Agent or the applicable Lender or Participant setting forth the basis for the
determination of such amount necessary to compensate such Lender or Participant
as aforesaid shall be delivered to Parent and shall be presumptive evidence of
such amount, absent manifest error or omission.
(b) If a Borrower is required to pay additional amounts to any
Lender pursuant to Section 3.3(a) that increase the effective lending rate of
such Lender with respect to its share of the Loans to greater than one-quarter
(1/4%) percent in excess of the percentage of the effective lending rate of the
other Lenders, then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to change the jurisdiction of its lending
office with respect to making Eurodollar Rate Loans so as to eliminate any such
additional payment by such Borrower which may thereafter accrue, if such change
in the judgment of such Lender is not otherwise
30
disadvantageous to such Lender. In the event that any one or more Lenders,
pursuant to Section 3.3(a) hereof, incur any increased costs (other than
increased costs to the extent such increased costs are not a recurring cost) for
which any such Lender demands compensation pursuant to Section 3.3(a) hereof
which increases the effective lending rate of such Lender with respect to its
share of the Loans to greater than one-quarter (1/4%) percent in excess of the
percentage of the effective lending rate of the other Lenders and such Lender
has not mitigated such costs within sixty (60) days after receipt by such Lender
from Parent of a written notice that such Lender's effective lending rate has so
exceeded the effective lending rate of the other Lenders, then and in any such
event, Borrowers may substitute another financial institution which is an
Eligible Transferee acceptable to Agent for such Lender to assume the Commitment
of such Lender and to purchase the Loans of such Lender hereunder, without
recourse to or warranty by, or expense to, such Lender for a purchase price
equal to the outstanding principal amount of the Loans owing to such Lender plus
any accrued but unpaid interest on such Loans and accrued but unpaid fees and
other amounts in respect of such Lender's Commitment and share of the Loans
(other than any prepayment penalty or other premiums). Upon such purchase such
Lender shall no longer be a party hereto or have any rights or benefits
hereunder (except for rights or benefits that such Lender would retain hereunder
and under the other Financing Agreements upon payment in full of all of the
Obligations) and the replacement Lender shall succeed to the rights and
benefits, and shall assume the obligations, of such Lender hereunder and
thereunder. The Agent and Lenders shall cooperate with Borrowers to amend the
Financing Agreements to reflect such substitution. In no event may Borrowers
replace a Lender that is also Agent or an issuer of a Letter of Credit
Accommodation.
(c) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Agent or any Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity or
otherwise), including any payments pursuant to the application of collections
under Section 6.3 or any other payments made with the proceeds of Collateral,
Borrowers shall pay to Agent, upon demand by Agent (or Agent may, at its option,
charge any loan account of any Borrower) any amounts required to compensate any
Lender or Participant for any additional loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of such prepayment
or payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate Loans or any portion
thereof. A certificate of Agent or the applicable Lender or Participant setting
forth the basis for the determination of such amount necessary to compensate
such Lender or Participant shall be delivered to Parent and shall be presumptive
evidence of such amount, absent manifest error or omission.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Agent and
Lenders making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
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(a) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, all releases, terminations and such
other documents as Agent may request to evidence and effectuate the termination
by the Existing Lenders of their respective financing arrangements with
Borrowers and Guarantors and the termination and release by it or them, as the
case may be, of any interest in and to any assets and properties of each
Borrower and Guarantor, duly authorized, executed and delivered by it or each of
them, including, but not limited to, UCC termination statements for all UCC
financing statements previously filed by it or any of them or their
predecessors, as secured party and any Borrower or Guarantor, as debtor;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Agent and Co- Arranger, and Agent shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Agent may have reasonably requested in
connection therewith, such documents where requested by Agent or its counsel to
be certified by appropriate corporate officers or Governmental Authority;
(c) no material adverse change shall have occurred in the assets
or business of Borrowers since March 31, 2001 and no change or event shall have
occurred which would impair the ability of any Borrower or Obligor to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Agent or any Lender to enforce the Obligations or
realize upon the Collateral;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records, list of accounts payable,
outstanding Indebtedness owing to Existing Lenders and roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Agent, together with such supporting documentation as may
be necessary or appropriate, and other documents and information that will
enable Agent to accurately identify and verify the Collateral), the results of
which each case shall be satisfactory to Agent and Co- Arranger in good faith,
not more than one (1) Business Day prior to the closing date;
(e) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, all consents, waivers, acknowledgments
and other agreements from third persons which Agent may deem necessary or
desirable in good faith in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the provisions or
purposes of this Agreement and the other Financing Agreements, including,
without limitation, Collateral Access Agreements by owners and lessors of leased
premises of each Borrower and by processors and warehouses at which Collateral
is located;
(f) the aggregate amount of the Excess Availability of Borrowers
as determined by Agent in good faith, as of the date hereof, shall be not less
than $6,000,000 after giving effect to the initial Loans made or to be made and
Letter of Credit Accommodations issued or to be issued in connection with the
initial transactions hereunder;
32
(g) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, Deposit Account Control Agreements by
and among Lender, each Borrower andGuarantor, as the case may be and each bank
where such Borrower (or Guarantor) has a deposit account, in each case, duly
authorized, executed and delivered by such bank and Borrower or Guarantor, as
the case may be (or Agent shall be the bank's customer with respect to such
deposit account as Agent may specify);
(h) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, a subordination agreement by and between
the holders of the Senior Subordinated Notes and Agent on behalf of Lenders, as
acknowledged and agreed to by Borrowers and Guarantors, duly authorized,
executed and delivered by such holders, Borrowers and Guarantors;
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent and Co-Arranger, that Agent has a valid perfected first
priority security interest in all of the Collateral;
(j) Agent shall have received and reviewed lien and judgment
search results for the jurisdiction of incorporation of each Borrower and
Guarantor, the jurisdiction of the chief executive office of each Borrower and
Guarantor and all jurisdictions in which assets of Borrower and Guarantors are
located, which search results shall be in form and substance satisfactory to
Agent and Co-Arranger;
(k) Agent shall have received originals of the shares of the
stock certificates representing all of the issued and outstanding shares of the
Capital Stock of each Borrower and Guarantor (other than Parent) and owned by
any Borrower or Guarantor, in each case together with stock powers duly executed
in blank with respect thereto;
(l) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, the limited joint and several guarantees
by each of Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxx Xxxxxx (also known as Xxxxxx
Xxxxxxxxxx, Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx, respectively) in favor of
Agent for the benefit of Agent and Lenders (which guarantees shall be limited to
$10,000,000 in the aggregate, plus interest from the date payment is due
thereunder and costs, expenses and other charges related to collection
thereunder) and the unlimited guarantees by each of Borrowers and Guarantors in
favor of Agent for the benefit of Agent and Lenders, in each case duly
authorized, executed and delivered by each of them;
(m) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, the subordination agreement by and among
Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxx Xxxxxx (also known as Xxxxxx Xxxxxxxxxx,
Xxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx, respectively) and Agent, as acknowledged
and agreed to by Borrowers and Guarantors, providing for, among other things,
the subordination in right of payment of certain Indebtedness owing by Borrowers
and Guarantors to such person to the right of Agent and Lenders to receive the
indefeasible payment and satisfaction in full of the Obligations and related
matters, duly authorized, executed and delivered by each of them and Borrowers
and Guarantors;
33
(n) Agent shall have received, in form and substance
satisfactory to Agent and Co- Arranger, the audited balance sheet of Parent and
its Subsidiaries for the fiscal year ended March 31, 2001, together with the
unqualified opinion of Xxxxxx Xxxxxxxx & Co. with respect to such audited
balance sheet;
(o) Agent shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance reasonably satisfactory to Agent, and certificates of
insurance policies and/or endorsements naming Agent as loss payee;
(p) Agent shall have received, in form and substance reasonably
satisfactory to Agent, such opinion letters of counsel to Borrowers and
Guarantors with respect to the Financing Agreements and such other matters as
Agent may reasonably request; and
(q) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Agent, in form and substance reasonably satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
the Loans and/or providing Letter of Credit Accommodations to Borrowers,
including the initial Loans and Letter of Credit Accommodations and any future
Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or, to the knowledge of any Borrower
or Guarantor, threatened in any court or before any arbitrator or Governmental
Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the making of the Loans or providing the Letter of Credit Accommodations, or
(B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or has a reasonable
likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred
and be continuing on and as of the date of the making of such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto.
34
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
-----------------------------------------
5.1 Grant of Security Interest. To secure payment and performance of
all Obligations, each Borrower and Guarantor hereby grants to Agent, for itself
and the ratable benefit of Lenders, a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Agent, for itself
and the ratable benefit of Lenders, as security, all personal and real property
and fixtures of each Borrower and Guarantor, whether now owned or hereafter
acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by Agent
or any Lender, collectively, the "Collateral"):
(a) all Accounts;
(b) all general intangibles (including, without limitation, all
Intellectual Property);
(c) all goods (including, without limitation, Inventory and
Equipment);
(d) all Real Property and fixtures;
(e) all chattel paper (including, without limitation, all
tangible and electronic chattel paper);
(f) all instruments (including, without limitation, all
promissory notes);
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lien or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any Borrower or Guarantor now or hereafter held
or received by or in transit to Agent, any Lender or its Affiliates
35
or at any other depository or other institution from or for the account of any
Borrower or Guarantor, whether for safekeeping, pledge, custody, transmission,
collection or otherwise;
(l) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(m) to the extent not otherwise described above, all
Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interest.
--------------------------------
(a) Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial
Code of such jurisdiction as Agent may determine, together with any amendment
and continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date hereof. Each Borrower
and Guarantor hereby ratifies and approves all financing statements naming Agent
or its designee as secured party and such Borrower or Guarantor, as the case may
be, as debtor with respect to the Collateral (and any amendments with respect to
such financing statements) filed by or on behalf of Agent prior to the date
hereof and ratifies and confirms the authorization of Agent to file such
financing statements (and amendments, if any). In no event shall any Borrower or
Guarantor at any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming Agent or its designee as
secured party and such Borrower or Guarantor as debtor.
(b) Each Borrower and Guarantor does not have any chattel paper
(whether tangible or electronic) or instruments as of the date hereof, except as
set forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify Agent
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Agent, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent's option, each Borrower and Guarantor shall,
or Agent may at any time on behalf of any Borrower or Guarantor, cause the
original of any such instrument or chattel paper to be conspicuously marked in a
form and manner acceptable to Agent with the
36
following legend referring to chattel paper or instruments as applicable: "This
[chattel paper][instrument] is subject to the security interest of Congress
Financial Corporation as Agent and any sale, transfer, assignment or encumbrance
of this [chattel paper][instrument] violates the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any
time hold or acquire an interest in any electronic chattel paper or any
"transferable record" (as such term is defined in Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction), such Borrower or Guarantor shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, such Borrower or Guarantor shall take,
or cause to be taken, such actions as Agent may request to give Agent control of
such electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) Each Borrower and Guarantor does not have any deposit
accounts as of the date hereof, except as set forth in the Information
Certificate. Borrowers and Guarantors shall not, directly or indirectly, after
the date hereof open, establish or maintain any deposit account unless each of
the following conditions is satisfied: (i) Agent shall have received not less
than five (5) Business Days prior written notice of the intention of any
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower or Guarantor is dealing and the purpose of the account, (ii)
the bank where such account is opened or maintained shall be acceptable to
Agent, and (iii) on or before the opening of such deposit account, such Borrower
or Guarantor shall as Agent may specify either (A) deliver to Agent a Deposit
Account Control Agreement with respect to such deposit account duly authorized,
executed and delivered by such Borrower or Guarantor and the bank at which such
deposit account is opened and maintained or (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Agent. The terms of this subsection (d) shall not apply to deposit
accounts specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of any Borrower's or
Guarantor's salaried employees.
(e) No Borrower or Guarantor owns or holds, directly or
indirectly, beneficially or as record owner or both, any investment property, as
of the date hereof, or have any investment account, securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
date hereof, in each case except as set forth in the Information Certificate.
(i) In the event that any Borrower or Guarantor shall be
entitled to or shall at any time after the date hereof hold or acquire any
certificated securities, such Borrower or Guarantor shall promptly endorse,
assign and deliver the same to Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as Agent may from time to time
specify. If any
37
securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Agent thereof and shall as Agent may specify, either (A) cause the issuer
to agree to comply with instructions from Agent as to such securities, without
further consent of any Borrower or Guarantor or such nominee, or (B) arrange for
Agent to become the registered owner of the securities.
(ii) Borrowers and Guarantors shall not, directly or
indirectly, after the date hereof open, establish or maintain any investment
account, securities account, commodity account or any other similar account
(other than a deposit account) with any securities intermediary or commodity
intermediary unless each of the following conditions is satisfied: (A) Agent
shall have received not less than five (5) Business Days prior written notice of
the intention of Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity acceptable to Agent
the name of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom such
Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Agent, and (C) on or
before the opening of such investment account, securities account or other
similar account with a securities intermediary or commodity intermediary, such
Borrower or Guarantor shall as Agent may specify either (1) execute and deliver,
and cause to be executed and delivered to Agent, an Investment Property Control
Agreement with respect thereto duly authorized, executed and delivered by such
Borrower or Guarantor and such securities intermediary or commodity intermediary
or (2) arrange for Agent to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Agent.
(f) Borrowers and Guarantors are not the beneficiary or
otherwise entitled to any right to payment under any letter of credit, banker's
acceptance or similar instrument as of the date hereof, except as set forth in
the Information Certificate. In the event that any Borrower or Guarantor shall
be entitled to or shall receive any right to payment under any letter of credit,
banker's acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing. Such Borrower or Guarantor shall immediately,
as Agent may specify, either (i) deliver, or cause to be delivered to Agent,
with respect to any such letter of credit, banker's acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Agent, consenting to
the assignment of the proceeds of the letter of credit to Agent by such Borrower
or Guarantor and agreeing to make all payments thereon directly to Agent or as
Agent may otherwise direct or (ii) cause Agent to become, at Borrowers' expense,
the transferee beneficiary of the letter of credit, banker's acceptance or
similar instrument (as the case may be).
(g) Borrowers and Guarantors do not have any commercial tort
claims as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall at any time after
the date hereof have any commercial tort claims, such Borrower
38
or Guarantor shall promptly notify Agent thereof in writing, which notice shall
(i) set forth in reasonable detail the basis for and nature of such commercial
tort claim and (ii) include the express grant by such Borrower or Guarantor to
Agent of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of a
security interest, the sending thereof by such Borrower or Guarantor to Agent
shall be deemed to constitute such grant to Agent. Upon the sending of such
notice, any commercial tort claim described therein shall constitute part of the
Collateral and shall be deemed included therein. Without limiting the
authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by
the execution by such Borrower or Guarantor of this Agreement or any of the
other Financing Agreements, Agent is hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Agent or its
designee as secured party and such Borrower or Guarantor as debtor, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, each Borrower and Guarantor shall promptly upon
Agent's request, execute and deliver, or cause to be executed and delivered, to
Agent such other agreements, documents and instruments as Agent may require in
connection with such commercial tort claim.
(h) Borrower and Guarantors do not have any goods, documents of
title or other Collateral in the custody, control or possession of a third party
as of the date hereof, except as set forth in the Information Certificate and
except for goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of business of
such Borrower or Guarantor in the possession of the carrier transporting such
goods. In the event that any goods, documents of the title or other Collateral
are at any time after the date hereof in the custody, control or possession of
any other person not referred to in the Information Certificate or such
carriers, Borrowers and Guarantors shall promptly notify Agent thereof in
writing. Promptly upon Agent's request, Borrowers and Guarantors shall deliver
to Agent a Collateral Access Agreement duly authorized, executed and delivered
by such person and the Borrower or Guarantor that is the owner of such
Collateral.
(i) Borrowers and Guarantors shall take any other actions
reasonably requested by Agent from time to time to cause the attachment,
perfection and first priority of, and the ability of Agent to enforce, the
security interest of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that any Borrower's or Guarantor's signature thereon
is required therefor, (ii) causing Agent's name to be noted as secured party on
any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
39
SECTION 6. COLLECTION AND ADMINISTRATION
-----------------------------
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Parent each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Agent
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and Guarantors and
conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Parent of any specific
exceptions of Parent thereto within forty-five (45) days after the date such
statement has been received by Parent. Until such time as Agent shall have
rendered to Parent a written statement as provided above, the balance in any
Borrower's loan account(s) shall be presumptive evidence of the amounts due and
owing to Agent and Lenders by Borrowers and Guarantors.
6.3 Collection of Accounts.
-----------------------
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Agent may specify, with such banks as are acceptable to
Agent into which Borrowers shall promptly deposit and direct their respective
account debtors to directly remit all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in
which such payments are made, whether by cash, check or other manner. Borrowers
shall deliver, or cause to be delivered to Lender a Depository Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and from
time to time Agent may become the bank's customer with respect to any of the
Blocked Accounts and promptly upon Agent's request, Borrowers shall execute and
deliver such agreements and documents as Agent may require in connection
therewith. Each Borrower and Guarantor agrees that all payments made to such
Blocked Accounts or other funds received and collected by Agent or any Lender,
whether in respect of the Receivables, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Agent and Lenders in
respect of the Obligations and therefore shall constitute the property of Agent
and Lenders to the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans
available to each Borrower, such payments will be applied (conditional upon
final collection) to the Obligations on the Business Day of receipt by Agent of
immediately available funds in the Agent Payment Account provided such payments
and notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
such Borrower's loan
40
account on such day, and if not, then on the next Business Day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) Business Day following the date of receipt of immediately available
funds by Agent in the Agent Payment Account provided such payments or other
funds and notice thereof are received in accordance with Agent's usual and
customary practices as in effect from time to time and within sufficient time to
credit such Borrower's loan account on such day, and if not, then on the next
Business Day. In the event that at any time or from time to time there are no
Loans outstanding, Agent shall be entitled to an administrative charge in an
amount equivalent to the interest that would have been payable for such Business
Day had there been Loans outstanding on such day as calculated by Agent in
accordance with its customary practice. The economic benefit of the timing in
the application of payments (and the administrative charge with respect thereto,
if applicable) shall be for the sole benefit of Agent.
(c) Each Borrower and Guarantor and their respective
shareholders, directors, employees, agents, Subsidiaries or other Affiliates
shall, acting as trustee for Agent, receive, as the property of Agent, any
monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Accounts or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent. In no event shall the same be commingled with any
Borrower's or Guarantor's own funds. Borrowers agree to reimburse Agent on
demand for any amounts owed or paid to any bank at which a Blocked Account is
established or any other bank or person involved in the transfer of funds to or
from the Blocked Accounts arising out of Agent's payments to or indemnification
of such bank or person. The obligations of Borrowers to reimburse Agent for such
amounts pursuant to this Section 6.3 shall survive the termination of this
Agreement.
6.4 Payments.
---------
(a) All Obligations shall be payable to the Agent Payment
Account as provided in Section 6.3 or such other place as Agent may designate
from time to time. Agent shall apply payments received or collected from any
Borrower or Guarantor or for the account of any Borrower or Guarantor (including
the monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest due
in respect of any Loans; third, to pay principal due in respect of the Loans;
fourth, to pay or prepay any other Obligations whether or not then due, in such
order and manner as Agent determines. Notwithstanding anything to the contrary
contained in this Agreement, (i) unless so directed by Parent, or unless a
Default or an Event of Default shall exist or have occurred and be continuing,
Agent shall not apply any payments which it receives to any Eurodollar Rate
Loans, except (A) on the expiration date of the Interest Period applicable to
any such Eurodollar Rate Loans or (B) in the event that there are no outstanding
Prime Rate Loans, and (ii) to the extent any Borrower uses any proceeds of the
Loans or Letter of Credit Accommodations to acquire rights in or the use of any
Collateral or to repay any Indebtedness used to acquire rights in or the use of
any Collateral, payments in respect of the Obligations shall be deemed applied
first to the Obligations arising from Loans and Letter of Credit Accommodations
that were not used for such purposes and second to
41
the Obligations arising from Loans and Letter of Credit Accommodations the
proceeds of which were used to acquire rights in or the use of any Collateral in
the chronological order in which such Borrower acquired such rights in or the
use of such Collateral.
(b) At Agent's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of any Borrower.
Borrowers and Guarantors shall make all payments to Agent and Lenders on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Agent or any Lender is required to surrender or return
such payment or proceeds to any Person for any reason, then the Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Agent or such Lender. Borrowers and
Guarantors shall be liable to pay to Agent, and do hereby indemnify and hold
Agent and Lenders harmless for the amount of any payments or proceeds
surrendered or returned. This Section 6.4(b) shall remain effective
notwithstanding any contrary action which may be taken by Agent or any Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination of this Agreement.
6.5 Mandatory Prepayments.
----------------------
(a) In the event that the aggregate amount of the Loans and
Letter of Credit Accommodations outstanding to a Borrower exceed the Borrowing
Base of such Borrower, or the aggregate amount of Loans and Letter of Credit
Accommodations based on the Eligible Inventory of Borrowers exceeds the sublimit
set forth above, or the aggregate amount of the Loans to Stanford based on its
Eligible Inventory consisting of raw materials or finished goods exceeds the
applicable sublimit set forth in Section 2.1(c) hereof, or the aggregate amount
of the outstanding Letter of Credit Accommodations exceed the sublimit for
Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate
amount of the Loans and Letter of Credit Accommodations exceed the Maximum
Credit, such event shall not limit, waive or otherwise affect any rights of
Agent or Lenders in such circumstances or on any future occasions and Borrowers
shall, immediately upon written demand by Agent, which may be made at any time
or from time to time, immediately repay to Agent the entire amount of any such
excess(es) for which payment is demanded.
(b) Upon any Debt Issuance or Equity Issuance, Borrowers shall
make a prepayment of the Loans in an aggregate amount equal to one hundred
(100%) percent of the net proceeds thereof, on the date such proceeds are
payable to any Borrower or Guarantor, with such net proceeds. The term "net
proceeds" as used in this Section shall mean the cash proceeds after deducting
underwriting discounts and commissions, and all reasonable fees, costs and
expenses directly related thereto. Nothing contained in this Section 6.5. should
be construed as a consent to any Debt Issuance or Equity Issuance or to waive
any of the limitations with respect thereto set forth in this Agreement or any
of the other Financing Agreements. In addition, if a Debt Issuance
42
or an Equity Issuance is consummated during a period in which an Event of
Default shall exist or have occurred and be continuing, the Maximum Credit shall
be reduced by the amount of net proceeds received by Borrowers from such Debt
Issuance or Equity Issuance and such reduction shall be effective as of the date
of the receipt by Agent of such payment.
(c) Subject to Section 13.1(c) hereof, all such payments in
respect of the Loans pursuant to this Section 6.5 shall be without premium or
penalty. All interest accrued on the principal amount of the Loans paid pursuant
to Section 6.5 shall be paid, or may be charged by Agent to the loan account(s)
of Borrowers, at Agent's option, on the date of such payment.
6.6 Authorization to Make Loans. Agent and Lenders are authorized to
make the Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Parent or any Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall specify
the date on which the requested advance is to be made or Letter of Credit
Accommodations established (which day shall be a Business Day) and the amount of
the requested Loan. Requests received after 12:00 p.m. New York City time on any
day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, any Borrower or Guarantor
when deposited to the credit of any Borrower or Guarantor or otherwise disbursed
or established in accordance with the instructions of any Borrower or Guarantor
or in accordance with the terms and conditions of this Agreement.
6.7 Use of Proceeds. Borrowers shall use the initial proceeds of the
Loans provided by Agent to Borrowers hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrowers
to Agent on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided to or for the benefit of any Borrower pursuant to
the provisions hereof shall be used by such Borrower only for general operating,
working capital and other proper corporate purposes of such Borrower not
otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
6.8 Appointment of Agent for Requesting Loans and Receipts of Loans
---------------------------------------------------------------
and Statements.
---------------
(a) Each Borrower hereby irrevocably appoints and constitutes
Parent as its agent to request and receive Loans and Letter of Credit
Accommodations pursuant to this Agreement and the other Financing Agreements
from Agent or any Lender in the name or on behalf of such Borrower. Agent and
Lenders may disburse the Loans to such bank account of Parent or a
43
Borrower or otherwise make such Loans to a Borrower and provide such Letter of
Credit Accommodations to a Borrower as Parent may designate or direct, without
notice to any other Borrower or Obligor. Notwithstanding anything to the
contrary contained herein, Agent may at any time and from time to time require
that Loans to or for the account of any Borrower be disbursed directly to an
operating account of such Borrower.
(b) Parent hereby accepts the appointment by Borrowers to act as
the agent of Borrowers pursuant to this Section 6.8. Parent shall ensure that
the disbursement of any Loans to each Borrower requested by or paid to or for
the account of Parent, or the issuance of any Letter of Credit Accommodations
for a Borrower hereunder, shall be paid to or for the account of such Borrower.
(c) Each Borrower and other Guarantor hereby irrevocably
appoints and constitutes Parent as its agent to receive statements on account
and all other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.
(d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by Parent
shall be deemed for all purposes to have been made by such Borrower or
Guarantor, as the case may be, and shall be binding upon and enforceable against
such Borrower or Guarantor to the same extent as if made directly by such
Borrower of Guarantor.
(e) No purported termination of the appointment of Parent as
agent as aforesaid shall be effective, except after ten (10) days' prior written
notice to Agent.
6.9 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
6.10 Sharing of Payments, Etc.
-------------------------
(a) Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim Agent
or any Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it or any of its Affiliates for the account
of such Borrower or Guarantor at any of its offices, in dollars or in any other
currency, against any principal of or interest on any Loans owed to such Lender
or any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to such Borrower or
Guarantor), in which case it shall promptly notify Parent and Agent thereof;
provided, that, such Lender's failure to give such notice shall not affect the
validity thereof.
44
(b) If any Lender (including Agent) shall obtain from any
Borrower or Guarantor payment of any principal of or interest on any Loan owing
to it or payment of any other amount under this Agreement or any of the other
Financing Agreements through the exercise of any right of setoff, banker's lien
or counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by any Borrower or Guarantor
to such Lender than the percentage thereof received by any other Lender, it
shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in
the Loans or such other amounts, respectively, owing to such other Lenders (or
such interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
Lenders shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Lender in obtaining or preserving such excess payment)
in accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Each Borrower and Guarantor agrees that any Lender
purchasing a participation (or direct interest) as provided in this Section may
exercise, in a manner consistent with this Section, all rights of setoff,
banker's lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as
the case may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to
exercise any right of setoff, banker's lien, counterclaims or similar rights or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable, assign
such rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.11 Settlement Procedures.
----------------------
(a) In order to administer the Credit Facility in an efficient
manner and to minimize the transfer of funds between Agent and Lenders, Agent
may, at its option, subject to the terms of this Section, make available, on
behalf of Lenders, the full amount of the Loans requested or charged to any
Borrower's loan account(s) or otherwise to be advanced by Lenders pursuant to
the terms hereof, without requirement of prior notice to Lenders of the proposed
Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders
as provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed
45
weekly, and shall be adjusted upward or downward on the basis of the amount of
the outstanding Loans as of 5:00 p.m. New York time on the Business Day
immediately preceding the date of each settlement computation; provided, that,
Agent retains the absolute right at any time or from time to time to make the
above described adjustments at intervals more frequent than weekly, but in no
event more than twice in any week. Agent shall deliver to each of the Lenders
after the end of each week, or at such lesser period or periods as Agent shall
determine, a summary statement of the amount of outstanding Loans for such
period (such week or lesser period or periods being hereinafter referred to as a
"Settlement Period"). If the summary statement is sent by Agent and received by
a Lender prior to 12:00 p.m. New York time, then such Lender shall make the
settlement transfer described in this Section by no later than 3:00 p.m. New
York time on the same Business Day and if received by a Lender after such time,
that such Lender shall make the settlement transfer by no later than 3:00 p.m.
on the next Business Day following the date of receipt. If, as of the end of any
Settlement Period, the amount of a Lender's Pro Rata Share of the outstanding
Loans is more than such Lender's Pro Rata Share of the outstanding Loans as of
the end of the previous Settlement Period, then such Lender shall forthwith (but
in no event later than the time set forth in the preceding sentence) transfer to
Agent by wire transfer in immediately available funds the amount of the
increase. Alternatively, if the amount of a Lender's Pro Rata Share of the
outstanding Loans in any Settlement Period is less than the amount of such
Lender's Pro Rata Share of the outstanding Loans for the previous Settlement
Period, Agent shall forthwith transfer to such Lender by wire transfer in
immediately available funds the amount of the decrease. The obligation of each
of the Lenders to transfer such funds and effect such settlement shall be
irrevocable and unconditional and without recourse to or warranty by Agent.
Agent and each Lender agrees to xxxx its books and records at the end of each
Settlement Period to show at all times the dollar amount of its Pro Rata Share
of the outstanding Loans and Letter of Credit Accommodations. Each Lender shall
only be entitled to receive interest on its Pro Rata Share of the Loans to the
extent such Loans have been funded by such Lender. Because the Agent on behalf
of Lenders may be advancing and/or may be repaid Loans prior to the time when
Lenders will actually advance and/or be repaid such Loans, interest with respect
to Loans shall be allocated by Agent in accordance with the amount of Loans
actually advanced by and repaid to each Lender and the Agent and shall accrue
from and including the date such Loans are so advanced to but excluding the date
such Loans are either repaid by Borrowers or actually settled with the
applicable Lender as described in this Section.
(c) To the extent that Agent has made any such amounts available
and the settlement described above shall not yet have occurred, upon repayment
of any Loans by Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
46
(d) If Agent is not funding a particular Loan to a Borrower (or
Parent for the benefit of such Borrower) pursuant to this Section on any day,
Agent may assume that each Lender will make available to Agent such Lender's Pro
Rata Share of the Loan requested or otherwise made on such day and Agent may, in
its discretion, but shall not obligated to, cause a corresponding amount to be
made available to or for the benefit of such Borrower on such day. If Agent
makes such corresponding amount available to Borrower and such corresponding
amount is not in fact made available to Agent by such Lender, Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of New York or
at Agent's option based on the arithmetic mean determined by Agent of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent's demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the
period in which such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any of
the other Financing Agreements, the amount so advanced by Agent to or for the
benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent
for its own account. Upon any such failure by a Lender to pay Agent, Agent shall
promptly thereafter notify Parent of such failure and Borrowers shall pay such
corresponding amount to Agent for its own account within five (5) Business Days
of Parent's receipt of such notice. A Lender who fails to pay Agent its Pro Rata
Share of any Loans made available by the Agent on such Lender's behalf, or any
Lender who fails to pay any other amount owing by it to Agent, is a "Defaulting
Lender". Agent shall not be obligated to transfer to a Defaulting Lender any
payments received by Agent for the Defaulting Lender's benefit, nor shall a
Defaulting Lender be entitled to the sharing of any payments hereunder
(including any principal, interest or fees). Amounts payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion, relend to Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. For purposes of voting
or consenting to matters with respect to this Agreement and the other Financing
Agreements and determining Pro Rata Shares, such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Commitment shall be deemed to be
zero (0). This Section shall remain effective with respect to a Defaulting
Lender until such default is cured. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by any Borrower or Obligor of their duties and
obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or
the other Financing Agreements shall be deemed to require Agent to advance funds
on behalf of any Lender or to relieve any Lender from its obligation to fulfill
its Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
47
SECTION 7. COLLATERAL REPORTING AND COVENANTS
----------------------------------
7.1 Collateral Reporting.
---------------------
(a) Borrowers shall provide Agent with the following documents
in a form reasonably satisfactory to Agent:
(i) on a daily basis, schedules for by each Borrower of
each of the following: (A) sales, (B) refunds, (C) credit memos, (D) discounts,
(E) collections and (F) an accounts receivable roll-forward;
(ii) as soon as possible after the fifteenth (15th) day of
each month and after the end of each month (but in any event within fifteen (15)
days after each such date, except for the months of September and October,
within twenty (20) days after each such date and except for any month in which
Passover occurs, within twenty (20) days after each such date), as of the
fifteenth (15th) day of such month and the last day of such month, respectively,
or more frequently as Agent may reasonably request, each of the following
reports for each Borrower: (A) perpetual inventory reports, (B) inventory
reports by location, division and category (and including the amounts of
Inventory and the value thereof at, any leased locations and at premises of
warehouses, processors or other third parties), (C) reports on inventory
markups, and (D) reports of discontinued inventory;
(iii) as soon as possible after the end of each month (but
in any event within fifteen (15) days after the end thereof, except for the
months of September and October, within twenty (20) days after the end thereof
and except for any month in which Passover occurs, within twenty (20) days after
the end thereof), on a monthly basis or more frequently as Agent may reasonably
request, organized by each Borrower, each of the following: (A) a report setting
forth the amounts owing by any Borrower to account debtors as of the end of such
month and the amounts owing by any account debtors to such Borrower, certified
as true and complete by the chief financial officer of Parent or other financial
officer of Parent acceptable to Agent; (B) a report of the expiration dates of
applicable Inventory (sometimes referred to as a "morgue report'), (C) agings of
accounts receivable (together with a reconciliation to the previous month's
aging and general ledger) and (D) agings of accounts payable (and including
information indicating the amounts owing to owners and lessors of leased
premises, warehouses, processors and other third parties from time to time in
possession of any Collateral);
(iv) upon Agent's reasonable request, (A) copies of
customer statements and credit memos, remittance advices and reports, and copies
of deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by any Borrower or Guarantor;
(v) such other reports as to the Collateral as Agent shall
request from time to time.
48
(b) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower and Guarantor hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Agent and to follow Agent's instructions with
respect to further services at any time that an Event of Default exists or has
occurred and is continuing.
7.2 Accounts Covenants.
-------------------
(a) Borrowers shall notify Agent promptly of: (i) any material
delay in any Borrower's performance of any of its material obligations to any
account debtor or the assertion of any material claims, offsets, defenses or
counterclaims by any account debtor, or any material disputes with account
debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information known to any Borrower or Guarantor relating to the financial
condition of any account debtor and (iii) any event or circumstance which, to
any Borrower's or Guarantor's knowledge, would cause Agent to consider any then
existing Accounts as no longer constituting Eligible Accounts. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Agent's consent, except in the ordinary
course of a Borrower's or Guarantor's business in accordance with practices and
policies previously disclosed in writing to Agent. So long as no Event of
Default exists or has occurred and is continuing, Borrowers and Guarantors shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred and
is continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Agent or schedule thereof delivered to Agent shall be true
and complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of each Borrower's business in accordance with
practices and policies previously disclosed to Agent, (iv) there shall be no
setoffs, deductions, contras, defenses, counterclaims or disputes existing or
asserted with respect thereto except as reported to Agent in accordance with the
terms of this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable foreign, Federal, State or local laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(c) Agent shall have the right at any time or times, in Agent's
name or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
49
7.3 Inventory Covenants. With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct a physical count of the Inventory at
least once each year but at any time or times as Agent may request on or after
an Event of Default and for so long as the same is continuing, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be reasonably satisfactory to Agent concerning
such physical count; (c) Borrowers and Guarantors shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Agent, except for sales of Inventory in the ordinary course of its
business and except to move Inventory directly from one location set forth or
permitted herein to another such location and except for Inventory shipped from
the manufacturer thereof to such Borrower or Guarantor which is in transit to
the locations set forth or permitted herein; (d) upon Agent's request, Borrowers
shall, at their expense, no more than twice in any twelve (12) month period, but
at any time or times as Agent may request on or after an Event of Default and
for so long as the same is continuing, deliver or cause to be delivered to Agent
written appraisals as to the Inventory in form, scope and methodology reasonably
acceptable to Agent and by an appraiser reasonably acceptable to Agent and
Co-Arranger, addressed to Agent and Lenders and upon which Agent and Lenders are
expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) each Borrower and Guarantor assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (g) Borrower and Guarantors shall not sell Inventory to any customer
on approval, or any other basis which entitles the customer to return (except
for the right of customers for Inventory which is defective or non-conforming)
or may obligate any Borrower or Guarantor to repurchase such Inventory; (h)
Borrowers and Guarantors shall keep the Inventory in good and marketable
condition; and (i) Borrowers and Guarantors shall not, without prior written
notice to Agent, acquire or accept any Inventory on consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a) Borrowers and Guarantors shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (b) Borrowers and Guarantors shall use the Equipment and
Real Property with all reasonable care and caution and in accordance with
applicable standards of any insurance and in material conformity with all
applicable laws; (c) Borrowers and Guarantors shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment replaced, repaired or maintained in the ordinary course of
its business or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles or other portable Equipment used by or for the benefit of such Borrower
or Guarantor in the ordinary course of business; and (d) each Borrower and
Guarantor assumes all responsibility and liability arising from the use of the
Equipment and Real Property.
50
7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably
designates and appoints Agent (and all persons designated by Agent) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower's, Guarantor's or Agent's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
such Borrower's or Guarantor's name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
or Guarantor and handle and store all mail relating to the Collateral; and (ix)
do all acts and things which are necessary, in Agent's good faith determination,
to fulfill such Borrower's or Guarantor's obligations under this Agreement and
the other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Agent or any Lender, (ii) have access to any lockbox or
postal box into which remittances from account debtors or other obligors in
respect of Receivables or other proceeds of Collateral are sent or received,
(iii) endorse such Borrower's or Guarantor's name upon any items of payment in
respect of Receivables or constituting Collateral or otherwise received by Agent
and any Lender and deposit the same in Agent's account for application to the
Obligations, (iv) endorse such Borrower's or Guarantor's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Receivable or any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other
negotiable or non-negotiable documents, (v) clear Inventory the purchase of
which was financed with Letter of Credit Accommodations through U.S. Customs in
such Borrower's or Guarantor's name, Agent's name or the name of Agent's
designee, and to sign and deliver to customs officials powers of attorney in
such Borrower's or Guarantor's name for such purpose, and to complete in such
Borrower's or Guarantor's or Agent's name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, (vi) sign such Borrower's or Guarantor's name on any verification of
Receivables and notices thereof to account debtors or other obligors in respect
thereof and (vii) execute in such Borrower's or Guarantor's name and file any
UCC financing statements or amendments thereto. Each Borrower and each Guarantor
hereby releases Agent and Lenders and their respective officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of Agent's or any Lender's own gross negligence or wilful misconduct
as determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
7.6 Right to Cure. Agent may, at its option, upon notice to Parent, (a)
cure any default by any Borrower or Guarantor under any material agreement with
a third party which affects the Collateral, its value or the ability of Agent to
collect, sell or otherwise dispose of the Collateral or
51
the rights and remedies of Agent or any Lender therein or the ability of any
Borrower or Guarantor to perform its obligations under the other Financing
Agreements, (b) pay or bond on appeal any judgment entered against any Borrower
or Guarantor, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and (d) pay any amount, incur any expense or perform any act which, in Agent's
good faith judgment, is necessary to preserve, protect, insure or maintain the
Collateral and the rights of Agent and Lenders with respect thereto. Agent may
add any amounts so expended to the Obligations and charge any Borrower's account
therefor, such amounts to be repayable by Borrowers on demand. Agent and Lenders
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of any
Borrower or Guarantor. Any payment made or other action taken by Agent or any
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower's and Guarantor's premises during normal business
hours and after notice to Parent, or at any time and without notice to Parent if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of each Borrower's
and Guarantor's books and records, including the Records, provided, that, so
long as no Default or Event of Default shall exist or have occurred and be
continuing, Agent shall not conduct more than three (3) field examinations with
respect to the Collateral in any twelve (12) month period, except Agent may, at
its option, and upon the written request of Co-Arranger, Agent shall, conduct a
fourth (4th) field examination should it so elect during such period (and any
field examinations conducted while a Default or an Event of Default exists shall
not be included in the determination of the number of field examinations
conducted during any such period for purposes hereof) and (b) each Borrower and
Guarantor shall promptly furnish to Agent such copies of such books and records
or extracts therefrom as Agent may reasonably request, and (c) Agent or any
Lender or Agent's designee may use during normal business hours such of any
Borrower's and Guarantor's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
------------------------------
Each Borrower and Guarantor hereby represents and warrants to Agent and
Lenders the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations to Borrowers:
8.1 Corporate Existence, Power and Authority.
----------------------------------------
(a) Each Borrower and Guarantor is a corporation duly organized
and in good standing under the laws of its state of incorporation and is duly
qualified as a foreign corporation
52
and in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have or be reasonably expected to have a Material Adverse
Effect. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
(i) are all within each Borrower's and Guarantor's corporate powers, (ii) have
been duly authorized, (iii) are not in contravention of law or the terms of any
Borrower's or Guarantor's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or undertaking to
which any Borrower or Guarantor is a party or by which any Borrower or Guarantor
or its property are bound and (iv) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of any Borrower or
Guarantor.
(b) This Agreement and the other Financing Agreements to which
any Borrower or Guarantor is a party constitute legal, valid and binding
obligations of such Borrowers and Guarantors enforceable in accordance with
their respective terms except as such enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium, or similar law
affecting creditors' rights generally and by general principles of equity
regardless of whether considered a proceeding in equity or at law.
8.2 Name; State of Organization; Chief Executive Office; Collateral
---------------------------------------------------------------
Locations.
----------
(a) The exact legal name of each Borrower and Guarantor is as
set forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the past five years, been
known by or used any other corporate or fictitious name or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property or assets out of the ordinary course
of business, except as set forth in the Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type
and organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each
Borrower and Guarantor and each Borrower's and Guarantor's Records concerning
Accounts are located only at the address identified as such in Schedule 8.2 to
this Agreement and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to
this Agreement subject to the rights of any Borrower or Guarantor to establish
new locations in accordance with Section 9.2 below. Schedule 8.2 correctly
identifies any of such locations which are not owned by a Borrower or Guarantor
and sets forth the owners and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or
53
Guarantor to Agent and Lenders have been prepared in accordance with GAAP and
fairly present in all material respects the financial condition and the results
of operation of such Borrower and Guarantor as at the dates and for the periods
set forth therein (except as to any interim financial statements, to the extent
such statements are subject to normal year-end adjustments and do not include
any notes). Except as disclosed in any interim financial statements furnished by
Borrowers and Guarantors to Agent prior to the date of this Agreement, there has
been no act, condition or event which has had or is reasonably likely to have a
Material Adverse Effect since the date of the most recent audited financial
statements of any Borrower or Guarantor furnished by any Borrower or Guarantor
to Agent prior to the date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4 to
this Agreement and the other liens permitted under Section 9.8 hereof. Each
Borrower and Guarantor has good and marketable fee simple title to or valid
leasehold interests in all of its Real Property and good, valid and merchantable
title to all of its other properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Agent and such others as are specifically listed on Schedule 8.4 to
this Agreement or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to
be filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, except taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower or Guarantor and with respect to which
adequate reserves have been set aside on its books. Adequate provision has been
made for the payment of all accrued and unpaid Federal, State, county, local,
foreign and other taxes whether or not yet due and payable and whether or not
disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to this Agreement,
(a) there is no investigation by any Governmental Authority pending, or to the
best of any Borrower's or Guarantor's knowledge threatened, against or affecting
any Borrower or Guarantor, its or their assets or business and (b) there is no
action, suit, proceeding or claim by any Person pending, or to the best of any
Borrower's or Guarantor's knowledge threatened, against any Borrower or
Guarantor or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, in each case, which if adversely
determined against such Borrower or Guarantor has or would reasonably be
expected to have a Material Adverse Effect. Since the date of this Agreement,
there has been no change in the status of the matters (of the type referred to
in the immediately preceding sentence) contained in the Information Certificate
that, individually or in the aggregate, has resulted in, or materially increased
the likelihood of, a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
-----------------------------------------------------
54
(a) Borrowers and Guarantors are not in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to their respective businesses,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, and all Environmental Laws where the failure to comply
has or would reasonably be expected to have a Material Adverse Effect.
(b) Borrowers and Guarantors have obtained all material permits,
licenses, approvals, consents, certificates, orders or authorizations of any
Governmental Authority required for the lawful conduct of its business (the
"Permits"). All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to the best of
any Borrower's or Guarantor's knowledge, threatened that seek the revocation,
cancellation, suspension or modification of any of the Permits which, if
determined adversely to any Borrower or Guarantor, would reasonably be expected
to have a Material Adverse Effect.
8.8 Environmental Compliance.
-------------------------
(a) Except as set forth on Schedule 8.8 to this Agreement,
Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor have not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates in any material respect
any applicable Environmental Law or Permit, and the operations of Borrowers,
Guarantors and any Subsidiary of any Borrower or Guarantor complies in all
material respects with all Environmental Laws and all Permits.
(b) Except as set forth on Schedule 8.8 to this Agreement, there
has been no investigation by any Governmental Authority or any proceeding,
complaint, order, directive, claim, citation or notice by any Governmental
Authority or any other person nor is any pending or to the best of any
Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or Guarantor and any Subsidiary of any Borrower or Guarantor or the
release, spill or discharge of any Hazardous Material or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which adversely affects or would reasonably be expected to adversely
affect in any material respect any Borrower or Guarantor or its or their
business, operations or assets or any properties at which such Borrower or
Guarantor has transported, stored or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to this Agreement,
Borrowers, Guarantors and their Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge of
any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
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(d) Borrowers, Guarantors and their Subsidiaries have all
Permits required to be obtained or filed in connection with the operations of
Borrowers and Guarantors under any Environmental Law where the failure to obtain
such Permits has or would reasonably be expected to have a Material Adverse
Effect and all of such licenses, certificates, approvals or similar
authorizations and other Permits are valid and in full force and effect.
8.9 Employee Benefits.
------------------
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best of any Borrower's or Guarantor's knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA
Affiliates have made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending, or to the best of any Borrower's or
Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not
incurred and do not reasonably expect to incur, any liability under Title IV of
ERISA with respect to any Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA
Affiliates, have not incurred and do not reasonably expect to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and
Guarantor, and their ERISA Affiliates, have not engaged in a transaction that
would be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to this
Agreement, subject to the right of each Borrower and Guarantor to establish new
accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Each Borrower and Guarantor owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted or proposed to be
conducted. As of the date hereof, Borrowers and Guarantors do not have any
Intellectual Property registered, or subject to pending applications, in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State
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thereof, any political subdivision thereof or in any other country, other than
those described in Schedule 8.11 to this Agreement and has not granted any
licenses with respect thereto other than as set forth in Schedule 8.11 to this
Agreement. No event has occurred which permits or would permit after notice or
passage of time or both, the revocation, suspension or termination of such
rights. To the best of any Borrower's and Guarantor's knowledge, no slogan or
other advertising device, product, process, method, substance or other
Intellectual Property or goods bearing or using any Intellectual Property
presently contemplated to be sold by or employed by any Borrower or Guarantor
infringes any patent, trademark, servicemark, tradename, copyright, license or
other Intellectual Property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting any Borrower or
Guarantor contesting its right to sell or use any such Intellectual Property.
Schedule 8.11 to this Agreement sets forth all of the agreements or other
arrangements of each Borrower and Guarantor pursuant to which such Borrower or
Guarantor has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of such Borrower or Guarantor as in effect on the date hereof
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower or Guarantor after the date hereof, collectively,
the "License Agreements" and individually, a "License Agreement"). No trademark,
servicemark, copyright or other Intellectual Property at any time used by any
Borrower or Guarantor which is owned by another person, or owned by such
Borrower or Guarantor subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than Agent,
is affixed to any Eligible Inventory, except (a) to the extent permitted under
the term of the license agreements listed on Schedule 8.11 to this Agreement and
(b) to the extent the sale of Inventory to which such Intellectual Property is
affixed is permitted to be sold by such Borrower or Guarantor under applicable
law (including the United States Copyright Act of 1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
---------------------------------------------------
(a) Each Borrower and Guarantor does not have any direct or
indirect Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to this Agreement.
(b) Each Borrower and Guarantor is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
the Subsidiaries listed on Schedule 8.12 to this Agreement as being owned by
such Borrower or Guarantor and there are no proxies, irrevocable or otherwise,
with respect to such shares and no equity securities of any of the Subsidiaries
are or may become required to be issued by reason of any options, warrants,
rights to subscribe to, calls or commitments of any kind or nature and there are
no contracts, commitments, understandings or arrangements by which any
Subsidiary is or may become bound to issue additional shares of it Capital Stock
or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each
Borrower and Guarantor are directly and beneficially owned and held by the
persons indicated on Schedule 8.12 to this Agreement in the Information
Certificate, and in each case all of such shares have been duly
57
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as disclosed in writing to
Agent prior to the date hereof.
(d) Each Borrower and Guarantor is Solvent and will continue to
be Solvent after the creation of the Obligations, the security interests of
Agent and the other transaction contemplated hereunder.
8.13 Labor Disputes.
---------------
(a) Set forth on Schedule 8.13 to this Agreement is a list
(including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or Guarantor or, to the best of any Borrower's or
Guarantor's knowledge, threatened against it, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is
pending on the date hereof against any Borrower or Guarantor or, to best of any
Borrower's or Guarantor's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against any
Borrower or Guarantor or, to the best of any Borrower's or Guarantor's
knowledge, threatened against any Borrower or Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained
in this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in effect on the date hereof, there
are no contractual or consensual restrictions on any Borrower or Guarantor or
any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of
cash or other assets (i) between any Borrower or Guarantor and any of its or
their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor
or (b) the ability of any Borrower or Guarantor or any of its or their
Subsidiaries to incur Indebtedness or grant security interests to Agent or any
Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to this Agreement sets forth all
Material Contracts to which any Borrower or Guarantor is a party or is bound as
of the date hereof. Borrowers and Guarantors have delivered true, correct and
complete copies of such Material Contracts to Agent on or before the date
hereof. Borrowers and Guarantors are not in breach or in default in any material
respect of or under any Material Contract and have not received any notice of
the intention of any other party thereto to terminate any Material Contract.
8.16 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.17 Accuracy and Completeness of Information. All information
furnished by or on behalf of any Borrower or Guarantor in writing to Agent or
any Lender in connection with this
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Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or would reasonably be expected to have
a Material Adverse Affect, which has not been fully and accurately disclosed to
Agent in writing prior to the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
9.1 Maintenance of Existence.
-------------------------
(a) Each Borrower and Guarantor shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted, except as to any Guarantor other than Parent as permitted in Section
9.7 hereto.
(b) No Borrower or Guarantor shall change its name unless each
of the following conditions is satisfied: (i) Agent shall have received not less
than thirty (30) days prior written notice from Parent of such proposed change
in its corporate name, which notice shall accurately set forth the new name; and
(ii) Agent shall have received a copy of the amendment to the Certificate of
Incorporation of such Borrower or Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower or Guarantor as soon as it is available.
(c) No Borrower or Guarantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless Agent shall have received not
less than thirty (30) days' prior written notice from such Borrower or Guarantor
of such proposed change, which notice shall set forth such information with
respect thereto as Agent may require and Agent shall have received such
agreements as Agent may reasonably require in connection therewith. No Borrower
or Guarantor shall change its type of organization, jurisdiction of organization
or other legal structure.
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9.2 New Collateral Locations. Each Borrower and Guarantor may only open
any new location within the continental United States provided such Borrower or
Guarantor (a) gives Agent thirty (30) days prior written notice of the intended
opening of any such new location and (b) executes and delivers, or causes to be
executed and delivered, to Agent such agreements, documents, and instruments as
Agent may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
---------------------------------------
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, approvals, orders and other Permits applicable to
it and duly observe all requirements of any foreign, Federal, State or local
Governmental Authority, including ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, and all statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including
all of the Environmental Laws.
(b) Borrowers and Guarantors shall give written notice to Agent
immediately upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor's otherwise obtaining knowledge of, (i) the occurrence
of any event involving the release, spill or discharge of any Hazardous Material
or (ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by any Borrower or Guarantor or (B) the release, spill or
discharge of any Hazardous Material other than in the ordinary course of
business and other than as permitted under any applicable Environmental Law.
Copies of all environmental surveys, audits, assessments, feasibility studies
and results of remedial investigations shall be promptly furnished, or caused to
be furnished, by such Borrower or Guarantor to Agent. Each Borrower and
Guarantor shall take prompt action to respond to any material non-compliance
with any of the Environmental Laws and shall regularly report to Agent on such
response.
(c) Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower or Guarantor in order to
avoid any non-compliance, with any Environmental Law, Borrowers shall, at
Agent's request and Borrowers' expense: (i) cause an independent environmental
engineer reasonably acceptable to Agent to conduct such tests of the site where
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Agent a report as
to such non- compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower's or
Guarantor's response thereto or the estimated costs thereof, shall change in any
material respect.
(d) Each Borrower and Guarantor shall indemnify and hold
harmless Agent and Lenders and their respective, directors, officers, employees,
agents, invitees, representatives,
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successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including reasonable attorneys' fees and
expenses) directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, spill, discharge,
disposal or presence of a Hazardous Material, including the costs of any
required or necessary repair, cleanup or other remedial work with respect to any
property of any Borrower or Guarantor and the preparation and implementation of
any closure, remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books. Each Borrower and Guarantor shall be
liable for any tax or penalties imposed on Agent or any Lender as a result of
the financing arrangements provided for herein and each Borrower and Guarantor
agrees to indemnify and hold Agent harmless with respect to the foregoing, and
to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and
until paid by such Borrower or Guarantor such amount shall be added and deemed
part of the Loans, provided, that, nothing contained herein shall be construed
to require any Borrower or Guarantor to pay any income or franchise taxes
attributable to the income of Lenders from any amounts charged or paid hereunder
to Lenders. The foregoing indemnity shall survive the payment of the Obligations
and the termination of this Agreement.
9.5 Insurance. Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated. Said policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Agent as
Agent shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, Agent is authorized, but not required, to obtain
such insurance at the expense of Borrowers. All policies shall provide for at
least thirty (30) days prior written notice to Agent of any cancellation or
reduction of coverage and that Agent may act as attorney for each Borrower and
Guarantor in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Agent to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Borrowers and Guarantors shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Agent. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by any Borrower, Guarantor or
any of its or their Affiliates. At its option, Agent may apply any insurance
proceeds received by Agent at any time to the cost of repairs or replacement
61
of Collateral and/or to payment of the Obligations, whether or not then due, in
any order and in such manner as Agent may determine or hold such proceeds as
cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
-------------------------------------------
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent
and Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and to notify the auditors and accountants of
Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers and Guarantors
shall furnish or cause to be furnished to Agent, the following: (i) within
thirty (30) days after the end of each fiscal month, monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Parent and its Subsidiaries as of the end of and through such
fiscal month, certified to be correct by the chief financial officer of Parent,
subject to normal year-end adjustments and no footnotes and accompanied by a
compliance certificate substantially in the form of Exhibit C hereto, along with
a schedule in a form reasonably satisfactory to Agent of the calculations used
in determining, as of the end of such month, whether Borrowers and Guarantors
are in compliance with the covenants set forth in Section 9.17 of this Agreement
for such month, (ii) quarterly unaudited consolidated financial statements and
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of operation of Parent and its Subsidiaries as of the
end of and through such fiscal quarter, certified to be correct by the chief
financial officer of Parent, subject to normal year-end adjustments, and (iii)
within ninety (90) days after the end of each fiscal year, audited consolidated
financial statements and unaudited consolidating financial statements of Parent
and its Subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Parent
and its Subsidiaries as of the end of and for such fiscal year, together with
the unqualified opinion of independent certified public accountants with respect
to the audited consolidated financial statements, which accountants shall be
Xxxxxx Xxxxxxxx & Co. or another independent accounting firm selected by
Borrowers and acceptable to Agent, that such audited consolidated financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Parent and its Subsidiaries as
of the end of and for the fiscal year then ended.
(b) Borrowers and Guarantors shall promptly notify Agent in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to Collateral having a value of more than $250,000
or which if adversely determined would result in any material
62
adverse change in any Borrower's or Guarantor's business, properties, assets,
goodwill or condition, financial or otherwise, (ii) any Material Contract being
terminated or amended or any new Material Contract entered into (in which event
Borrowers and Guarantors shall provide Agent with a copy of such Material
Contract), (iii) any order, judgment or decree in excess of $500,000 shall have
been entered against any Borrower or Guarantor any of its or their properties or
assets, (iv) any notification of a material violation of laws or regulations
received by any Borrower or Guarantor, (v) any ERISA Event; and (vi) the
occurrence of any Default or Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending or
filing thereof furnish or cause to be furnished to Agent copies of all reports
which any Borrower or Guarantor sends to its stockholders generally and copies
of all reports and registration statements which any Borrower or Guarantor files
with the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
(d) Borrowers and Guarantors shall furnish or cause to be
furnished to Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrowers and Guarantors, as Agent
may, from time to time, reasonably request. Agent is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrowers and Guarantors to any court or other Governmental
Authority or to any Lender or Participant or prospective Lender or Participant,
subject to Section 13.5 hereof. Each Borrower and Guarantor hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrowers' expense, copies of the financial statements of any Borrower and
Guarantor and any reports or management letters prepared by such accountants or
auditors on behalf of any Borrower or Guarantor and to disclose to Agent and
Lenders such information as they may have regarding the business of any Borrower
and Guarantor. Any documents, schedules, invoices or other papers delivered to
Agent or any Lender may be destroyed or otherwise disposed of by Agent or such
Lender one (1) year after the same are delivered to Agent or such Lender, except
as otherwise designated by party to Agent or such Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it except that
any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with
and into or consolidate with any other wholly- owned Subsidiary of Parent (other
than any Borrower), provided, that, each of the following conditions is
satisfied as determined by Agent in good faith: (i) Agent shall have received
not less than ten (10) Business Days' prior written notice of the intention of
such Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Agent, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the
assets of the persons that are merging or consolidating, and the material
agreements and documents relating to such merger or consolidation, (ii) Agent
shall have received such other information with respect to such merger or
consolidation as Agent may reasonably request, (iii) as of the effective date of
the merger or consolidation and after giving effect thereto, no Default or Event
of Default shall exist or have occurred and be continuing, (iv) Agent shall have
received,
63
true, correct and complete copies of all agreements, documents and instruments
relating to such merger or consolidation, including, but not limited to, the
certificate or certificates of merger to be filed with each appropriate
Secretary of State (with a copy as filed promptly after such filing), (v) the
surviving corporation shall expressly confirm, ratify and assume the Obligations
and the Financing Agreements to which it is a party in writing, in form and
substance satisfactory to Agent, and execute and deliver such other agreements,
documents and instruments as Agent may request in connection therewith;
(b) sell, assign, lease, transfer, abandon or otherwise dispose
of any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for
(i) sales of Inventory in the ordinary course of business,
(ii) the sale or other disposition of Equipment (including
worn-out or obsolete Equipment or Equipment no longer used or useful in the
business of any Borrower or Guarantor) so long as such sales or other
dispositions do not involve Equipment having an aggregate fair market value in
excess of $250,000 for all such Equipment disposed of in any fiscal year of
Borrowers or as Agent may otherwise agree, and
(iii) the issuance and sale by any Borrower or Guarantor of
Capital Stock of such Borrower or Guarantor after the date hereof; provided,
that, (A) Agent shall have received not less than ten (10) Business Days' prior
written notice of such issuance and sale by such Borrower or Guarantor, which
notice shall specify the parties to whom such shares are to be sold, the terms
of such sale, the total amount which it is anticipated will be realized from the
issuance and sale of such stock and the net cash proceeds which it is
anticipated will be received by such Borrower or Guarantor from such sale, (B)
such Borrower or Guarantor shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of
such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letter of Credit Accommodations or
the right of any Borrower and Guarantor to amend or modify any of the terms and
conditions of this Agreement or any of the other Financing Agreements or
otherwise in any way relate to or affect the arrangements of Borrowers and
Guarantors with Agent and Lenders or are more restrictive or burdensome to any
Borrower or Guarantor than the terms of any Capital Stock in effect on the date
hereof, and (D) as of the date of such issuance and sale and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing except, that none of the foregoing conditions shall apply to Parent's
issuance of Capital Stock to holders of the Senior Subordinated Notes pursuant
to the exercise of the "Warrants" or issuance by Parent of "PIK Stock" to
holders of the Senior Subordinated Notes (as such quoted terms are defined in
the Subordination Agreement, dated of even date herewith, by and among Agent and
the holders of the Senior Subordinated Notes),
(iv) the issuance of Capital Stock of any Borrower or
Guarantor consisting of common stock pursuant to an employee stock option or
grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for
the benefit of its employees, directors and consultants,
64
provided, that, in no event shall such Borrower or Guarantor be required to
issue, or shall such Borrower or Guarantor issue, Capital Stock pursuant to such
stock plans or 401(k) plans which would result in a Change of Control or other
Event of Default,
(c) wind up, liquidate or dissolve except that any Guarantor
(other than Parent) may wind up, liquidate and dissolve, provided, that, each of
the following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor shall not violate any law or any order or decree
of any court or other Governmental Authority in any material respect and shall
not conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or any other agreement or instrument to
which any Borrower or Guarantor is a party or may be bound, (ii) such winding
up, liquidation or dissolution shall be done in accordance with the requirements
of all applicable laws and regulations, (iii) effective upon such winding up,
liquidation or dissolution, all of the assets and properties of such Guarantor
shall be duly and validly transferred and assigned to a Borrower, free and clear
of any liens, restrictions or encumbrances other than the security interest and
liens of Agent (and Agent shall have received such evidence thereof as Agent may
require), (iv) Agent shall have received all documents and agreements that any
Borrower or Guarantor has filed with any Governmental Authority or as are
otherwise required to effectuate such winding up, liquidation or dissolution,
(v) no Borrower or Guarantor shall assume any Indebtedness, obligations or
liabilities as a result of such winding up, liquidation or dissolution, or
otherwise become liable in respect of any obligations or liabilities of the
entity that is winding up, liquidating or dissolving, unless such Indebtedness
is otherwise expressly permitted hereunder or such obligations or liabilities
are not prohibited under this Agreement or any of the other Financing
Agreements, (vi) Agent shall have received not less than ten (10) Business Days
prior written notice of the intention of such Guarantor to wind up, liquidate or
dissolve, (vii) Agent shall have received such deeds, assignments or other
agreements as Agent may request to evidence and confirm the transfer of such
assets to the parent corporation of such Guarantor and (viii) as of the date of
such winding up, liquidation or dissolution and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, except:
(a) the security interests and liens of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
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(c) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of such Borrower's,
Guarantor's or Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower, Guarantor or such Subsidiary, in each case prior to the
commencement of foreclosure or other similar proceedings and with respect to
which adequate reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and
other restrictions affecting the use of Real Property which do not interfere in
any material respect with the use of such Real Property or ordinary conduct of
the business of such Borrower, Guarantor or such Subsidiary as presently
conducted thereon or materially impair the value of the Real Property which may
be subject thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) pledges and deposits of cash by any Borrower or Guarantor
after the date hereof in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
benefits consistent with the current practices of such Borrower or Guarantor as
of the date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor
after the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance satisfactory to Agent;
(h) liens arising from (i) operating leases and the
precautionary UCC financing statement filings in respect thereof and (ii)
equipment or other materials which are not owned by any Borrower or Guarantor
located on the premises of such Borrower or Guarantor (but not in connection
with, or as part of, the financing thereof) from time to time in the ordinary
course of business and consistent with current practices of such Borrower or
Guarantor and the precautionary UCC financing statement filings in respect
thereof;
(i) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto; and
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(j) the security interests and liens set forth on Schedule 8.4
to this Agreement.
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly),
the Indebtedness, performance, obligations or dividends of any other Person,
except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases)
arising after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property not to exceed $7,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of such Borrower or Guarantor other than the Equipment or Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Borrower or Guarantor of the Obligations
of the other Borrowers or Guarantors in favor of Agent for the benefit of
Lenders;
(d) unsecured Indebtedness of Parent evidenced by or arising
under the Senior Subordinated Notes as in effect on the date hereof, provided,
that:
(i) as of the date hereof, the aggregate principal amount of
such Indebtedness is $15,000,000, of which $11,470,588 was incurred on July 25,
2000 and $3,529,412 was incurred on September 26, 2000;
(ii) the aggregate principal amount of such Indebtedness
shall not exceed $25,000,000, less the aggregate amount of all repayments,
repurchases or redemptions, whether optional or mandatory, in respect thereof,
plus interest thereon at the rate provided for in the Senior Subordinated Notes
as in effect on the date hereof,
(iii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that
Parent may make regularly scheduled payments of interest in respect of such
Indebtedness in accordance with the terms of the Senior Subordinated Notes as in
effect on the date hereof to the extent permitted under the Subordination
Agreement, dated of even date herewith, by and among Agent and the holders of
the Senior Subordinated Notes;
(iv) such Indebtedness is and shall be at all times subject
and subordinate in right of payment to the indefeasible payment in full of the
Obligations;
(v) the Obligations shall at all times constitute "Senior
Debt" entitled to the benefits of the "Senior Credit Subordination Agreement"
(as each of such terms is defined in the Senior Subordinated Note Purchase
Agreement as in effect on the date hereof),
(vi) Borrowers and Guarantors shall not, directly or
indirectly, (A) amend, modify, alter or change in any material respect any terms
of such Indebtedness or any of the
69
Senior Subordinated Notes, the Senior Subordinated Note Purchase Agreement or
any related agreements, documents or instruments, except that Parent may, after
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness other
than pursuant to payments thereof, or to reduce the interest rate or any fees in
connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and
(vii) Agent shall have received true, correct and complete
copies of the Senior Subordinated Note Purchase Agreement and all related
agreements and documents,
(viii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf concurrently with the sending
thereof, as the case may be;
(e) unsecured Indebtedness of Borrowers and Guarantors to Xxxxxx
Xxxxxx, Xxxxxx Xxxxxx and Xxxxx Xxxxxx arising pursuant to the loans by them to
Borrowers and Guarantors on or about June 7, 2001 in the amount of $5,000,000,
provided, that:
(i) as of the date hereof, the aggregate principal amount of
such Indebtedness is $5,000,000;
(ii) such Indebtedness of Borrowers and Guarantors is
subject and subordinate in right of payment to the right of Agent and Lenders to
receive the indefeasible payment and satisfaction in full of all of the
Obligations;
(iii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except, that,
Borrowers and Guarantors may make payments of principal or interest in
accordance with the terms of the Subordination Agreement by and among Xxxxxx
Xxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Agent, provided, that, as to any such
payment, each of the following conditions is satisfied as determined by Agent:
(A) no such payment shall be made prior to thirty (30) days after the date
hereof, (B) as of the date of any such payment and after giving effect thereto,
the aggregate Excess Availability of Borrowers shall be not less than $6,000,000
and (C) as of the date of any such payment and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing,
(iv) Borrowers and Guarantors shall not directly or
indirectly, (A) amend, modify, alter or change any terms of such Indebtedness or
of any agreement, document or instrument which may exist after the date hereof
related thereto, except, that, Borrowers and Guarantors may, after prior written
notice to Agent, amend, modify, alter or change the terms thereof so as to
extend the maturity thereof or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness other than
pursuant to payments thereof, or to contribute such Indebtedness as an equity
capital contribution, or to reduce the interest rate
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or any fees in connection therewith, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest
any sums for such purpose, and
(v) as of the date hereof, such Indebtedness is not
evidenced by any agreement, document or instrument, provided, that, in the event
that at any time hereafter such Indebtedness is evidenced by or subject to any
agreement, document or instrument, Agent shall have received true, correct and
complete copies thereof (with such legends and endorsements as Agent may
require),
(vi) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf concurrently with the sending
thereof, as the case may be;
(f) the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor arising after the date hereof pursuant to loans by any
Borrower or Guarantor permitted under Section 9.10(g) hereof;
(g) unsecured Indebtedness of any Borrower or Guarantor arising
after the date hereof to any third person (but not to any other Borrower or
Guarantor), provided, that, each of the following conditions is satisfied as
determined by Agent: (i) such Indebtedness shall be on terms and conditions
acceptable to Agent and shall be subject and subordinate in right of payment to
the right of Agent and Lenders to receive the prior indefeasible payment and
satisfaction in full payment of all of the Obligations pursuant to the terms of
an intercreditor agreement between Agent and such third party, in form and
substance satisfactory to Agent, (ii) Agent shall have received not less than
ten (10) days prior written notice of the intention of such Borrower or
Guarantor to incur such Indebtedness, which notice shall set forth in reasonable
detail satisfactory to Agent the amount of such Indebtedness, the person or
persons to whom such Indebtedness will be owed, the interest rate, the schedule
of repayments and maturity date with respect hereto and such other information
as Agent may reasonably request with respect thereto, (iii) Agent shall have
received true, correct and complete copies of all agreements, documents and
instruments evidencing or otherwise related to such Indebtedness, (iv) on and
before the date of incurring such Indebtedness and after giving effect thereto,
no Default or Event of Default shall exist or have occurred and be continuing,
(v) such Borrower and Guarantor shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto, except, that, such Borrower or Guarantor
may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof so as to extend the maturity thereof, or defer the timing of any
payments in respect thereof, or to forgive or cancel any portion of such
Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vi) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or
71
sent by any Borrower or Guarantor or on its behalf concurrently with the sending
thereof, as the case may be;
(h) the Indebtedness set forth on Schedule 9.9 to this Agreement;
provided, that, (i) Borrowers and Guarantors may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrowers and Guarantors
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such Indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof except, that, Borrowers and Guarantors may, after
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not,
and shall not permit any Subsidiary to, directly or indirectly, make any loans
or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the Capital Stock
or Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
(a) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i)
no Loans are then outstanding and (ii) the terms and conditions of Section 5.2
hereof shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are held;
(c) the existing equity investments of each Borrower and
Guarantor as of the date hereof in its Subsidiaries, provided, that, no Borrower
or Guarantor shall have any further obligations or liabilities to make any
capital contributions or other additional investments or other payments to or in
or for the benefit of any of such Subsidiaries;
(d) loans and advances by any Borrower or Guarantor to employees
of such Borrower or Guarantor not to exceed the principal amount of $500,000 in
the aggregate at any time outstanding for: (i) reasonably and necessary
work-related travel or other ordinary business expenses to be incurred by such
employee in connection with their work for such Borrower or
72
Guarantor and (ii) reasonable and necessary relocation expenses of such
employees (including home mortgage financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by
any Person (or the representative of such Person) in respect of Indebtedness of
such Person owing to such Borrower or Guarantor in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; provided, that, the
original of any such stock or instrument evidencing such obligations shall be
promptly delivered to Agent, upon Agent's request, together with such stock
power, assignment or endorsement by such Borrower or Guarantor as Agent may
request;
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed;
(g) loans by a Borrower or Guarantor to another Borrower or
Guarantor after the date hereof, provided, that,
(i) as to all of such loans, (A) within thirty (30) days
after the end of each fiscal month, Borrowers shall provide to Agent a report in
form and substance satisfactory to Agent of the outstanding amount of such loans
as of the last day of the immediately preceding month and indicating any loans
made and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument is promptly delivered to Agent upon its request to hold as part
of the Collateral, with such endorsement and/or assignment by the payee of such
note or other instrument as Agent may require, (C) as of the date of any such
loan and after giving effect thereto, the Borrower or Guarantor making such loan
shall be Solvent, and (D) as of the date of any such loan and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing,
(ii) as to loans by a Guarantor to a Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Agent and Lenders to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) promptly upon Agent's request, Agent shall
have received a subordination agreement, in form and substance satisfactory to
Agent, providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by such
Guarantor and such Borrower, and (C) such Borrower shall not, directly or
indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement,
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(iii) as to loans by a Borrower to a Guarantor or another
Borrower, as of the date of any such loan and after giving effect thereto, (A)
with respect to any such loans by Xxxxx to any other Borrower or Guarantor, (1)
the Excess Availability of Xxxxx shall be not less than $250,000 and (2) Xxxxx
shall have an Adjusted Tangible Net Worth of not less than $7,500,000, (B) with
respect to any such loans by Distributors to any other Borrower or Guarantor,
(1) the Excess Availability of Distributors shall be not less than $250,000 and
(2) Distributors shall have an Adjusted Tangible Net Worth of not less than
$25,000,000, (C) with respect to any such loans by Direct, (1) the Excess
Availability of Direct shall be not less than $100,000 and (2) Direct shall have
an Adjusted Tangible Net Worth of not less than $1,000,000, and (D) with respect
to any such loans by Stanford, the Excess Availability of Stanford shall be not
less than $100,000;
(h) the loans and advances set forth on Schedule 9.10 to this
Agreement; provided, that, as to such loans and advances, (i) Borrowers and
Guarantors shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such loans and advances either received by
any Borrower or Guarantor or on its behalf, promptly after the receipt thereof,
or sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be.
9.11 Dividends and Redemptions. Each Borrower and Guarantor shall
not, directly or indirectly, declare or pay any dividends on account of any
shares of class of any Capital Stock of such Borrower or Guarantor now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock (or set aside or otherwise deposit or
invest any sums for such purpose) for any consideration or apply or set apart
any sum, or make any other distribution (by reduction of capital or otherwise)
in respect of any such shares or agree to do any of the foregoing, except that:
(a) such Borrower or Guarantor may declare and pay such
dividends or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of Capital Stock for consideration in the form of shares of common
stock (so long as after giving effect thereto no Change of Control or other
Default or Event of Default shall exist or occur);
(b) Borrowers and Guarantors may pay dividends to the extent
permitted in Section 9.12 below;
(c) Borrowers and Guarantors may repurchase Capital Stock
consisting of common stock held by employees pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of such plan, provided, that, as to
any such repurchase, each of the following conditions is satisfied: (i) as of
the date of the payment for such repurchase and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing, (ii)
such repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party
74
or by which such Borrower or Guarantor or its or their property are bound, and
(iv) the aggregate amount of all payments for such repurchases in any calendar
year shall not exceed $250,000.
9.12 Transactions with Affiliates. Each Borrower and Guarantor shall
not, directly or indirectly,
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director or other Affiliate of
such Borrower or Guarantor, except in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or Guarantor's business (as the case
may be) and upon fair and reasonable terms no less favorable to such Borrower or
Guarantor than such Borrower or Guarantor would obtain in a comparable arm's
length transaction with an unaffiliated person; or
(b) make any payments (whether by dividend, loan or otherwise)
of management, consulting or other fees for management or similar services, or
of any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of such Borrower or Guarantor, except (i) reasonable
compensation to officers, employees and directors for services rendered to such
Borrower or Guarantor in the ordinary course of business, and (ii) payments by
any such Borrower or Guarantor to Parent for actual and necessary reasonable
out-of-pocket legal and accounting, insurance, marketing, payroll and similar
types of services paid for by Parent on behalf of such Borrower or Guarantor, in
the ordinary course of their respective businesses or as the same may be
directly attributable to such Borrower or Guarantor and for the payment of taxes
by or on behalf of Parent.
9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and
shall cause each of its ERISA Affiliates, to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any material liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA; (e) make all required contributions to any Plan which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or
the terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such Plan that is a single employer plan, which
termination would result, or would reasonably be expected to result, in any
material liability to the Pension Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and
Guarantor shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on
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March 31 of each year and (b) fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
9.15 Change in Business. (a) Each Borrower and Guarantor shall not
engage in any business other than the business of such Borrower or Guarantor on
the date hereof and any business reasonably related, ancillary or complimentary
to the business in which such Borrower or Guarantor is engaged on the date
hereof.
(b) None of Guarantors shall have any material assets,
operations or business, other than (i) the ownership by Parent of Capital Stock
of its Subsidiaries, (ii) the ownership by Personal Care of Capital Stock of
Xxxx Xxxxxx, and (iii) the ownership by Xxxx Xxxxxx of Capital Stock of
Stanford.
9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower
and Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create, incur,
assume or suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of such Borrower or
Guarantor prior to the date on which such Subsidiary was acquired by Borrower or
such Guarantor and outstanding on such acquisition date, and (vi) the extension
or continuation of contractual obligations in existence on the date hereof;
provided, that, any such encumbrances or restrictions contained in such
extension or continuation are no less favorable to Agent and Lenders than those
encumbrances and restrictions under or pursuant to the contractual obligations
so extended or continued.
9.17 Financial Covenants.
-------------------
(a) Parent and its Subsidiaries shall, at all times have, and
shall maintain, Adjusted Tangible Net Worth of not less than $50,000,000.
(b) Parent and its Subsidiaries shall not permit EBITDA to be
less than the amount set forth on Schedule 9.17 for the twelve (12) consecutive
months ending on each date specified on such Schedule.
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(c) Parent and its Subsidiaries shall at all times maintain a
Current Ratio of not less than 1.10 to 1.0.
9.18 License Agreements.
------------------
(a) Each Borrower and Guarantor shall (i) promptly and
faithfully observe and perform all of the material terms, covenants, conditions
and provisions of the material License Agreements to which it is a party to be
observed and performed by it, at the times set forth therein, if any, (ii) not
do, permit, suffer or refrain from doing anything that would reasonably be
expected to result in a default under or breach of any of the terms of any
material License Agreement, (iii) not cancel, surrender, modify, amend, waive or
release any material License Agreement in any material respect or any term,
provision or right of the licensee thereunder in any material respect, or
consent to or permit to occur any of the foregoing; except, that, subject to
Section 9.18(b) below, such Borrower or Guarantor may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
such Borrower or Guarantor; provided, that, such Borrower or Guarantor (as the
case may be) shall give Agent not less than thirty (30) days prior written
notice of its intention to so cancel, surrender and release any such material
License Agreement, (iv) give Agent prompt written notice of any material License
Agreement entered into by such Borrower or Guarantor after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request, (v) give Agent prompt
written notice of any material breach of any obligation, or any default, by any
party under any material License Agreement, and deliver to Agent (promptly upon
the receipt thereof by such Borrower or Guarantor in the case of a notice to
such Borrower or Guarantor and concurrently with the sending thereof in the case
of a notice from such Borrower or Guarantor) a copy of each notice of default
and every other notice and other communication received or delivered by such
Borrower or Guarantor in connection with any material License Agreement which
relates to the right of such Borrower or Guarantor to continue to use the
property subject to such License Agreement, and (vi) furnish to Agent, promptly
upon the request of Agent, such information and evidence as Agent may reasonably
require from time to time concerning the observance, performance and compliance
by such Borrower or Guarantor or the other party or parties thereto with the
material terms, covenants or provisions of any material License Agreement.
(b) Each Borrower and Guarantor will either exercise any option
to renew or extend the term of each material License Agreement to which it is a
party in such manner as will cause the term of such material License Agreement
to be effectively renewed or extended for the period provided by such option and
give prompt written notice thereof to Agent or give Agent prior written notice
that such Borrower or Guarantor does not intend to renew or extend the term of
any such material License Agreement or that the term thereof shall otherwise be
expiring, not less than sixty (60) days prior to the date of any such
non-renewal or expiration. In the event of the failure of such Borrower or
Guarantor to extend or renew any material License Agreement to which it is a
party, Agent shall have, and is hereby granted, the irrevocable right and
authority, at its option, to renew or extend the term of such material License
Agreement, whether in its own name and behalf, or in the name and behalf of a
designee or nominee of Agent or in the name and behalf of
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such Borrower or Guarantor, as Agent shall determine at any time that an Event
of Default shall exist or have occurred and be continuing. Agent may, but shall
not be required to, perform any or all of such obligations of such Borrower or
Guarantor under any of the License Agreements, including, but not limited to,
the payment of any or all sums due from such Borrower or Guarantor thereunder.
Any sums so paid by Agent shall constitute part of the Obligations.
9.19 Prepaid Inventory. Borrowers and Guarantors shall not, at any
time, acquire Inventory, on a prepaid basis, in an aggregate amount greater than
$20,000,000, or in an amount greater than $5,000,000 from any one supplier or
seller of such Inventory.
9.20 Costs and Expenses. Borrowers and Guarantors shall, jointly and
severally, pay to Agent and Lenders on demand all reasonable costs, expenses,
filing fees and taxes paid or payable in connection with the preparation,
negotiation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Agent's rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes and intangibles taxes, if
applicable); (b) costs and expenses and fees for insurance premiums, appraisal
fees and search fees, costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Agent's customary charges and fees with respect thereto;
(c) charges, fees or expenses charged by any bank or issuer in connection with
the Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Agent and Lenders during the course of periodic field examinations
of the Collateral and such Borrower's or Guarantor's operations as permitted
under Section 7.7 hereof, plus a per diem charge at the rate of $750 per person
per day for Agent's examiners in the field and office; and (g) the fees and
disbursements of counsel (including legal assistants) to Agent and Lenders in
connection with any of the foregoing.
9.21 Minimum Excess Availability. The aggregate amount of the Excess
Availability of Borrowers shall, at all times during the period commencing the
date hereof through and including September 30, 2001, be equal to or greater
than $6,000,000.
9.22 Further Assurances. At the request of Agent at any time and from
time to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce
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the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Financing Agreements. Agent may at any time and from time to time request
a certificate from an officer of any Borrower or Guarantor representing that all
conditions precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied. In the event of such request by
Agent, Agent and Lenders may, at Agent's option, cease to make any further Loans
or provide any further Letter of Credit Accommodations until Agent has received
such certificate and, in addition, Agent has determined that such conditions are
satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
------------------------------
10.1 Events of Default. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations when
due or (ii) any Borrower or Guarantor fails to perform any of the covenants
contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, 9.16 and 9.18 of this
Agreement and such failure shall continue for thirty (30) days; provided, that,
such thirty (30) day period shall not apply in the case of: (A) any failure to
observe any such covenant which is not capable of being cured at all or within
such thirty (30) day period or which has been the subject of a prior failure
within a six (6) month period or (B) an intentional breach by any Borrower or
Guarantor of any such covenant or (iii) any Borrower or Guarantor fails to
perform any of the terms, covenants, conditions or provisions contained in this
Agreement or any of the other Financing Agreements other than those described in
Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
any Borrower or Guarantor to Agent in this Agreement, the other Financing
Agreements or any other written agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent;
(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $250,000 in any one case or in excess of
$750,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or Obligor or any of the Collateral
having a value in excess of $750,000;
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(e) any two of Xxxxxx Xxxxxx, Xxxxxx Xxxxxx and Xxxxx Xxxxxx
dies or any Borrower or Obligor, which is a partnership, limited liability
company, limited liability partnership or a corporation, dissolves or suspends
or discontinues doing business (other than a dissolution otherwise permitted
under Section 9.7 hereof);
(f) any Borrower or Obligor makes an assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors in connection with a moratorium or adjustment
of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property;
(i) any default or event of default in respect of any
Indebtedness of any Borrower or any Obligor (including pursuant to the Senior
Subordinated Notes) other than Indebtedness to Agent or any Lender hereunder, in
any case in an amount in excess of $750,000, which default or event of default
continues for more than the applicable cure period, if any, with respect thereto
and/or is not waived without condition or limitation in writing by the other
parties thereto, or any default or event of default by any Borrower or Obligor
under any Material Contract, which default or event of default continues for
more than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto;
(j) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Agent) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
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(k) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of any Borrower in an aggregate
amount in excess of $500,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Agent
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor
or Agent receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Agent, under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$750,000 or (ii) any other property of any Borrower or Guarantor which is
necessary or material to the conduct of its business;
(n) there shall be a material adverse change in the business,
assets or financial condition of any Borrower or Obligor after the date hereof;
or
(o) there shall be an event of default under any of the other
Financing Agreements which has not been cured or waived as provided therein.
10.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and
is continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Obligor of this
Agreement or any of the other Financing Agreements. Subject to Section 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
and upon the direction of the Required Lenders, shall (i) accelerate the payment
of all Obligations and demand immediate payment thereof to Agent for itself and
the ratable benefit of Lenders, (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be
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located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii) require
any Borrower or Obligor, at Borrowers' expense, to assemble and make available
to Agent any part or all of the Collateral at any place and time designated by
Agent, (iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose, (vi)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Agent or
elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon
credit or for future delivery, with Agent having the right to purchase the whole
or any part of the Collateral at any such public sale, all of the foregoing
being free from any right or equity of redemption of any Borrower or Obligor,
which right or equity of redemption is hereby expressly waived and released by
Borrowers and Obligors and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Agent upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Agent. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Agent to Parent designating the
time and place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrowers and Obligors waive any other notice. In
the event Agent institutes an action to recover any Collateral or seeks recovery
of any Collateral by way of prejudgment remedy, each Borrower and Obligor waives
the posting of any bond which might otherwise be required. At any time an Event
of Default exists or has occurred and is continuing, upon Agent's request,
Borrowers will either, as Agent shall specify, furnish cash collateral to the
issuer of any Letter of Credit Accommodations to be used to secure and fund
Agent's reimbursement obligations to the issuer in connection with any Letter of
Credit Accommodations or furnish cash collateral to Agent for the Letter of
Credit Accommodations. Such cash collateral shall be in the amount equal to one
hundred ten (110%) percent of the amount of the Letter of Credit Accommodations
plus the amount of any fees and expenses payable in connection therewith through
the end of the latest expiration date of such Letter of Credit Accommodations.
(c) Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
and other obligors in respect thereof that the Receivables have been assigned to
Agent and that Agent has a security interest therein and Agent may direct any or
all accounts debtors and other obligors to make payment of Receivables directly
to Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for its or their failure to collect or enforce the payment
thereof nor for the negligence of its or their agents or attorneys with respect
thereto and (iv) take whatever other action Agent may in good xxxxx xxxx
necessary or desirable for the protection of its interests. At any time that an
Event of
82
Default exists or has occurred and is continuing, at Agent's request, all
invoices and statements sent to any account debtor shall state that the Accounts
and such other obligations have been assigned to Agent and are payable directly
and only to Agent and Borrowers and Guarantors shall deliver to Agent such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require. In the
event any account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrowers and Guarantors shall, upon Agent's
request, hold the returned Inventory in trust for Agent, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Agent's instructions, and not issue any credits, discounts
or allowances with respect thereto without Agent's prior written consent.
(d) To the extent that applicable law imposes duties on Agent or
any Lender to exercise remedies in a commercially reasonable manner (which
duties cannot be waived under such law), each Borrower and Guarantor
acknowledges and agrees that it is not commercially unreasonable for Agent or
any Lender (i) to fail to incur expenses reasonably deemed significant by Agent
or any Lender to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain consents of any Governmental Authority or other third party for
the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors, secondary
obligors or other persons obligated on Collateral or to remove liens or
encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower and Guarantor acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
any Borrower or Guarantor would not be commercially unreasonable in the exercise
by any Agent or any Lender of remedies against the Collateral and that other
actions or omissions by Agent or any Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without
limitation of the foregoing, nothing contained in this Section shall be
construed to grant any rights to any Borrower or Guarantor or to impose any
duties on Agent or Lenders that would
83
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section.
(e) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Obligor hereby grants to Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof,
provided, that, such license shall terminate on the date that Agent has received
final payment and satisfaction in full of all of the Obligations in immediately
available funds and this Agreement has been terminated.
(f) Agent may, at any time or times that an Event of Default
exists or has occurred and is continuing, enforce the rights of any Borrower or
Obligor against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, Agent may at such time or times (i) notify any or
all account debtors, secondary obligors or other obligors in respect thereof
that the Receivables have been assigned to Agent and that Agent has a security
interest therein and Agent may direct any or all accounts debtors, secondary
obligors and other obligors to make payment of Receivables directly to Agent,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or
other obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Agent and Lenders shall not be
liable for any failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Agent's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Agent and are payable directly and only to Agent and Borrowers
and Obligors shall deliver to Agent such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Agent may require. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Agent's request, hold the returned Inventory in trust for Agent,
segregate all returned Inventory from all of its other property, dispose of the
returned Inventory solely according to Agent's instructions, and not issue any
credits, discounts or allowances with respect thereto without Agent's prior
written consent.
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(g) Agent may apply the cash proceeds of Collateral actually
received by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrowers and Guarantors shall
remain liable to Agent and Lenders for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and expenses.
(h) Without limiting the foregoing, upon the occurrence of a
Default or an Event of Default and for so long as the same is continuing, Agent
and Lenders may, at Agent's option, and upon the direction of the Required
Lenders, Agent and Lenders shall, without notice, (i) cease making Loans or
arranging for Letter of Credit Accommodations or reduce the lending formulas or
amounts of Loans and Letter of Credit Accommodations available to Borrowers
and/or (ii) terminate any provision of this Agreement providing for any future
Loans or Letter of Credit Accommodations to be made by Agent and Lenders to
Borrowers.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
--------------------------------
AND CONSENTS; GOVERNING LAW
---------------------------
11.1 Governing Law; Choice of Forum; Service of Process;
---------------------------------------------------
Jury Trial Waiver.
-----------------
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
excluding (to the greatest extent a New York court permits) any rule of law that
would cause the application of the law of any jurisdiction other than the State
of New York. Without in any way limiting the preceding choice of law, the
parties elect to be governed by New York law in accordance with, and are relying
(at least in part) on Section 5-1402 of the General Obligations Law of the State
of New York.
(b) Borrowers, Guarantors, Agent and Lenders irrevocably consent
and submit to the non-exclusive jurisdiction of the Supreme Court of the State
of New York in New York County and the United States District Court for the
Southern District of New York, whichever Agent may elect, and waive any
objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Agreement or any of the other Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above (except that Agent and Lenders shall
have the right to bring any action or proceeding against any Borrower or
Guarantor or its or their property in the courts of any other jurisdiction which
Agent deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against any Borrower or Guarantor or its or their
property). Without in any way limiting the preceding consents to jurisdiction
and venue, the parties agree to submit
85
to the jurisdiction of such New York courts in accordance with Section 5-1402 of
the General Obligations Law of the State of New York.
(c) Each Borrower and Guarantor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) to it at the address for
notices set forth herein or, at Agent's option, by service upon such Borrower or
Guarantor, as the case may be, in any other manner provided under the rules of
any such courts. Except as otherwise required by the applicable court, and only
after an Event of Default, within thirty (30) days after such service, such
Borrower or Guarantor shall appear in answer to such process, failing which such
Borrower or Guarantor, as the case may be, shall be deemed in default and
judgment may be entered by Agent against such Borrower or Guarantor for the
amount of the claim and other relief requested.
(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY
FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to any
Borrower or Guarantor (whether in tort, contract, equity or otherwise) for
losses suffered by such Borrower or Guarantor in connection with, arising out
of, or in any way related to the transactions or relationships contemplated by
this Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on Agent and such Lender, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct. In any such
litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement. Each Borrower and
Guarantor: (i) certifies that neither Agent, any Lender nor any representative,
agent or attorney acting for or on behalf of Agent or any Lender has
represented, expressly or otherwise, that Agent and Lenders would not, in the
event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Agent and
Lenders are relying upon, among other things, the waivers and certifications set
forth in this Section 11.1 and elsewhere herein and therein.
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11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all instruments and chattel paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle such Borrower or Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers.
----------------------
(a) Neither this Agreement nor any other Financing Agreement nor
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by
Agent and the Required Lenders or at Agent's option, by Agent with the
authorization of the Required Lenders, and as to amendments to this Agreement or
any of the Financing Agreements (other than with respect to any provision of
Section 12 hereof), by any Borrower or Guarantor (including by Parent on behalf
of any Borrower or other Guarantor; except, that, no such change, waiver,
discharge or termination shall:
(i) reduce the interest rate or any fees or extend the time
of payment of interest or any fees or reduce the principal amount of any Loan or
Letter of Credit Accommodations, without the consent of the Lender directly
affected thereby,
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, without the consent of the Lender
directly affected thereby,
(iii) release any Collateral (except as expressly required
hereunder or under any of the other Financing Agreements or applicable law and
except as permitted under Section 12.11(b) hereof), without the consent of Agent
and all of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3
or Section 12.8 hereof, without the consent of Agent and all of Lenders,
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
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(b) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in
Section 11.3(a) above, in the event that any Borrower or Guarantor requests that
this Agreement or any other Financing Agreements be amended or otherwise
modified in a manner which would require the unanimous consent of all of the
Lenders and such amendment or other modification is agreed to by the Required
Lenders, then, with the consent of Parent, Agent and the Required Lenders,
Parent, Agent and the Required Lenders may amend this Agreement without the
consent of the Lenders that did not agree to such amendment or other
modification (collectively, the "Minority Lenders") to provide for (i) the
termination of the Commitment of each of the Minority Lenders, (ii) the addition
to this Agreement of one or more other Lenders, or an increase in the Commitment
of one or more of the Required Lenders, so that the Commitments, after giving
effect to such amendment, shall be in the same aggregate amount as the
Commitments immediately before giving effect to such amendment, (iii) if any
Loans are outstanding at the time of such amendment, the making of such
additional Loans by such new Lenders or Required Lenders, as the case may be, as
may be necessary to repay in full the outstanding Loans of the Minority Lenders
immediately before giving effect to such amendment and (iv) the payment of all
interest, fees and other Obligations payable or accrued in favor of the Minority
Lenders and such other modifications to this Agreement as Borrower and the
Required Lenders may determine to be appropriate.
(d) The consent of Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Agent hereunder or under any
of the other Financing Agreements, in addition to the consent of the Lenders
otherwise required by this Section.
11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other then compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification.
---------------
(a) Each Borrower and Guarantor shall, jointly and severally,
indemnify and hold Agent and each Lender, and its directors, agents, employees,
advisors and counsel, and their respective Affiliates (each such person being an
"Indemnitee") harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses (including reasonable attorneys' fees and
expenses) imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation,
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preparation, execution, delivery, enforcement, performance or administration of
this Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the reasonable fees and expenses of counsel except
that Borrowers and Guarantors shall not have any obligation under this Section
11.5 to indemnify an Indemnitee with respect to a matter covered hereby
resulting from the gross negligence or wilful misconduct of such Indemnitee (but
without limiting the obligations of Borrowers and Guarantors as to any other
Indemnitee) as determined pursuant to a final, non- appealable order of a court
of competent jurisdiction. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers and Guarantors shall pay the
maximum portion which it is permitted to pay under applicable law to Agent and
Lenders in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
(b) To the extent permitted by applicable law, no Borrower or
Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, or in connection with, or as a result of, this Agreement or any
of the other Financing Agreements or any agreement or document contemplated
hereby or thereby.
SECTION 12. THE AGENT
---------
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Agent; (b) shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any of the other
Financing Agreements, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by Borrower or any Obligor or any other Person to perform any of its
obligations hereunder or thereunder; and (c) shall not be responsible to Lenders
for any action taken or omitted to be taken by it hereunder or under any other
Financing Agreement or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
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Agent may deem and treat the payee of any note as the holder thereof for all
purposes hereof unless and until the assignment thereof pursuant to an agreement
(if and to the extent permitted herein) in form and substance satisfactory to
Agent shall have been delivered to and acknowledged by Agent. The identification
of Citibank as Co-Arranger and Documentation Agent hereunder shall not create
any rights in favor of it in any such capacity, nor subject it to any duties or
obligations in any such capacity.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
12.3 Events of Default.
-----------------
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of an Event of Default or other failure of a condition precedent to
the Loans and Letter of Credit Accommodations hereunder, unless and until Agent
has received written notice from a Lender, or a Borrower specifying such Event
of Default or any unfulfilled condition precedent, and stating that such notice
is a "Notice of Default or Failure of Condition". In the event that Agent
receives such a Notice of Default or Failure of Condition, Agent shall give
prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take
such action with respect to any such Event of Default or failure of condition
precedent as shall be directed by the Required Lenders; provided, that, unless
and until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders. Without limiting the
foregoing, and notwithstanding the existence or occurrence and continuance of an
Event of Default or any other failure to satisfy any of the conditions precedent
set forth in Section 4 of this Agreement to the contrary, Agent may, but shall
have no obligation to, continue to make Loans and issue or cause to be issued
Letter of Credit Accommodations for the ratable account and risk of Lenders from
time to time if Agent believes making such Loans or issuing or causing to be
issued such Letter of Credit Accommodations is in the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender
may assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.
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12.4 Congress in its Individual Capacity. With respect to its
Commitment and the Loans made and Letter of Credit Accommodations issued or
caused to be issued by it (and any successor acting as Agent), so long as
Congress shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Congress in its individual capacity as Lender
hereunder. Congress (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with Borrowers (and
any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and
Congress and its Affiliates may accept fees and other consideration from
Borrower and any of its Subsidiaries and Affiliates for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has, independently and without reliance on Agent or other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrower and Obligors and has made its own decision to enter
into this Agreement and that it will, independently and without reliance upon
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance or observance by any Borrower or Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any Borrower or Obligor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from any
Borrower or Obligor which is required to be provided to Lenders hereunder and
with a copy of any Notice of Default or Failure of Condition received by Agent
from any Borrower or any Lender; provided, that, Agent shall not be liable to
any Lender for any failure to do so, except to the extent that such failure is
attributable to Agent's own gross negligence or willful misconduct as determined
by a final non-appealable judgment of a court of competent jurisdiction. Except
for notices, reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall not have any duty or responsibility to
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provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Borrower or Obligor that may
come into the possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Loans or provide any
Letter of Credit Accommodations to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Loans or Letter of Credit
Accommodations would cause the aggregate amount of the total outstanding Loans
and Letter of Credit Accommodations to such Borrower to exceed the Borrowing
Base of such Borrower, without the prior consent of all Lenders, except, that,
Agent may make such additional Loans or provide such additional Letter of Credit
Accommodations on behalf of Lenders, intentionally and with actual knowledge
that such Loans or Letter of Credit Accommodations will cause the total
outstanding Loans and Letter of Credit Accommodations to such Borrower to exceed
the Borrowing Base of such Borrower, as Agent may deem necessary or advisable in
its discretion, provided, that: (a) the total principal amount of the additional
Loans or additional Letter of Credit Accommodations to any Borrower which Agent
may make or provide after obtaining such actual knowledge that the aggregate
principal amount of the Loans equal or exceed the Borrowing Bases of Borrowers
shall not exceed the aggregate amount equal to $10,000,000 outstanding at any
time and shall not cause the total principal amount of the Loans and Letter of
Credit Accommodations to exceed the Maximum Credit and (b) no such additional
Loans or Letter of Credit Accommodations shall be outstanding more than ninety
(90) days after the date of such additional Loan or Letter of Credit
Accommodation is made or issued (as the case may be), except as the Required
Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the
amount of its Pro Rata Share of any such additional Loans or Letter of Credit
Accommodations provided that Agent is acting in accordance with the terms of
this Section 12.8.
12.9 Concerning the Collateral and the Related Financing Agreements.
Each Lender authorizes and directs Agent to enter into this Agreement and the
other Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a weekly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and
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weekly report with respect to the Borrowing Base being referred to herein as a
"Report" and collectively, "Reports");
(b) expressly agrees and acknowledges that Agent (A) does not
make any representation or warranty as to the accuracy of any Report, or (B)
shall not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers' and
Guarantors' books and records, as well as on representations of Borrowers' and
Guarantors' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
------------------
(a) Agent may, at its option, from time to time, at any time on
or after an Event of Default and for so long as the same is continuing or upon
any other failure of a condition precedent to the Loans and Letter of Credit
Accommodations hereunder, make such disbursements and advances ("Special Agent
Advances") which Agent, in its sole discretion, deems necessary or desirable
either (i) to preserve or protect the Collateral or any portion thereof or (ii)
to enhance the likelihood or maximize the amount of repayment by Borrowers and
Guarantors of the Loans and other Obligations or (iii) to pay any other amount
chargeable to any Borrower or Guarantor pursuant to the terms of this Agreement
or any of the other Financing Agreements consisting of costs, fees and expenses
and payments to any issuer of Letter of Credit Accommodations. Special Agent
Advances shall be repayable on demand and be secured by the Collateral. Special
Agent Advances shall not constitute Loans but shall otherwise constitute
Obligations hereunder. Agent shall notify each Lender and Parent in writing of
each such Special Agent Advance, which notice shall include a description of the
purpose of such Special Agent Advance. Without limitation of its obligations
pursuant to Section 6.9, each Lender agrees that it shall make available to
Agent, upon Agent's demand, in immediately available funds, the amount equal to
such Lender's Pro Rata Share of each such Special Agent Advance. If such funds
are not made available to Agent by such Lender, Agent shall be entitled to
recover such funds, on demand from such Lender together with interest thereon
for each day from the date such payment was due until the date such amount is
paid to Agent at the Federal Funds Rate for each day during such period (as
published by the Federal Reserve Bank of New York or at Agent's option based on
the arithmetic mean determined by Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of the three leading brokers of Federal funds transactions in New
York City selected by Agent) and if such amounts are not paid within three (3)
days of Agent's demand, at the highest Interest Rate provided for in Section 3.1
hereof applicable to Prime Rate Loans.
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(b) Lenders hereby irrevocably authorize Agent, at its option
and in its discretion to release any security interest in, mortgage or lien
upon, any of the Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations and delivery of cash collateral to
the extent required under Section 13.1 below, or (ii) constituting property
being sold or disposed of, if Parent or any Borrower certifies to Agent that the
sale or disposition is made in compliance with Section 9.7 hereof (and Agent may
rely conclusively on any such certificate, without further inquiry), or (iii)
constituting property in which any Borrower or Guarantor did not own an interest
at the time the security interest, mortgage or lien was granted or at any time
thereafter, or (iv) having a value in the aggregate in any twelve (12) month
period of less than $5,000,000 or (v) if approved, authorized or ratified in
writing by all of Lenders. Except as provided above, Agent will not release any
security interest in, mortgage or lien upon, any of the Collateral without the
prior written authorization of all of Lenders (and any Lender may require that
the proceeds from any sale or other disposition of the Collateral to be so
released be applied to the Obligations in a manner satisfactory to such Lender).
Upon request by Agent at any time, Lenders will promptly confirm in writing
Agent's authority to release particular types or items of Collateral pursuant to
this Section.
(c) Without any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of any Borrower or
Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.
(d) Agent shall have no obligation whatsoever to any Lender or
any other Person to investigate, confirm or assure that the Collateral exists or
is owned by such Borrower or Guarantor or is cared for, protected or insured or
has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Loans or Letter of Credit
Accommodations hereunder, or whether any particular reserves are appropriate, or
that the liens and security interests granted to Agent pursuant hereto or any of
the Financing Agreements or otherwise have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to Agent in this Agreement
or in any of the other Financing Agreements, it being understood and agreed that
in respect of the Collateral, or any act, omission or event related thereto,
Agent may act in any manner it may deem appropriate, in its discretion, given
Agent's own interest in the Collateral as a Lender and that Agent shall have no
duty or liability whatsoever to any other Lender.
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12.12 Agency for Perfection. Each Lender hereby appoints Agent and
each other Lender as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent as secured party. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Resignation of Agent. Agent may resign as Agent at any time upon
thirty (30) days' notice to Lenders. If the Agent resigns under this Agreement,
the Required Lenders shall appoint from among Lenders a successor agent for
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint a successor agent from among the
Lenders. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 12 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is thirty (30) days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and Required Lenders
shall perform all of the duties of Agent hereunder until such time, if any, as
the Required Lenders appoint a successor agent as provided for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
--------------------------------
13.1 Term.
----
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Maturity Date"), unless sooner terminated pursuant to
the terms hereof. In addition, Borrowers (or Parent on behalf of Borrowers) may,
at any time, upon thirty (30) days' prior written notice to Agent, terminate
this Agreement; provided, that, in each case, this Agreement and all other
Financing Agreements must be terminated simultaneously. Upon the Maturity Date
or any other effective date of termination of the Financing Agreements,
Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall
furnish cash collateral to Agent (or at Agent's option, a letter of credit
issued for the account of Borrowers and at Borrowers' expense, in form and
substance satisfactory to Agent, by an issuer acceptable to Agent and payable to
Agent as beneficiary) in such amounts as Agent determines are reasonably
necessary to secure Agent and Lenders from loss, cost, damage or expense,
including attorneys' fees and expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Agent or any Lender
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has not yet received final and indefeasible payment. The amount of such cash
collateral (or letter of credit, as the case may be), as to the Letter of Credit
Accommodations shall be in an amount equal to one hundred ten (110%) percent of
the amount of the Letter of Credit Accommodations plus the amount of any fees
and expenses payable in connection therewith through the latest date of the
expiration of such Letter of Credit Accommodations. Such payments in respect of
the Obligations and cash collateral shall be remitted by wire transfer in
Federal funds to the Agent Payment Account or such other bank account of Agent,
as Agent may, in its discretion, designate in writing to Parent for such
purpose. Interest shall be due until and including the next Business Day, if the
amounts so paid by Borrowers to the Agent Payment Account or other bank account
designated by Agent are received in such bank account later than 12:00 noon, New
York City time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent's continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid. Accordingly, each
Borrower and Guarantor waives any rights it may have under the UCC to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrowers or Guarantors,
or to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
(c) If for any reason this Agreement is terminated prior to the
Maturity Date, in view of the impracticality and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Agent's and each Lender's lost profits as a result
thereof, Borrowers agree to pay to Agent for itself and the ratable benefit of
Lenders, upon the effective date of such termination, an early termination fee
in the amount equal to
Amount Period
(i) 2% of Maximum Credit From the date hereof to and including the
first anniversary of the date hereof
(ii) 1% of Maximum Credit From and after the first anniversary of the
date hereof to and including the second
anniversary of the date hereof
96
Amount Period
(iii) 1/2% of Maximum Credit From and after the second anniversary of the
date hereof, to but not
including the third
anniversary of the date
hereof or if the term of this
Agreement is extended, at any
time prior to the end of the
then current term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Agent and Lenders as a result of such early termination and
Borrowers and Guarantors agree that it is reasonable under the circumstances
currently existing. In addition, Agent and Lenders shall be entitled to such
early termination fee upon the occurrence of any Event of Default described in
Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise
the right to terminate this Agreement, but elect, at their option, to provide
financing to any Borrower or permit the use of cash collateral under the United
States Bankruptcy Code. The early termination fee provided for in this Section
13.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to contrary contained in Section
13.1(c) above, in the event of the termination of this Agreement by Borrowers
prior to the Maturity Date and the full and final repayment of all of the
Obligations and the receipt by Agent and Lenders of cash collateral (or a letter
of credit, as applicable) all as provided in Section 13.1(a) with the proceeds
of initial loans and advances to Borrowers pursuant to a revolving credit
facility provided by First Union National Bank to Borrowers to replace the
financing arrangements provided for herein, and as to which Agent shall not be
acting on behalf of First Union National Bank in any capacity, Borrowers shall
not be required to pay the early termination fee provided for above.
13.2 Interpretative Provisions.
-------------------------
(a) All terms used herein which are defined in Article 1,
Article 8 or Article 9 of the UCC shall have the meanings given therein unless
otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to any Borrower, Guarantor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
97
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as determined by Agent.
(g) All references to the term "good faith" used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.
(h) Any accounting term used in this Agreement shall have,
unless otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent most recently received
by Agent prior to the date hereof.
(i) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(k) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(l) This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Agent and the
other parties, and are the products of all parties. Accordingly, this Agreement
and the other Financing Agreements shall
98
not be construed against Agent or Lenders merely because of Agent's or any
Lender's involvement in their preparation.
13.3 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed to have been
duly given or made: if delivered in person, immediately upon delivery; if by
facsimile transmission, on the business day sent if sent by 4:00 p.m. in the
time zone of the recipient and upon confirmation of receipt, or if sent after
that time, one (1) business day after sending; if by nationally recognized
overnight courier service with instructions to deliver the next business day,
one (1) business day after sending; and if by registered or certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section)
If to any Borrower or Guarantor: Allou Health & Beauty Care, Inc.
00 Xxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx Xxxxxxxxxxx
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
with a copy to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
If to Agent: Congress Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxxx X. Xxxxx
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
13.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 Confidentiality.
---------------
99
(a) Agent and each Lender shall use all reasonable efforts to
keep confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrowers pursuant to this Agreement, provided,
that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation, subpoena
or court order, (ii) to bank examiners and other regulators, auditors and/or
accountants, (iii) in connection with any litigation to which Agent or such
Lender is a party relating to this Agreement, (iv) to any Lender or Participant
(or prospective Lender or Participant) so long as such Lender or Participant (or
prospective Lender or Participant) shall have been instructed to treat such
information as confidential in accordance with this Section 13.5, or (v) to
counsel for Agent or any Participant or Lender (or prospective Participant or
Lender so long as clause (iv) of this Section is satisfied as to such person).
(b) In the event that Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such Lender, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, statute, rule or
regulation to the extent Agent determines in good faith that it will not create
any risk of liability to Agent or such Lender, that Agent or such Lender will
promptly notify Parent or any Borrower of such request so that Borrowers may
seek a protective order or other appropriate relief or remedy and (ii) if
disclosure of such information is required, disclose such information and,
subject to reimbursement by Borrowers of Agent's or such Lender's reasonable
expenses, cooperate with Borrowers in the reasonable efforts to obtain an order
or other reliable assurance that confidential treatment will be accorded to such
portion of the disclosed information which Parent so designates, to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender.
(c) In no event shall this Section 13.5 or any other provision
of this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers or any
third party without breach of this Section 13.5 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, or in violation of any other confidentiality agreement in favor of
Borrowers to the extent Agent or the Lender involved has actual knowledge of
such agreement and the violation thereof at the time it receives such
information, (ii) to apply to or restrict disclosure of information that was or
becomes available to Agent on a non-confidential basis from a person other than
Borrowers other than in violation of a confidentiality agreement in favor of
Borrowers by such person to the extent Agent or the Lender involved has actual
knowledge of such agreement and the violation thereof at the time it receives
such information, (iii) require Agent or any Lender to return any materials
furnished by Borrowers or Guarantors to Agent or (iv) prevent Agent from
responding to routine informational requests in accordance with the Code of
Ethics for the Exchange of Credit Information promulgated by The Xxxxxx Xxxxxx
Associates or other applicable industry standards relating to the exchange of
credit information. The obligations of Agent and Lenders under this Section 13.5
shall supersede and replace the obligations of Agent and Lenders under any
confidentiality letter signed prior to the date hereof.
100
13.6 Successors. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Agent, Lenders, Borrowers, Guarantors
and their respective successors and assigns, except that Borrower may not assign
its rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. Any such purported assignment without such express prior
written consent shall be void. No Lender may assign its rights and obligations
under this Agreement without the prior written consent of Agent, except as
provided in Section 13.7 below. The terms and provisions of this Agreement and
the other Financing Agreements are for the purpose of defining the relative
rights and obligations of Borrowers, Guarantors, Agent and Lenders with respect
to the transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of the
other Financing Agreements.
13.7 Assignments; Participations.
---------------------------
(a) Each Lender may (i) assign all or a portion of its rights
and obligations under this Agreement (including, without limitation, a portion
of its Commitment, the Loans owing to it and its rights and obligations as a
Lender with respect to Letters of Credit Accommodations) and the other Financing
Agreements to (A) its parent company and/or any Affiliate of such Lender which
is at least fifty (50%) percent owned by such Lender or its parent company or
(B) one or more Lenders or (C) any person (whether a corporation, partnership,
trust or otherwise) that is engaged in the business of making, purchasing,
holding or otherwise investing in bank loans and similar extensions of credit in
the ordinary course of its business and is administered or managed by a Lender
or with respect to any Lender that is a fund which invests in bank loans and
similar extensions of credit, any other fund that invests in bank loans and
similar extensions of credit and is managed by the same investment advisor as
such Lender or by an Affiliate of such investment advisor, (ii) assign all, or
if less than all a portion equal to at least $10,000,000 in the aggregate for
the assigning Lender, of such rights and obligations under this Agreement to one
or more Eligible Transferees, each of which assignees shall become a party to
this Agreement as a Lender by execution of an Assignment and Acceptance;
provided, that, (A) the consent of Agent shall be required in connection with
any assignment to an Eligible Transferee pursuant to clause (ii) above, which
consent shall not be unreasonably withheld, (B) if such Eligible Transferee is
not a bank, Agent shall receive a representation in writing by such Eligible
Transferee that either (1) no part of its acquisition of its Loans is made out
of assets of any employee benefit plan, or (2) after consultation, in good
faith, with Borrowers and provision by Borrowers of such information as may be
reasonably requested by such Eligible Transferee, the acquisition and holding of
such Commitments and Loans does not constitute a non-exempt prohibited
transaction under Section 406 of ERISA and Section 4975 of the Code, or (3) such
assignment is an "insurance company general account," as such term is defined in
the Department of Labor Prohibited Transaction Class Exemption 95.60 (issued
July 12, 1995) ("PTCE 95-60), and, as of the date of the assignment, there is no
"employee benefit plan" with respect to which the aggregate amount of such
general account's reserves and liabilities for the contracts held by or on
behalf of such "employee benefit plan" and all other "employee benefit plans"
maintained by the same employer (and affiliates thereof as defined in Section
V(a)(1) of PTCE 95-60) or by the same employee organization (in
101
each case determined in accordance with the provisions of PTCE 95-60) exceeds
ten (10%) percent of the total reserves and liabilities of such general account
(as determined under PTCE 95- 60) (exclusive of separate account liabilities)
plus surplus as set forth in the National Association of Insurance Commissioners
Annual Statement filed with the state of domicile of such Eligible Transferee
and (C) such transfer or assignment will not be effective until recorded by the
Agent on the Register. As used in this Section, the term "employee benefit plan"
shall have the meaning assigned to it in Title I of ERISA and shall also include
a "plan" as defined in Section 4975(e)(1) of the Code.
(b) Agent shall maintain a register of the names and addresses
of Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and any Borrowers,
Obligors, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Parent and any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
(i) the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance,
the assignor and assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or Obligor of any
of the Obligations; (iii) such assignee confirms that it has received a copy of
this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements, (v) such
assignee appoints and authorizes Agent to take such action as agent on its
102
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto, and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Financing
Agreements are required to be performed by it as a Lender. Agent and Lenders may
furnish any information concerning any Borrower or Obligor in the possession of
Agent or any Lender from time to time to assignees and Participants.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Accommodations, without the consent of
Agent or the other Lenders); provided, that, (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors and Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Financing Agreements, (iii) the
Participant shall not have any rights under this Agreement or any of the other
Financing Agreements (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the Participant relating thereto) and all amounts payable by
any Borrower or Obligor hereunder shall be determined as if such Lender had not
sold such participation, and (iv) if such Participant is not a bank, represent
that either (A) no part of its acquisition of its participation is made out of
assets of any employee benefit plan, or (B) after consultation, in good faith,
with Parent and provision by Borrowers and Guarantors of such information as may
be reasonably requested by the Participant, the acquisition and holding of such
participation does not constitute a non-exempt prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code, or (C) such participation is
an "insurance company general account, " as such term is defined in the "PTCE
95-60", and, as of the date of the transfer there is no "employee benefit plan"
with respect to which the aggregate amount of such general account's reserves
and liabilities for the contracts held by or on behalf of such "employee benefit
plan" and all other "employee benefit plans" maintained by the same employer
(and affiliates thereof as defined in Section V(a)(1) of PTCE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTCE 95-60) exceeds ten (10%) percent of the total reserves and
liabilities of such general account (as determined under PTCE 95-60) (exclusive
of separate account liabilities) plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the state of
domicile of the Participant. As used in this Section, the term "employee benefit
plan" shall have the meaning assigned to it in Title I of ERISA and shall also
include a "plan" as defined in Section 4975(e)(1) of the Code.
(f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.
103
(g) Borrowers and Guarantors shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the delivery of informational materials, appraisals or
other documents for, and the participation of relevant management in meetings
and conference calls with, potential Lenders or Participants. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such
materials.
13.8 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
13.9 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
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IN WITNESS WHEREOF, Agent, Co-Arranger, Lenders, Borrowers and
Guarantors have caused these presents to be duly executed as of the day and year
first above written.
AGENTS
CONGRESS FINANCIAL CORPORATION, CITIBANK, N.A., as Co-Arranger and
as Agent and Arranger Documentation Agent
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxx
Title: Executive Vice President Title: Vice President, Structured
------------------------- ---------------------------
Products/ABF
------------
BORROWERS
ALLOU DISTRIBUTORS, INC. X. XXXXX, INC.
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
DIRECT FRAGRANCES, INC. STANFORD PERSONAL CARE
MANUFACTURING, INC.
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
LENDERS
CONGRESS FINANCIAL CORPORATION CITIBANK, N.A.
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxx
Title: Executive Vice President Title: Vice President, Structured
------------------------- ---------------------------
Products/ABF
------------
Commitment: $100,000,000 Commitment: $100,000,000
105
GUARANTORS
ALLOU HEALTH & BEAUTY CARE, INC. HBA NATIONAL SALES CORP.
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
HBA DISTRIBUTORS, INC. RONA BEAUTY SUPPLIES, INC.
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
PASTEL COSMETIC & BEAUTY AIDS, INC TRANS WORLD GROCERS, INC.
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
XXXX XXXXXX PERSONAL CARE CORP. ALLOU PERSONAL CARE
CORPORATION
By: /s/ Xxxxx Xxxxxxxxxxx By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO Title: President and CFO
------------------------- ---------------------------
CORE MARKETING, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
Title: President and CFO
-------------------------
106