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EXHIBIT 10.10
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 4, ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇.▇.▇., INC.
AS BORROWER,
AND
▇▇▇▇▇▇ FINANCIAL, INC.,
AS AGENT AND AS LENDER
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TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS............................... 1
1.1 Certain Defined Terms.......................................... 1
SECTION 2. LOANS AND COLLATERAL........................................... 1
2.1 Loans.......................................................... 1
(A)(1)Term Loan A.............................................. 1
(A)(2)Term Loan B.............................................. 1
(B) Revolving Loan........................................... 1
(C) Eligible Collateral...................................... 2
(D) Swingline Loan........................................... 4
(E) Borrowing Mechanics...................................... 4
(F) Notes.................................................... 5
(G) Letters of Credit........................................ 5
(1) Maximum Amount..................................... 5
(2) Reimbursement...................................... 5
(3) Request for Letters of Credit...................... 5
(H) Other Letter of Credit Provisions........................ 7
(1) Obligations Absolute............................... 7
(2) Nature of Lender's Duties.......................... 7
(3) Liability.......................................... 7
(I) Availability of a Lender's Pro Rata Share................ 7
2.2 Interest....................................................... 8
(A) Rate of Interest......................................... 8
(B) Computation and Payment of Interest...................... 8
(C) Interest Laws............................................ 9
(D) Conversion or Continuation............................... 9
2.3 Fees........................................................... 9
(A) Unused Line Fee.......................................... 9
(B) Overadvance Fee.......................................... 9
(C) Prepayment Fee........................................... 10
(D) Other Fees and Expenses.................................. 10
2.4 Payments and Prepayments....................................... 10
(A) Manner and Time of Payment............................... 10
(B) Mandatory Prepayments.................................... 10
(1) Overadvance........................................ 10
(2) Proceeds of Asset Dispositions..................... 10
(C) Voluntary Prepayments and Repayments..................... 10
(D) Payments on Business Days................................ 10
2.5 Term of this Agreement......................................... 10
2.6 Statements..................................................... 11
2.7 Grant of Security Interest..................................... 11
2.8 Capital Adequacy and Other Adjustments......................... 11
2.9 Taxes.......................................................... 11
(A) No Deductions............................................ 11
(B) Changes in Tax Laws...................................... 12
(C) Foreign Lenders.......................................... 12
2.10 Required Termination and Prepayment............................ 12
2.11 Optional Prepayment/Replacement of Agent or Lenders
in Respect of Increased Costs ............................... 13
2.12 Compensation................................................... 13
2.13 Booking of LIBOR Loans......................................... 13
2.14 Assumptions Concerning Funding of LIBOR Loans.................. 13
SECTION 3. CONDITIONS TO LOANS............................................ 14
SECTION 4. BORROWER'S REPRESENTATIONS, WARRANTIES......................... 14
4.1 Organization, Powers, Capitalization........................... 14
(A) Organization and Powers.................................. 14
(B) Capitalization........................................... 14
4.2 Authorization of Borrowing, No Conflict........................ 14
4.3 Financial Condition............................................ 14
4.4 Indebtedness and Liabilities................................... 14
4.5 Account Warranties and Covenants............................... 15
4.6 Names and Locations............................................ 15
4.7 Title to Properties; Liens..................................... 15
4.8 Litigation; Adverse Facts...................................... 15
4.9 Payment of Taxes............................................... 15
4.10 Performance of Agreements...................................... 16
4.11 Employee Benefit Plans......................................... 16
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4.12 Intellectual Property.......................................... 16
4.13 Broker's Fees.................................................. 16
4.14 Environmental Compliance....................................... 16
4.15 Solvency....................................................... 16
4.16 Disclosure..................................................... 16
4.17 Insurance...................................................... 16
4.18 Compliance with Laws........................................... 17
4.19 Bank Accounts.................................................. 17
4.20 Employee Matters............................................... 17
4.21 Governmental Regulation........................................ 17
4.22 Access to Accountants and Management........................... 17
4.23 Inspection..................................................... 17
4.24 Collateral Records............................................. 17
4.25 Account Covenant; Verification................................. 17
4.26 Collection of Accounts and Payments............................ 18
SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS ..................... 18
5.1 Financial Statements and Other Reports......................... 18
5.2 Endorsement.................................................... 18
5.3 Maintenance of Properties...................................... 18
5.4 Compliance with Laws........................................... 18
5.5 Further Assurances............................................. 19
5.6 Additional Mortgaged Property.................................. 19
5.7 Use of Proceeds and Margin Security............................ 19
5.8 Bailee......................................................... 19
SECTION 6. FINANCIAL COVENANTS............................................ 19
SECTION 7. NEGATIVE COVENANTS............................................. 19
7.1 Indebtedness and Liabilities................................... 19
7.2 Guaranties..................................................... 19
7.3 Transfers, Liens and Related Matters........................... 19
(A) Transfers................................................ 19
(B) Liens.................................................... 20
(C) No Negative Pledges...................................... 20
(D) No Restrictions on Subsidiary Distributions to Borrower.. 20
7.4 Investments and Loans.......................................... 20
7.5 Restricted Junior Payments..................................... 20
7.6 Restriction on Fundamental Changes............................. 20
7.7 Bank Accounts.................................................. 20
7.8 Transactions with Affiliates................................... 20
7.9 Conduct of Business............................................ 21
7.10 Tax Consolidations............................................. 21
7.11 Subsidiaries................................................... 21
7.12 Fiscal Year; Tax Designation................................... 21
7.13 Press Release; Public Offering Materials....................... 21
SECTION 8. DEFAULT, RIGHTS AND REMEDIES................................... 21
8.1 Event of Default............................................... 21
(A) Payment.................................................. 21
(B) Default in Other Agreements.............................. 21
(C) Breach of Certain Provisions............................. 21
(D) Breach of Warranty....................................... 21
(E) Other Defaults Under Loan Documents...................... 21
(F) Change in Control........................................ 21
(G) Involuntary Bankruptcy; Appointment of Receiver, etc..... 22
(H) Voluntary Bankruptcy; Appointment of Receiver, etc....... 22
(I) Liens.................................................... 22
(J) Judgment and Attachments................................. 22
(K) Dissolution.............................................. 22
(L) Solvency................................................. 22
(M) Injunction............................................... 22
(N) Invalidity of Loan Documents............................. 22
(O) Failure of Security...................................... 22
(P) Damage, Strike, Casualty................................. 22
(Q) Licenses and Permits..................................... 23
(R) Forfeiture............................................... 23
8.2 Suspension of Commitments...................................... 23
8.3 Acceleration................................................... 23
8.4 Remedies....................................................... 23
8.5 Appointment of Attorney-in-Fact................................ 23
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8.6 Limitation on Duty of Agent with Respect to Collateral......... 24
8.7 Application of Proceeds........................................ 24
8.8 License of Intellectual Property............................... 24
8.9 Waivers, Non-Exclusive Remedies................................ 24
SECTION 9. AGENT.......................................................... 24
9.1 Agent.......................................................... 24
(A) Appointment.............................................. 24
(B) Nature of Duties......................................... 25
(C) Rights, Exculpation, Etc................................. 25
(D) Reliance................................................. 25
(E) Indemnification.......................................... 25
(F) ▇▇▇▇▇▇ Individually...................................... 26
(G) Successor Agent.......................................... 26
(H) Collateral Matters....................................... 26
(1) Release of Collateral.............................. 26
(2) Execution of Releases.............................. 26
(3) Absence of Duty.................................... 27
(I) Agency for Perfection.................................... 27
(J) Exercise of Remedies..................................... 27
9.2 Notice of Default.............................................. 27
9.3 Action by Agent................................................ 27
9.4 Amendments, Waivers and Consents............................... 27
9.5 Assignments and Participations in Loans........................ 28
9.6 Set Off and Sharing of Payments................................ 29
9.7 Disbursement of Funds.......................................... 29
9.8 Settlements, Payments and Information.......................... 29
(A) Revolving Advances and Payments; Fee Payments............ 29
(B) Return of Payments....................................... 30
9.9 Dissemination of Information................................... 30
9.10 Discretionary Advances......................................... 30
SECTION 10. MISCELLANEOUS................................................. 30
10.1 Expenses and Attorneys' Fees................................... 30
10.2 Indemnity...................................................... 31
10.3 Notices........................................................ 31
10.4 Survival of Representations and Warranties
and Certain Agreements......................................... 32
10.5 Indulgence Not Waiver.......................................... 32
10.6 Marshaling; Payments Set Aside................................. 32
10.7 Entire Agreement............................................... 32
10.8 Severability................................................... 32
10.9 Lenders' Obligations Several; Independent Nature of
Lenders' Rights................................................ 32
10.10 Headings....................................................... 32
10.11 APPLICABLE LAW................................................. 32
10.12 Successors and Assigns......................................... 33
10.13 No Fiduciary Relationship; No Duty; Limitation of Liabilities.. 33
10.14 CONSENT TO JURISDICTION........................................ 33
10.15 WAIVER OF JURY TRIAL........................................... 33
10.16 Construction................................................... 33
10.17 Counterparts; Effectiveness.................................... 33
10.18 Confidentiality................................................ 34
SECTION 11. DEFINITIONS AND ACCOUNTING TERMS.............................. 34
11.1 Definitions.................................................... 34
11.2 Accounting Terms............................................... 42
11.3 Other Definitional Provisions.................................. 43
CONDITIONS RIDER........................................................... 45
(A) Closing Deliveries....................................... 45
(B) Security Interests....................................... 45
(C) Representations and Warranties........................... 45
(D) Fees..................................................... 45
(E) No Default............................................... 45
(F) Performance of Agreements................................ 45
(G) No Prohibition........................................... 45
(H) No Litigation............................................ 45
REPORTING RIDER............................................................ 46
(A) Monthly Financials....................................... 46
(B) Year-End Financials...................................... 46
(C) Accountants' Certification and Reports................... 46
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(D) Compliance Certificate................................... 46
(E) Borrowing Base Certificates, Registers and Journals...... 46
(F) Reconciliation Reports, Inventory Reports
and Listings and Agings ............................... 46
(G) Management Report........................................ 47
(H) Appraisals............................................... 47
(I) Government Notices....................................... 47
(J) Events of Default, etc................................... 47
(K) Projections.............................................. 47
(L) Other Information........................................ 47
FINANCIAL COVENANTS RIDER.................................................. 48
(A) Tangible Net Worth....................................... 48
(B) Working Capital.......................................... 48
(C) Ratio of Indebtedness to Tangible Net Worth.............. 48
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AGREEMENT is dated as of September 4, 1998, and entered into among
SKECHERS U.S.A., INC., a California corporation ("Borrower"), the financial
institution(s) listed on the signature pages hereof, and their respective
successors and Eligible Assignees (each individually a "Lender" and collectively
"Lenders") and ▇▇▇▇▇▇ FINANCIAL, INC., a Delaware corporation (in its individual
capacity, "▇▇▇▇▇▇"), for itself as Lender and as agent. This Agreement amends
and restates the Loan and Security Agreement between ▇▇▇▇▇▇ and Borrower
originally dated June 21, 1993 (as subsequently amended, the "Original
Agreement").
WHEREAS, Borrower desires that Lenders extend a credit facility to enable
Borrower to retire certain of its existing Indebtedness (including Indebtedness
incurred under the Original Agreement) and to provide working capital financing
and to provide funds for other general corporate purposes;
WHEREAS, to secure Borrower's obligations under the Loan Documents,
Borrower is granting to Agent, for benefit of Lenders, a security interest in
and lien upon certain of Borrower's property;
WHEREAS, The ▇▇▇▇▇▇▇▇▇ Family Trust ("Guarantor") is willing to guaranty
certain of the Obligations of Borrower to Agent and Lenders under the Loan
Documents and to grant to Agent, for benefit of Lenders, a security interest in
the Guarantor Cash Collateral to secure such guaranty; and
WHEREAS, Skechers By Mail, Inc., a Delaware corporation ("Subsidiary
Guarantor") and a Subsidiary of Borrower, has also agreed to guaranty the
Obligations of Borrower to Agent under the Loan Documents;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower, Agent and Lenders agree as
follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS
1.1 Certain Defined Terms. The capitalized terms and the accounting terms
used in this Agreement shall have the meanings set forth in Section 11 of this
Agreement:
SECTION 2. LOANS AND COLLATERAL
2.1 Loans.
(A)(1) Term Loan A. Each Lender, severally, agrees to lend to
Borrower, on the Closing Date, its Pro Rata Share of Term Loan A which is in the
aggregate amount of $2,775,000. Term Loan A shall be funded in one drawing.
Amounts borrowed under this subsection 2.1(A)(1) and repaid may not be
reborrowed. Borrower shall make principal payments in the amount of the
applicable Scheduled Installment of Term Loan A (or such lesser principal amount
as shall the be outstanding) on the dates set forth below.
"Scheduled Installment" of Term Loan A means a payment of $25,000 on
the first day of each month commencing October 1, 1998; provided, however, the
entire Term Loan A shall be due and payable on Termination Date.
(A)(2) Term Loan B. Each Lender, severally, agrees to lend to Borrower
on the Closing Date its Pro Rata Share of Term Loan B which is in the aggregate
amount of $13,250,000. Term Loan B shall be funded in one drawing. Amounts
borrowed under this subsection 2.1.(A)(2) and repaid may not be reborrowed.
Borrower shall pay the entire Term Loan B in a single installment on the earlier
of (i) the one year anniversary of the Closing Date, or (ii) the receipt by
Borrower of any proceeds of an initial public offering.
(B) Revolving Loan. Each Lender, severally, agrees to lend to Borrower
from time to time its Pro Rata Share of each Revolving Advance. The aggregate
amount of all Revolving Loan Commitments shall not exceed at any time
$120,000,000 as reduced by Section 2.4(B). Amounts borrowed under this
subsection 2.1(B) may be repaid and reborrowed at any time prior to the earlier
of (i) the termination of the Revolving Loan Commitment pursuant to subsection
8.3 or (ii) the Termination Date; provided, however, that Borrower shall reduce
the Revolving Loan to an amount not greater than the Cleanup Amount for at least
one Business Day each consecutive twenty one (21) day period. Except as
otherwise provided herein, no Lender shall have any obligation to make a
Revolving Advance to the extent such Revolving Advance would cause the Revolving
Loan (after giving effect to any immediate application of the proceeds thereof)
to exceed the Maximum Revolving Loan Amount.
(1) "Maximum Revolving Loan Amount" means, as of any date of
determination, the lesser of (a) the Revolving Loan Commitment(s) of all Lenders
less the Letter of Credit Reserve and (b) the Borrowing Base less (i) the Letter
of Credit Reserve, (ii) the unpaid amount of Term Loan A and Term Loan B plus
(iii) the amount of any outstanding Discretionary Advances; and
(2) "Borrowing Base" means, as of any date of determination, an
amount equal to the sum of (a) 85% of Eligible Accounts plus (b) the lesser of
(i) $55,000,000, and (ii) 60% of Eligible Inventory (excluding Eligible Retail
Inventory) plus (c) the lesser of (i) $2,000,000 and (ii) fifty percent (50%) of
the Eligible Retail Inventory plus (d) the Overadvance Amount; plus (e) the
amount of Guarantor Cash Collateral; and less in each case such reserves as
Agent in its reasonable discretion may elect to establish. Without limiting the
generality of the foregoing, commencing thirty (30) days following the Closing
Date, Agent may reserve from the Borrowing Base up to the amount of three
months' rent in respect of each leased warehouse where there is located Eligible
Inventory to the extent Agent has not received a Landlord Waiver and Consent in
respect of such location.
(3) "Cleanup Amount" means the Borrowing Base less (i) the Letter
of Credit Reserve, (ii) the amount of Guarantor Cash Collateral; (iii) the
Overadvance Amount; and (iv) the amount of any outstanding Discretionary
Advances.
(C) Eligible Collateral.
"Eligible Accounts" means, as at any date of determination, the
aggregate of all Accounts that Agent, in its reasonable credit judgment, deems
to be eligible for borrowing purposes. Without limiting the generality of the
foregoing, the Requisite Lenders may determine that the following Accounts are
not Eligible Accounts:
(1) Accounts which, at the date of issuance of the respective
invoice therefor, were payable more than sixty (60) days after the date of
issuance of such invoice, provided that thirty-five percent (35%) of the
aggregate amount of Accounts outstanding at any one time that contain dating of
more than sixty (60) but less than or equal to one hundred twenty (120) days
after the issuance of any such invoice would be eligible; provided, however,
that with respect to any one customer, Accounts that contains such dated terms
may not exceed ten percent (10%) of the aggregate amount of Accounts outstanding
at any one time from such customer;
(2) Accounts which remain unpaid for more than sixty (60) days
after the due date specified in the original invoice or for more than one
hundred twenty one (121) days after invoice date if no due date was specified;
(3) Accounts due from a customer whose principal place of
business is located outside the United States of America (other than Accounts
due from (i) Foot Locker Europe B.V. up to an aggregate outstanding amount of
$750,000 and (ii) Woolworth Canada, Inc. or its successor up to an aggregate
outstanding amount of $750,000), unless such Account is backed by a letter of
credit, in form and substance acceptable to Agent, and issued or confirmed by a
bank that is organized under the laws of the United States of America or a State
thereof, that has capital and surplus in excess of $250,000,000 and that is
acceptable to Agent, provided that such letter of credit has been delivered to
Agent as additional Collateral;
(4) Accounts which are otherwise eligible with respect to which
the account debtor is owed a credit by Borrower, but only to the extent of such
credit;
(5) Accounts due from an account debtor which Agent has notified
Borrower does not have a satisfactory credit rating;
(6) Accounts with payment terms in excess of sixty (60) days with
respect to which the account debtor is the United States of America, any state
or any municipality, or any department, agency or instrumentality thereof unless
Borrower has, with respect to such Accounts, complied with the Federal
Assignment of Claims Act of 1940 as amended (31 U.S.C. Section 3727 et seq) or
any applicable statute or municipal ordinance of similar purpose and effect;
(7) Accounts with respect to which the account debtor is an
Affiliate of Borrower or a director, officer, agent, stockholder or employee of
Borrower or any of its Affiliates (other than arms length Accounts owing by
Division Six Sports, Inc. so long as such company is a factoring client of
▇▇▇▇▇▇);
(8) Accounts due from an account debtor if more than 25% of the
aggregate amount of Accounts of such account debtor have at the time remained
unpaid for more than sixty (60) days after due date or one hundred and twenty
(120) days after the invoice date if no due date was specified;
(9) Accounts with respect to which there is any unresolved
dispute with the respective account debtor (but only to the extent of such
dispute);
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(10) Accounts evidenced by an "instrument" or "chattel paper"
(as defined in the UCC) not in the possession of Agent, on behalf of Lenders;
(11) Accounts with respect to which Agent, on behalf of
Lenders, does not have a valid, first priority and fully perfected security
interest;
(12) Accounts subject to any lien except those in favor of
Agent, on behalf of Lenders;
(13) Accounts with respect to which the account debtor is the
subject of any bankruptcy or other insolvency proceeding;
(14) Accounts due from an account debtor to the extent that
such Accounts exceed in the aggregate an amount equal to thirty percent (30%) of
the aggregate of all Accounts at said date;
(15) Accounts with respect to which the account debtor's
obligation to pay is conditional or subject to a repurchase obligation or right
to return or with respect to which the goods or services giving rise to such
Account have not been delivered (or performed, as applicable) and accepted by
such account debtor, including progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold sales,
guarantied sales, sale or return transactions, sales on approval or consignment
sales;
(16) Accounts with respect to which the account debtor is
located in New Jersey, or any other state denying creditors access to its courts
in the absence of a Notice of Business Activities Report or other similar
filing, unless Borrower has either qualified as a foreign corporation authorized
to transact business in such state or has filed a Notice of Business Activities
Report or similar filing with the applicable state agency for the then current
year;
(17) Accounts with respect to which the customer is owed a
credit balance by Borrower which remains unpaid for more than ninety (90) days
(but only to the extent of such credit);
(18) Any Account with respect to which the customer is a
Person to which Borrower is indebted, provided, however, that any such account
shall only be ineligible as to that portion of such account which is less than
or equal to the amount owed by Borrower to such Person; and
(19) Accounts with respect to which the account debtor is a
creditor of Borrower, provided, however, that any such Account shall only be
ineligible as to that portion of such Account which is less than or equal to the
amount owed by Borrower to such Person.
"Eligible Inventory" means, as at any date of determination, the
value (determined at the lower of cost or market on a first-in, first-out basis)
of all Inventory owned by Borrower and located in the United States of America
that Agent, in its reasonable credit judgment, deems to be eligible for
borrowing purposes. Without limiting the generality of the foregoing, the
Requisite Lenders may determine that the following is not Eligible Inventory:
(a) work-in-process that is not readily marketable in its current form; (b)
finished goods which do not meet the specifications of the purchase order for
such goods; (c) Inventory which Agent determines, is unacceptable for borrowing
purposes due to age, quality, type, category and/or quantity; (d) packaging,
shipping materials or supplies consumed in Borrower's business; (e) Inventory
with respect to which Agent, on behalf of Lenders, does not have a valid, first
priority and fully perfected security interest; (f) Inventory with respect to
which there exists any Lien in favor of any Person other than Agent, on behalf
of Lenders; (g) Inventory produced in violation of the Fair Labor Standards Act
and subject to the so-called "hot goods" provisions contained in Title 29 U.S.C.
215(a)(i) or any replacement statute; (h) Inventory located at any location not
scheduled by Borrower; and (i) any finished goods inventory styled with a turn
of greater than three hundred and sixty (360) days; provided, however, that any
such style shall remain eligible if open orders exist in respect of greater than
forty percent (40%) of the total such inventory on hand.
"Eligible Retail Inventory" means Eligible Inventory (a) which is
located at any of the Borrower's retail locations for which Borrower has used
its best commercial efforts to obtain for the benefit of Agent a Landlord Waiver
and consent executed by the lessor or landlord of such location and (b) the
proceeds of the sale of which are remitted by Borrower to a bank account or
accounts blocked or controlled by Agent.
"Swingline Lender" means ▇▇▇▇▇▇, or if ▇▇▇▇▇▇ shall resign as
Swingline Lender, another lender selected by Agent and reasonably acceptable to
Borrower.
(D) Swingline Loan. Agent may convert any request by Borrower for a
Revolving Advance into a request for an Advance under the Swingline Loan. The
Swingline Loan shall be a Base Rate Loan and shall not exceed in the aggregate
at any time outstanding the Maximum Swingline Loan Amount. In the event that on
any Business Day Swingline Lender desires that all or any portion of the
Swingline Loan should be reduced in whole or in part, Swingline Lender shall
promptly notify Agent to that effect and indicate the portion of the Swingline
Loan to be reduced. Swingline Lender hereby agrees that it shall notify Agent to
reduce the Swingline Loan to $0 at least once every rolling, consecutive twenty
one (21) day period. Agent agrees to promptly transmit to Lenders the
information contained in each notice received by Agent from Swingline Lender and
shall concurrently notify Lenders of each Lender's Pro Rata Share of the
obligation to make a Revolving Advance to repay the Swingline Loan (or portion
thereof).
Each of the Lenders hereby unconditionally and irrevocably agrees to fund
to Agent for the benefit of Swingline Lender, in lawful money of the United
States and in same day funds, not later than 1:00 p.m. Central time on the
Business Day immediately following the Business Day of such Lender's receipt of
such notice from Agent (provided that if any Lender shall receive such notice at
or prior to 11:00 a.m. Central time on a Business Day, such funding shall be
made by such Lender on such Business Day), such Lender's Pro Rata Share of a
Revolving Advance (which Revolving Advance shall be a Base Rate Loan and shall
be deemed to be requested by Borrower) in the principal amount of such portion
of the Swingline Loan which is required to be paid to Swingline Lender under
this subsection 2.1(D) (regardless of whether the conditions precedent thereto
set forth in Section 3 and the Conditions Rider are then satisfied and whether
or not Borrower has provided a notice of borrowing under subsection 2.1(E) and
whether or not any Default or Event of Default exists or all or any of the Loans
have been accelerated, but subject to the other provisions of this subsection
2.1(D). The proceeds of any such Revolving Advance shall be immediately paid
over to Agent for the benefit of Swingline Lender for application applied by
Agent to the Swingline Loan.
In the event that an Event of Default shall occur and either (i) such
Event of Default is of the type described in subsection 8.1(G) or (H) hereof or
(ii) no further Revolving Advances are being made under this Agreement, so long
as any such Event of Default is continuing, then, each of the Lenders (other
than Swingline Lender) shall be deemed to have irrevocably, unconditionally and
immediately purchased from Swingline Lender such Lender's pro rata share of the
Swingline Loan outstanding as of the date of the occurrence of such Event of
Default. Each Lender shall effect such purchase by making available an amount
equal to its participation on the due date of such purchase in U.S. Dollars in
immediately available funds to Agent's Accounts for the benefit of Swingline
Lender. In the event any Lender fails to make available to Swingline Lender when
due the amount of such Lender's participation in the Swingline Loan, Swingline
Lender shall be entitled to recover such amount on demand from such Lender
together with interest at the Federal Funds Effective Rate. Each such purchase
by a Lender shall be made without recourse to Swingline Lender, without
representation or warranty of any kind, and shall be effected and evidenced
pursuant to documents reasonably acceptable to Swingline Lender. The obligations
of the Lenders under this subsection 2.1(D) shall be absolute, irrevocable and
unconditional, shall be made under all circumstances and shall not be affected,
reduced or impaired for any reason whatsoever.
(E) Borrowing Mechanics. (1) LIBOR Loans made on any Funding Date
shall be in an aggregate minimum amount of $500,000 and integral multiples of
$100,000 in excess of such amount. (2) On any day when Borrower desires an
advance under this subsection 2.1, Borrower shall give Agent telephonic notice
of the proposed borrowing by 11:00 a.m. Central time on the Funding Date of a
Base Rate Loan and three Business Days in advance of the Funding Date of a LIBOR
Loan, which notice (a "Notice of Borrowing") shall specify the proposed Funding
Date (which shall be a Business Day), whether such Loans shall consist of Base
Rate Loans or LIBOR Loans, and, for LIBOR Loans, the Interest Period applicable
thereto. Any such telephonic notice shall be confirmed in writing on the same
day. Neither Agent nor Lender shall incur any liability to Borrower for acting
upon any telephonic notice Agent believes in good faith to have been given by a
duly authorized officer or other person authorized to borrow on behalf of
Borrower or for otherwise acting in good faith under this subsection 2.1(E).
Neither Agent nor Lender will be required to make any advance pursuant to any
telephonic notice unless Agent has also received the most recent Borrowing Base
Certificate and all other documents required under Section 3 and the Reporting
Rider hereof by 11:00 a.m. Central time. Each Advance shall be deposited by wire
transfer in immediately available funds in such account as Borrower may from
time to time designate to Agent in writing. The becoming due of any amount
required to be paid under this Agreement or any of the other Loan Documents as
principal, accrued interest and fees shall be deemed irrevocably to be on
automatic request by Borrower for a Revolving Advance, which shall be a Base
Rate Loan on the due date of, and in the amount required to pay (as set forth on
Agent's books and records), such principal, accrued interest and fees.
(F) Notes. Borrower shall execute and deliver to each Lender with
appropriate insertions a Note to evidence such Lender's Commitments. In the
event of an assignment under subsection 9.5, Borrower shall, upon surrender of
the assigning Lender's Notes, issue new Notes to reflect the interest held by
the assigning Lender and its Eligible Assignee.
(G) Letters of Credit. The Revolving Loan Commitments, may, in
addition to Revolving Advances, be utilized, upon the request of Borrower, for
(i) the issuance of letters of credit by Agent; or with Agent's consent any
Lender, or (ii) issuance by Agent of risk participations to banks to induce such
banks to issue Bank Letters of Credit or bank acceptances ("Bank Acceptances")
for the account of Borrower (each of (i) and (ii) above a "Lender Letter of
Credit"). Each Lender shall be deemed to have purchased a participation in each
Lender Letter of Credit issued on behalf of Borrower in an amount equal to its
Pro Rata Share thereof. In no event shall any Lender Letter of Credit be issued
to the extent that the issuance of such Lender Letter of Credit would cause the
sum of the Letter of Credit Reserve (after giving effect to such issuance) plus
the Revolving Loan to exceed the lesser of (x) the Borrowing Base and (y) the
Revolving Loan Commitment.
(1) Maximum Amount. The aggregate amount of Bank Acceptances
outstanding at any time shall not exceed $9,000,000. The aggregate amount of
Letter of Credit Liability with respect to all Lender Letters of Credit
outstanding at any time shall not exceed $18,000,000.
(2) Reimbursement. Borrower shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind, to reimburse Agent or the issuer for any amounts
paid with respect to a Lender Letter of Credit including all fees, costs and
expenses paid to any bank that issues a Bank Letter of
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Credit. Borrower hereby authorizes and directs Agent, at Agent's option, to
debit Borrower's account (by increasing the Revolving Loan) in the amount of any
payment made with respect to any Lender Letter of Credit. In the event that
Agent elects not to debit Borrower's account and Borrower fails to reimburse
Agent in full on the date of any payment under a Lender Letter of Credit, Agent
shall promptly notify each Lender of the unreimbursed amount of such payment
together with accrued interest thereon and each Lender, on the next Business
Day, shall deliver to Agent an amount equal to its respective participation in
same day funds. The obligation of each Lender to deliver to Agent an amount
equal to its respective participation pursuant to the foregoing sentence shall
be absolute and unconditional and such remittance shall be made notwithstanding
the occurrence or continuation of an Event of Default or Default or the failure
to satisfy any condition set forth in Section 3. In the event any Lender fails
to make available to Agent the amount of such Lender's participation in such
Lender Letter of Credit, Agent shall be entitled to recover such amount on
demand from such Lender together with interest at the Base Rate.
(3) Request for Letters of Credit. Borrower shall give Agent
at least one (1) Business Days prior notice specifying the date a Lender Letter
of Credit is to be issued, identifying the beneficiary and describing the nature
of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the letter of credit being requested. Any letter of
credit which Borrower requests must be in such form, be for such amount, contain
such terms and support such transactions as are reasonably satisfactory to
Agent. The expiration date of each Lender Letter of Credit shall be on a date
which is at least 30 days prior to the Termination Date, unless otherwise agreed
to by Agent.
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(H) Other Letter of Credit Provisions.
(1) Obligations Absolute. The obligation of Borrower to
reimburse Agent or any Lender for payments made under, and other amounts payable
in connection with, any Lender Letter of Credit shall be unconditional and
irrevocable and shall be paid under all circumstances strictly in accordance
with the terms of this Agreement including, without limitation, the following
circumstances:
(a) any lack of validity or enforceability of any Lender
Letter of Credit, or any other agreement;
(b) the existence of any claim, set-off, defense or
other right which Borrower, any of its Affiliates, Agent or any Lender, on the
one hand, may at any time have against any beneficiary or transferee of any
Lender Letter of Credit (or any Persons for whom any such transferee may be
acting), Agent, any Lender or any other Person, on the other hand, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between Borrower or
any of its Affiliates and the beneficiary of the Lender Letter of Credit);
(c) any draft, demand, certificate or any other document
presented under any Lender Letter of Credit is alleged to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; or
(d) payment under any Lender Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Lender Letter of Credit; provided that, in the
case of any payment by Agent or a Lender under any Lender Letter of Credit,
Agent or such Lender has not acted with gross negligence or willful misconduct
(as determined by a court of competent jurisdiction) in determining that the
demand for payment under such Letter of Credit complies on its face with any
applicable requirements for a demand for payment under such Lender Letter of
Credit.
(2) Nature of Lender's Duties. As between any Lender that
issues a Lender Letter of Credit (an "Issuing Lender"), on the one hand, and all
Lenders on the other hand, all Lenders assume all risks of the acts and
omissions of, or misuse of any Lender Letter of Credit by the beneficiary
thereof. In furtherance and not in limitation of the foregoing, neither Agent
nor any Issuing Lender shall be responsible: (a) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document by any party
in connection with the application for and issuance of any Lender Letter of
Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (b) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Lender Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (c) for failure of the beneficiary of any
Lender Letter of Credit to comply fully with conditions required in order to
demand payment thereunder; provided that, in the case of any payment under any
such Lender Letter of Credit, any Issuing Lender has not acted with gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction) in determining that the demand for payment under any such Lender
Letter of Credit complies on its face with any applicable requirements for a
demand for payment thereunder; (d) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (e) for errors in
interpretation of technical terms; (f) for any loss or delay in the transmission
or otherwise of any document required in order to make a payment under any such
Lender Letter of Credit; (g) for the credit of the proceeds of any drawing under
any such Lender Letter of Credit; and (h) for any consequences arising from
causes beyond the control of Agent or any Lender as the case may be.
(3) Liability. In furtherance and extension of and not in
limitation of, the specific provisions herein above set forth, any action taken
or omitted by Agent or any Lender under or in connection with any Lender Letter
of Credit, if taken or omitted in good faith, shall not put Agent or any Lender
under any resulting liability to Borrower or any other Lender.
(I) Availability of a Lender's Pro Rata Share.
(1) Unless Agent receives written notice from a Lender on or
prior to any Funding Date that such Lender will not make available to Agent as
and when required such Lender's Pro Rata Share of any requested Loan or Advance,
Agent may assume that each Lender will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrower on
such date a corresponding amount.
(2) A Defaulting Lender shall pay interest at the Federal
Funds Effective Rate plus fifty basis points on the Defaulted Amount from the
Business Day following the applicable Funding Date of such Defaulted Amount
until the date such Defaulted Amount is paid to Agent. A notice of Agent
submitted to any Lender with respect to amounts owing under this subsection
shall be conclusive, absent manifest error. If such amount is not paid when due
to Agent, Agent, at its option, may notify Borrower of such failure to fund and,
upon demand by Agent, Borrower shall pay the unpaid amount to Agent for Agent's
account, together with interest thereon for each day elapsed since the date of
such borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loan made by the other Lenders on such Funding Date. The failure of
any Lender to make available any portion of its Commitment on any Funding Date
or to fund its participation in a Lender Letter of Credit or Swingline Loan
shall not relieve any other Lender of any obligation hereunder to fund such
Lender's Commitment on such Funding Date or to fund any such participation, but
no Lender shall be responsible for the failure of any other Lender to honor its
Commitment on any Funding Date or to fund any participation to be funded by any
other Lender.
(3) Agent shall not be obligated to transfer to a Defaulting
Lender any payment made by Borrower to Agent or any amount otherwise received by
Agent for application to the Obligations nor shall a Defaulting Lender be
entitled to the sharing of any interest, fees or payments hereunder.
(4) For purposes of voting or consenting to matters with
respect to (i) the Loan Documents or (ii) any other matter concerning the Loans,
a Defaulting Lender shall be deemed not to be a "Lender" and such Lender's
Commitments and outstanding Loans and Advances shall be deemed to be zero.
2.2 Interest.
(A) Rate of Interest. Term Loan A, Term Loan B, and any Swingline
Loan shall be Base Rate Loans. Revolving Loans may be Base Rate Loans or LIBOR
Loans, subject to the terms hereof. The Loans and all other Obligations shall
bear interest from the date such Loans are made or such other Obligations become
due to the date paid at a rate per annum equal to (i) in the case of Base Rate
Loans and Obligations for which no other interest rate is specified, the Base
Rate plus (a) 0.25% with respect to the Revolving Loan, Swingline Loan and other
Obligations for which no other interest rate is specified, (b) 1.0% with respect
to Term Loan A and (c) 0.25% with respect to Term Loan B; and (ii) in the case
of LIBOR Loans, LIBOR plus 2.75% (collectively, the "Interest Rate"). Subject to
the provisions of subsection 2.1(E), Borrower shall designate to Agent whether a
Loan shall be a Base Rate or LIBOR Rate Loan at the time a Notice of Borrowing
is given pursuant to subsection 2.1(E). Such designation by Borrower may be
changed from time to time pursuant to subsection 2.2(D). If on any day a Loan or
a portion of any Loan is outstanding with respect to which notice has not been
delivered to Agent in accordance with the terms of this Agreement specifying the
basis for determining the rate of interest or if LIBOR has been specified and no
LIBOR quote is available, then for that day that Loan or portion thereof shall
bear interest determined by reference to the Base Rate.
After the occurrence and during the continuance of an Event of Default (i)
the Loans and all other Obligations shall, at the option of Requisite Lenders,
bear interest at a rate per annum equal to 2% plus the applicable Interest Rate
(the "Default Rate"), (ii) each LIBOR Loan shall automatically convert to a Base
Rate Loan at the end of any applicable Interest Period and (iii) no Loans may be
converted to LIBOR Loans.
(B) Computation and Payment of Interest. Interest on the Loans
and all other Obligations shall be computed on the daily principal balance on
the basis of a 360 day year for the actual number of days elapsed. In computing
interest on any Loan, the date of funding of the Loan or the first day of an
Interest Period applicable to such Loan or, with respect to a Base Rate Loan
being converted from a LIBOR Loan, the date of conversion of such LIBOR Loan to
such Base Rate Loan, shall be included; and the date of payment of such Loan or
the expiration date of an Interest Period applicable to such Loan, or with
respect to a Base Rate Loan being converted to a LIBOR Loan, the date of
conversion of such Base Rate Loan to such LIBOR Loan, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day's
interest shall be paid on that Loan. Interest on Base Rate Loans and all other
Obligations other than LIBOR Loans shall be payable to Agent for benefit of
Lenders monthly in arrears on the first day of each month, on the date of any
prepayment of Loans, and at maturity, whether by acceleration or otherwise.
Interest on LIBOR Loans shall be payable to Agent for benefit of Lenders ninety
days after the commencement of any Interest Period for such Loan, on the last
day of the applicable Interest Period for such Loan, on the date of any
prepayment of the Loan, and at maturity, whether by acceleration or otherwise.
(C) Interest Laws. Notwithstanding any provision to the
contrary contained in this Agreement or any other Loan Document, Borrower shall
not be required to pay, and neither Agent nor any Lender shall be permitted to
collect, any amount of interest in excess of the maximum amount of interest
permitted by applicable law ("Excess Interest"). If any Excess Interest is
provided for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any other Loan Document, then in such
event: (1) the provisions of this subsection shall govern and control; (2)
neither Borrower nor any other Loan Party shall be obligated to pay any Excess
Interest; (3) any Excess Interest that Agent or any Lender may have received
hereunder shall be, at such Lender's option, (a) applied as a credit against the
outstanding principal balance of the Obligations or accrued and unpaid interest
(not to exceed the maximum amount permitted by law), (b) refunded to the payor
thereof, or (c) any combination of the foregoing; (4) the interest rate(s)
provided for herein shall be automatically reduced to the maximum lawful rate
allowed from time to time under applicable law (the "Maximum Rate"), and this
Agreement and the other Loan Documents shall be deemed to have been and shall
be, reformed and modified to reflect such reduction; and (5) neither Borrower
nor any Loan Party shall have any action against Agent or any Lender for any
damages arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligation is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Obligations shall remain at
the Maximum Rate until each Lender shall have received the amount of interest
which such Lender would have received during such period on such Obligations had
the rate of interest not been limited to the Maximum Rate during such period.
(D) Conversion or Continuation. Subject to the provisions of
this subsection 2.2, Borrower shall have the option to (1) convert at any time
all or any part of outstanding Loans equal to $500,000 and integral multiples of
$100,000 in excess of that amount from Base Rate Loans to LIBOR Loans or (2)
upon the expiration of any Interest Period applicable to a
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LIBOR Loan, to (a) continue all or any portion of such LIBOR Loan equal to
$500,000 and integral multiples of $100,000 in excess of that amount as a LIBOR
Loan or (b) convert all or any portion of such LIBOR Loan to a Base Rate Loan.
The succeeding Interest Period(s) of such continued or converted Loan commence
on the last day of the Interest Period of the Loan to be continued or converted;
provided that no outstanding Loan may be continued as, or be converted into, a
LIBOR Loan, when any Event of Default or Default has occurred and is continuing.
Borrower shall deliver a notice of conversion/continuation in
the form of Exhibit "F" hereto to Agent no later than 11:00 a.m. (Central time)
at least 3 Business Days in advance of the proposed conversion/continuation date
("Notice of Conversion/Continuation"). A Notice of Conversion/Continuation shall
certify: (1) the proposed conversion/continuation date (which shall be a
Business Day); (2) the amount of the Loan to be converted/continued; (3) the
nature of the proposed conversion/continuation; (4) in the case of conversion
to, or a continuation of, a LIBOR Loan, the requested Interest Period; and (5)
that no Default or Event of Default has occurred and is continuing or would
result from the proposed conversion/continuation.
In lieu of delivering the Notice of Conversion/Continuation,
Borrower may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2(D); provided that such notice
shall be promptly confirmed in writing by delivery of a Notice of
Conversion/Continuation to Agent on or before the proposed
conversion/continuation date.
Neither Agent nor any Lender shall incur any liability to
Borrower in acting upon any telephonic notice referred to above that Agent
believes in good faith to have been given by an officer or other person
authorized to act on behalf of Borrower or for otherwise acting in good faith
under this subsection 2.2(D).
2.3 Fees.
(A) Unused Line Fee. Borrower shall pay to Agent, for the
benefit of Lenders, a fee in an amount equal to the Revolving Loan Commitment
less the sum of (i) the average daily balance of each of the Revolving Loan and
the Swingline Loan plus, (ii) the average daily face amount of the Letter of
Credit Reserve during the preceding month, multiplied by 0.25% per annum, such
fee to be calculated on the basis of a 360 day year for the actual number of
days elapsed and to be payable monthly in arrears on the first day of each month
following the Closing Date.
(B) Other Fees and Expenses. Borrower shall pay to Agent, for
Agent's own account, such other fees and charges as set forth in Agent's Fee
Letter.
2.4 Payments and Prepayments.
(A) Manner and Time of Payment. In its sole discretion, Agent
may elect to honor the automatic requests by Borrower for Revolving Advances for
all principal, interest, fees and any other amounts due hereunder on their
applicable due dates pursuant to subsection 2.1, and the proceeds of each such
Advance, if made, shall be applied as a direct payment of the relevant
Obligation. If Agent elects to ▇▇▇▇ Borrower for any amount due hereunder, such
amount shall be immediately due and payable with interest thereon as provided
herein. All payments made by Borrower with respect to the Obligations shall be
made without deduction, defense, setoff or counterclaim. All payments to Agent
hereunder shall, unless otherwise directed by Agent, be made to Agent's Account
or in accordance with subsection 4.26. Proceeds remitted to Agent's Account
shall be credited to the Obligations on the Business Day such proceeds were
received.
(B) Mandatory Prepayments.
(1) Overadvance. At any time that the sum of the
Revolving Loan and Swingline Loan exceeds the Maximum Revolving Loan Amount,
Borrower shall, immediately repay the Revolving Loan and/or Swingline Loan to
the extent necessary to reduce the aggregate principal balance to an amount
equal to or less than the Maximum Revolving Loan Amount.
(2) Proceeds of Asset Dispositions. Immediately upon
receipt by Borrower or any of its Subsidiaries of proceeds of any Asset
Disposition (in one or a series of related transactions), which proceeds exceed
$5,000 (it being understood that if the proceeds exceed $5,000, the entire
amount and not just the portion above $5,000 shall be subject to this subsection
2.4(B)(2), Borrower shall prepay the Obligations in an amount equal to such
proceeds. All such prepayments shall first be applied in payment of Scheduled
Installments of Term Loan A in inverse order of maturity and, at any time after
Term Loan A shall have been repaid in full, such payments shall be applied as a
permanent reduction of the Revolving Loan Commitment. If Borrower reasonably
expects the proceeds of any Asset Disposition to be reinvested within 180 days
to repair or replace such assets with like assets, Borrower shall deliver the
proceeds to Agent to be applied to the Revolving Loan and Agent shall establish
a reserve against available funds for borrowing purposes under the Revolving
Loan for such amount, until such time as such proceeds have been re-borrowed or
applied to other Obligations as set forth herein. Borrower may, so long as no
Default or Event of Default shall have occurred and be continuing, reborrow such
proceeds only for such repair or replacement. If Borrower fails to reinvest such
proceeds within 180 days, Borrower hereby authorizes Lenders to make a Revolving
Advance to repay the Obligations in the manner set forth in this subsection
2.4(B)(2).
(C) Voluntary Prepayments and Repayments. Except as provided
in subsection 2.4(B), Borrower's Obligations may only be prepaid or repaid in
full and not in part. Borrower may, at any time upon not less than three
Business Days prior notice to Agent, prepay the Term Loans or terminate the
Revolving Loan Commitment; provided, however, the Revolving Loan Commitment may
not be terminated by Borrower until all Loans are paid in full. Upon termination
of the Revolving Loan Commitment, Borrower shall cause Agent and each Lender to
be released from all liability under any Lender Letters of Credit or, at Agent's
option, Borrower will deposit cash collateral with Agent in an amount equal to
105% of the Letter of Credit Liability that will remain outstanding after such
termination.
(D) Payments on Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
2.5 Term of this Agreement. This Agreement shall be effective until
December 31, 2002 (the "Original Term") and shall automatically renew from year
to year thereafter (each such year a "Renewal Term") unless terminated by (a)
Borrower giving to Agent or (b) any Lender giving to Borrower and Agent not less
than 60 days prior written notice of its intention to terminate at the end of
the Original Term or at the end of any Renewal Term (the "Termination Date").
The Commitments shall (unless earlier terminated) terminate upon the earlier of
(i) the occurrence of an event specified in subsection 8.3 or (ii) the
Termination Date. Upon termination in accordance with subsection 8.3 or on the
Termination Date, all Obligations shall become immediately due and payable
without notice or demand. Notwithstanding any termination, until all Obligations
have been fully paid and satisfied, agent, on behalf of Lenders, shall be
entitled to retain security interests in and liens upon all Collateral, and even
after payment of all Obligations hereunder, Borrower's obligation to indemnify
Agent and each Lender in accordance with the terms hereof shall continue.
2.6 Statements. Agent shall render a monthly statement of account to
Borrower within 20 days after the end of each month. Such statement of account
shall constitute an account stated unless Borrower makes written objection
thereto within 30 days from the date such statement is mailed to Borrower. Agent
shall record in its books and records, including computer records, the principal
amount of the Loan[s] owing to each Lender from time to time. Agent's books and
records including computer records, shall constitute presumptive evidence,
absent manifest error, of the accuracy of the information contained therein.
Failure by Agent to make any such notation or record shall not affect the
obligations of Borrower[s] to Lenders with respect to the Loans.
2.7 Grant of Security Interest. To secure the payment and performance of
the Obligations, including all renewals, extensions, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Agent,
on behalf of Lenders, a continuing security interest, lien and mortgage in and
to all right, title and interest of Borrower in all of Borrower's personal and
real property, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
"Collateral") including, without limitation, (A) Accounts, and all guaranties
and security therefor, and all goods and rights represented thereby or arising
therefrom including the rights of stoppage in transit, replevin and reclamation;
(B) Inventory; (C) general intangibles (as defined in the UCC); (D) documents
(as defined in the UCC) or other receipts covering, evidencing or representing
goods; (E) instruments (as defined in the UCC): (F) chattel paper (as defined in
the UCC): (G) Equipment; (H) investment property (as defined in the UCC)
including, without limitation, all securities (certificated and uncertificated)
security accounts, security entitlements, commodity contracts and commodity
accounts; (I) Intellectual Property; (J) all deposit accounts of Borrower
maintained with any bank or financial institution; (K) all cash and other monies
and property of Borrower in the possession or under the control of Agent, any
Lender or any participant; (L) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that any time evidence or contain information relating to any of the
property described above or are otherwise necessary or helpful in the collection
thereof or realization thereon; and (M) proceeds and products of all or any of
the property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.
2.8 Capital Adequacy and Other Adjustments. In the event Agent or any
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Agent or such Lender or any corporation controlling Agent or
such Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from any central
bank or governmental agency or body having jurisdiction does or shall have the
effect of increasing the amount of capital, reserves or other funds required to
be maintained by Agent or such Lender or any corporation controlling Agent or
such Lender and thereby reducing the rate of return on Agent's or such Lender's
or such corporation's capital as a consequence of its obligations hereunder,
then Borrower shall within 15 days after notice and demand from such Lender
(with a copy to Agent) or Agent (together with the certificate referred to in
the next sentence) pay to Agent or such Lender additional amounts sufficient to
compensate Agent or such Lender for such reduction. A certificate as to the
amount of such cost and showing the basis of the computation of such cost
submitted by Agent or any Lender to Borrower shall, absent manifest error, be
final, conclusive and binding for all purposes.
2.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto; excluding, however, the following: taxes imposed on the
net income of any Lender or Agent by the jurisdiction under the laws of which
Agent or such Lender is organized or doing business or any political subdivision
thereof and taxes imposed on its net income by the jurisdiction of Agent's or
such Lender's applicable lending office or any political subdivision thereof
(all such taxes, levies, imposts, deductions, charges or withholdings and all
liabilities with respect thereto excluding such taxes imposed on net income,
herein "Tax Liabilities"). If Borrower shall be required by law to deduct any
such Tax Liabilities from or in respect of any sum payable hereunder to Agent or
any Lender, then the sum payable hereunder shall be
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increased as may be necessary so that, after making all required deductions,
Agent or such Lender receives an amount equal to the sum it would have received
had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the
Closing Date, (i) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (ii) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (iii) compliance by Lender with any request or directive (whether or
not having the force of law) from any governmental authority, agency or
instrumentality:
(1) does or shall subject Agent or any Lender to any tax
of any kind whatsoever with respect to this Agreement, the other Loan Documents
or any Loans made or Lender Letters of Credit issued hereunder, or change the
basis of taxation of payments to Agent or such Lender of principal, fees,
interest or any other amount payable hereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally by
federal, state or local taxing authorities with respect to interest or
commitment or other fees payable hereunder or changes in the rate of tax on the
overall net income of Agent or such Lender); or
(2) does or shall impose on Agent or any Lender any
other condition or increased cost in connection with the transactions
contemplated hereby or participations herein; and the result of any of the
foregoing is to increase the cost to Agent or such Lender of issuing any Lender
Letter of Credit or making or continuing any Loan hereunder, as the case may be,
or to reduce any amount receivable hereunder; then, in any such case, Borrower
shall promptly pay to Agent or such Lender, upon its demand, any additional
amounts necessary to compensate Agent or such Lender, on an after-tax basis, for
such additional cost or reduced amount receivable, as determined by Agent or
such Lender with respect to this Agreement or the other Loan Documents. If Agent
or any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify Borrower of the event by reason of which
Agent or such Lender has become so entitled (with any such Lender concurrently
notifying Agent). A certificate as to any additional amounts payable pursuant to
the foregoing sentence submitted by Agent or any Lender to Borrower shall,
absent manifest error, be final, conclusive and binding for all purposes.
(C) Foreign Lenders. Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to which payments
to be made under this Agreement are exempt from United States withholding tax or
are subject to United States withholding tax at a reduced rate under an
applicable statute or tax treaty shall provide to Borrower and Agent (i) a
properly completed and executed Internal Revenue Service Form 4224 or Form 1001
or other applicable form, certificate or document prescribed by the Internal
Revenue Service of the Untied States certifying as to such Foreign Lender's
entitlement to such exemption or reduced rate of withholding with respect to
payments to be made to such Foreign Lender under this Agreement, (a "Certificate
of Exemption"), or (ii) a letter from any such Foreign Lender stating that it is
not entitled to any such exemption or reduced rate of withholding (a "Letter of
Non-Exemption"). Prior to becoming a Lender under this Agreement and within 15
days after a reasonable written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement shall
provide a Certificate of Exemption or a Letter of Non-Exemption to Borrower and
Agent.
If a Foreign Lender is entitled to an exemption with respect
to payments to be made to such Foreign Lender under this Agreement (or to a
reduced rate of withholding) and does not provide a Certificate of Exemption to
Borrower and Agent within the time periods set forth in the preceding paragraph,
Borrower shall withhold taxes from payments to such Foreign Lender at the
applicable statutory rates and Borrower shall not be required to pay any
additional amounts as a result of such withholding; provided, however, that all
such withholding shall cease upon delivery by such Foreign Lender of a
Certificate of Exemption to Borrower and Agent.
2.10 Required Termination and Prepayment. If on any date any Lender shall
have reasonably determined (which determination shall be final and conclusive
and binding upon all parties) that the making or continuation of its LIBOR Loans
has become unlawful or impossible by compliance by Lender in good faith with any
law, governmental rule, regulation or order (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful), then, and
in any such event, that Lender shall promptly give notice (by telephone
confirmed in writing) to Borrower and Agent of that determination. Subject to
prior withdrawal of a Notice of Borrowing or a Notice of Conversion/Continuation
or prepayment of LIBOR Loans as contemplated by subsection 2.12, the obligation
of Lender to make or maintain its LIBOR Loans during any such period shall be
terminated at the earlier of the termination of the Interest Period then in
effect or when required by law and Borrower shall no later than the termination
of the Interest Period in effect at the time any such determination pursuant to
this subsection 2.10 is made or, earlier when required by law, repay or prepay
LIBOR Loans together with all interest accrued thereon or convert LIBOR Loans to
Base Rate Loans.
2.11 Optional Prepayment/Replacement of Agent or Lenders in Respect of
Increased Costs. Within 15 days after receipt by Borrower of written notice and
demand from Agent or any Lender (an "Affected Lender") for payment of additional
costs as provided in subsection 2.8 or subsection 2.9, Borrower may, at its
option, notify Agent and such Affected Lender of its intention to do one of the
following:
(a) Borrower may obtain, at Borrower's expense, a replacement
Lender ("Replacement Lender") for such Affected Lender, which Replacement
Lender shall be reasonably satisfactory to Agent. In the event Borrower obtains
a Replacement Lender within 90 days following notice of its intention to do so,
the Affected Lender shall sell and assign its Loans and Commitments to such
Replacement Lender provided, that Borrower has reimbursed such Affected Lender
for its increased costs for which it is entitled to reimbursement under this
Agreement through the date of such sale and assignment; or
(b) Borrower may prepay in full all outstanding obligations
owed to such Affected Lender and terminate such Affected Lender's Commitments.
Borrower shall, within 90 days following notice of its intention to do so,
prepay in full all outstanding Obligations owed to such Affected Lender,
including such Affected Lender's increased costs for which it is entitled to
reimbursement under this Agreement through the date of such prepayment and
terminate such Affected Lender's Commitments.
2.12 Compensation. Borrower shall compensate a Lender, upon written
request by such Lender (which request shall set forth in reasonable detail the
basis for requesting such amounts and which shall, absent manifest error, be
conclusive and binding upon all parties hereto), for all reasonable losses,
expenses and liabilities including, without limitation, any loss sustained by
such Lender in connection with the re-employment of such funds: (i) if for any
reason (other than a default by Lender) a borrowing of any LIBOR Loan does not
occur on a date specified therefor in a Notice of Borrowing, a Notice of
Conversion/Continuation or a telephonic notice for borrowing or
Conversion/Continuation; (ii) if any prepayment of any of its LIBOR Loans occurs
on a date that is not the last day of an Interest Period applicable to that
Loan; (iii) if any prepayment of any of its LIBOR Loans is not made on any date
specified in a notice of prepayment given by Borrower; or (iv) as a consequence
of any other default by Borrower to repay its LIBOR Loans when required by the
terms of this Agreement; provided that during the period while any such amounts
have not been paid, Lender shall reserve an equal amount from amounts otherwise
available to be borrowed under the Revolving Loan Commitment.
2.13 Booking of LIBOR Loans. Each Lender may make, carry or transfer LIBOR
Loans at, to, or for the account of, any of its branch offices or the office of
an affiliate of Lender.
2.14 Assumptions Concerning Funding of LIBOR Loans. Calculation of all
amounts payable to Lender under subsection 2.12 shall be made as though each
Lender had actually funded its relevant LIBOR Loan through the purchase of a
LIBOR deposit bearing interest at LIBOR in an amount equal to the amount of that
LIBOR Loan and having maturity comparable to the relevant Interest Period and
through the transfer of such LIBOR deposit from an offshore office to a domestic
office in the United States of America; provided, however, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
subsection 2.12.
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SECTION 1. CONDITIONS TO LOANS
The obligations of Agent and each Lender to make Loans and the obligation
of Agent or any Lender to issue Lender Letters of Credit on the Closing Date and
on each Funding Date are subject to satisfaction of all of the terms and
conditions set forth in this Agreement and in the Conditions Rider attached
hereto and the accuracy of all the representations and warranties of Borrower
and the other Loan Parties set forth herein and in the other Loan Documents.
SECTION 2. BORROWER'S REPRESENTATIONS, WARRANTIES
AND CERTAIN COVENANTS
To induce Agent and each Lender to enter into the Loan Documents, to make
and to continue to make Loans and to issue and to continue to issue Lender
Letters of Credit, Borrower represents, warrants and covenants to Agent and each
Lender that the following statements are and will be true, correct and complete
and, unless specifically limited, shall remain so for so long as any of the
Commitments hereunder shall be in effect and until payment in full of all
Obligations.
2.1 Organization, Powers, Capitalization.
(A) Organization and Powers. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and qualified to do business in all states
where such qualification is required except where failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect. Each of the
Loan Parties has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.
(B) Capitalization. The authorized capital stock of each of the Loan
Parties and its respective Subsidiaries is as set forth on Schedule 4.1(B)
including, all preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Loan Party of any shares of capital stock or other
securities of any such entity. All issued and outstanding shares of capital
stock of each of the Loan Parties are duly authorized and validly issued, fully
paid, nonassessable, free and clear of all Liens [other than those in favor of
Agent for the benefit of Lenders,] and such shares were issued in compliance
with all applicable state and federal laws concerning the issuance of
securities. Each Loan Party will promptly notify Lender of any change in its
ownership or corporate structure.
2.2 Authorization of Borrowing, No Conflict. Borrower has the corporate
power and authority to incur the Obligations and to grant security interests in
the Collateral. On the Closing Date, the execution, delivery and performance of
the Loan Documents by each Loan Party signatory thereto will have been duly
authorized by all necessary corporate and shareholder action. The execution,
delivery and performance by each Loan Party of each Loan Document to which it is
a party and the consummation of the transactions contemplated by the Loan
Documents by each Loan Party do not contravene any applicable law, the corporate
charter or bylaws of any Loan Party or any agreement or order by which any Loan
Party or any Loan Party's property is bound. The Loan Documents are the legally
valid and binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms.
2.3 Financial Condition. All financial statements concerning Borrower and
its Subsidiaries furnished by or on behalf of Borrower or its Subsidiaries to
Agent or any Lender pursuant to this Agreement have been prepared in accordance
with GAAP consistently applied throughout the periods involved (except as
disclosed therein) and present fairly the financial condition of Persons covered
thereby as at the dated thereof and the results of their operations for the
periods then ended. The Projections delivered by Borrower will be prepared in
light of the past operations of the business of Borrower and its Subsidiaries,
and such Projections will represent the good faith estimate of Borrower and its
senior management concerning the most probable course of its business as of the
date such Projections are delivered.
2.4 Indebtedness and Liabilities. As of the Closing Date, Borrower does
not have (a) any Indebtedness except as reflected on the most recent financial
statements delivered to Agent and Lenders; or (b) any Liabilities other than as
reflected on the most recent financial statements delivered to Agent and Lenders
or as incurred in the ordinary course of business following the date of the most
recent financial statements delivered to Agent and Lenders. Borrower shall
promptly deliver copies of all notices given or received by Borrower and any of
its Subsidiaries with respect to noncompliance with any term or condition
related to any Indebtedness, and shall promptly notify Agent of any potential or
actual Event of Default with respect to any Indebtedness.
2.5 Account Warranties and Covenants. Except as otherwise disclosed to
Agent in writing, as to each Account that, at the time of its creation, the
Account is a valid, bona fide account, representing an undisputed indebtedness
incurred by the named account debtor for goods actually sold and delivered or
for services completely rendered; there are no setoffs, offsets or
counterclaims, genuine or otherwise, against the Account; the Account does not
represent a sale to an Affiliate or a consignment, sale or return or a ▇▇▇▇ and
hold transaction; no agreement exists permitting any deduction or discount
(other than the discount stated on the invoice); Borrower is the lawful owner of
the Account and has the right to assign the same to Agent, for the benefit of
Lenders; the Account is free of all security interests, liens and encumbrances
other than those in favor of Agent, on behalf of Lenders, and the Account is due
and payable in accordance with its terms. Borrower shall, at its own expense:
(a) cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes established in accordance
with subsection 4.26 and (b) use its best efforts to assure prompt payment of
all amounts due or to become due under the Accounts. No credits or allowances
will be issued, granted or allowed by Borrower to customers and no returns will
be accepted without Agent's prior written consent; provided, that until Agent
notifies Borrower to the contrary, Borrower may presume consent. Borrower will
immediately notify Agent in the event that a customer alleges any dispute or
claim with respect to an Account or of any other circumstances known to Borrower
that may impair the validity or collectibility of an Account. Agent shall have
the right, at any time or times hereafter, to verify the validity, amount or any
other matter relating to an Account, by mail, telephone or in person. After the
occurrence of a Default or an Event of Default, Borrower shall not, without the
prior consent of Agent, adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor thereof, or
allow any credit or discount thereon.
2.6 Names and Locations. Schedule 4.6 sets forth all names, trade names,
fictitious names and business names under which Borrower currently conducts
business or has at any time during the past five years conducted business and
the name of any entity which Borrower has acquired in whole or in part or from
whom Borrower has acquired a significant amount of assets within the past five
years and sets forth the location of Borrower's principal place of business, the
location of Borrower's books and records, the location of all other offices of
Borrower and all Collateral locations, and such locations are Borrower's sole
locations for its business and the Collateral. Borrower and each of its
Subsidiaries will give Agent at least 30 days advance written notice of: (a) any
change of name or of any new trade name or fictitious business name, (b) change
of principal place of business, (c) any change in the location of such party's
books and records or the Collateral, or (d) any new location for such Person's
books and records or the Collateral.
2.7 Title to Properties; Liens. Borrower and each of its Subsidiaries has
good, sufficient and legal title, to all of its respective material properties
and assets, in each case, free and clear of all Liens except Permitted
Encumbrances.
2.8 Litigation; Adverse Facts. There are no judgments outstanding against
any Loan Party or affecting any property of any Loan Party nor is there any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending or, to the best knowledge of Borrower
after due inquiry, threatened against or affecting any Loan Party or any
property of any Loan Party which could reasonably be expected to result in any
Material Adverse Effect. Promptly upon any officer of Borrower or its
Subsidiaries obtaining knowledge of (a) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Agent or (b) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which
could reasonably be expected to have a material Adverse Effect, Borrower will
promptly give notice thereof to Agent and provide such other information as may
be reasonably available to them to enable Agent and its counsel to evaluate such
matter.
2.9 Payment of Taxes. All material tax returns and reports of Borrower and
each of its Subsidiaries required to be filed by any of them have been timely
filed and are complete and accurate in all material respects. All taxes,
assessments, fees and other governmental charges which are due and payable by
Borrower and each of its Subsidiaries have been paid when due; provided that no
such tax need be paid if Borrower or one of its Subsidiaries is contesting same
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if Borrower or such Subsidiary has established appropriate
reserves as shall be required in conformity with GAAP. As of the Closing Date,
none of the income tax returns of Borrower or any of its Subsidiaries are under
audit and Borrower shall promptly notify Agent in the event that any of
Borrower's or any of its Subsidiaries' tax returns become the subject of an
audit. No tax liens have been filed against Borrower or any of its Subsidiaries.
The charges, accruals and reserves on the books of Borrower and each of its
Subsidiaries in respect of any taxes or other governmental charges are in
accordance with GAAP. Borrower's federal tax identification number is 954376145.
2.10 Performance of Agreements. None of the Loan Parties and none of their
respective Subsidiaries is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
material contractual obligation of any such Person, and no condition exists
that, with the giving of notice or the lapse of time or both, would constitute
such a default.
2.11 Employee Benefit Plans. Borrower, each of its Subsidiaries and each
ERISA Affiliate is in compliance, and will continue to remain in compliance, in
all material respects with all applicable provisions of ERISA, the IRC and all
other applicable laws and the regulations and interpretations thereof with
respect to all Employee Benefit Plans. No material liability has been incurred
by Borrower, any Subsidiaries or any ERISA Affiliate which remains unsatisfied
for any funding obligation, taxes or penalties with respect to any Employee
Benefit Plan. Neither Borrower nor any of its Subsidiaries shall establish any
new Employee Benefit Plan or amend any existing Employee Benefit Plan if the
liability or increased liability resulting from such establishment or amendment
is material.
2.12 Intellectual Property. Borrower and each of its Subsidiaries owns, is
licensed to use or otherwise has the right to use, all Intellectual Property
used in or necessary for the conduct of its business as currently conducted, and
all such Intellectual Property is identified on Schedule 4.12. Borrower's
existing licensing agreements in respect of its Intellectual Property are
identified on Schedule 4.12(A).
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2.13 Broker's Fees. No broker's or finder's fee or commission will be
payable with respect to any of the transactions contemplated hereby.
2.14 Environmental Compliance. Each Loan Party is in compliance with all
applicable Environmental Laws. There are no claims, liabilities, Liens,
investigations, litigation, administrative proceedings, whether pending or
threatened, or judgments or orders relating to any Hazardous Materials asserted
or threatened against any Loan Party or relating to any real property currently
or formerly owned, leased or operated by any Loan Party.
2.15 Solvency. From and after the date of this Agreement, Borrower: (a)
owns assets the fair salable value of which are greater than the total amount of
its liabilities (including contingent liabilities); (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.
2.16 Disclosure. No representation or warranty of Borrower, any of its
Subsidiaries or any other Loan Party contained in this Agreement, the financial
statements, the other Loan Documents, or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. There is
no material fact known to Borrower that has had or could have a Material Adverse
Effect and that has not been disclosed herein or in such other documents,
certificates and statements furnished to Agent or any Lender for use in
connection with the transactions contemplated thereby.
2.17 Insurance. Borrower and each of its Subsidiaries maintains adequate
insurance policies for public liability, property damage, product liability, and
business interruption with respect to its business and properties and the
business and properties of its Subsidiaries against loss or damage of the kinds
customarily carried or maintained by corporations of established reputation
engaged in similar business and in amounts acceptable to Agent. Borrower shall
cause Agent, for itself and on behalf of Lenders, to be named as loss payee on
all insurance policies relating to any Collateral and shall cause each Lender to
be named as additional insured under all liability policies, in each case
pursuant to appropriate endorsements in form and substance satisfactory to Agent
and shall collaterally assign to Agent, for itself and on behalf of Lenders, as
security for the payment of the Obligations all business interruption insurance
of Borrowers. No notice of cancellation has been received with respect to such
policies and Borrower and each of its Subsidiaries is in compliance with all
conditions contained in such policies. Borrower shall apply any proceeds
received from any policies of insurance relating to any Collateral to the
Obligations as set forth in Subsection 2.4(B). In the event Borrower fails to
provide Agent with evidence of the insurance coverage required by this
Agreement, Agent may, but is not required to, purchase insurance at Borrower's
expense to protect Agent's and the Lenders' interests in the Collateral. This
insurance may, but need not, protect Borrower's interests. The coverage
purchased by Agent may not pay any claim made by Borrower or any claim that is
made against Borrower in connection with the Collateral. Borrower may later
cancel any insurance purchased by Agent, but only after providing Agent with
evidence that Borrower has obtained insurance as required by this Agreement. If
Agent purchases insurance for the Collateral, Borrower will be responsible for
the costs of that insurance, including interest thereon and other charges
imposed on Agent in connection with the placement of the insurance, until the
effective date of the cancellation or expiration of the insurance, and such
costs may be added to the Obligations. The costs of the insurance may be more
than the cost of insurance Borrower is able to obtain on its own.
2.18 Compliance with Laws. Neither Borrower nor any of its Subsidiaries is
in violation of any law, ordinance, rule, regulation, order, policy, guideline
or other requirement of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of its
business or the ownership of its properties, including, without limitation, any
Environmental Law, which violation would subject Borrower or any of its
Subsidiaries, or any of their respective officers to criminal liability or have
a Material Adverse Effect and no such violation has been alleged.
2.19 Bank Accounts. Schedule 4.19 sets forth the account numbers and
locations of all bank accounts of Borrower and its Subsidiaries. Borrower shall
not establish any new bank accounts, or amend or terminate any Blocked Account
or lockbox agreement without Agent's prior written consent.
2.20 Employee Matters. Except as set forth on Schedule 4.20, (a) no Loan
Party nor any of such Loan Party's employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election is
pending with respect to the employees of any Loan Party and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Loan Party and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
Borrower after due inquiry, threatened between any Loan Party and its respective
employees, other than employee grievances arising in the ordinary course of
business, which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. Except as set forth on Schedule 4.20,
neither Borrower nor any of its Subsidiaries is subject to an employment
contract.
2.21 overnmental Regulation. None of the Loan Parties is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or the Investment Company Act of 1940 or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
2.22 Access to Accountants and Management. Borrower authorizes Agent and
Lenders to discuss the financial condition and financial statements of Borrower
and its Subsidiaries with Borrower's Accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes Borrower's Accountants to
respond to all of Agent's inquiries. Agent and each Lender may, with the consent
of Agent, which will not be unreasonably denied, confer with Borrower's
management directly regarding Borrower's business, operations and financial
condition.
2.23 Inspection. Borrower shall permit Agent and any authorized
representatives designated by Agent to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, including their financial and accounting
records, and, in conjunction with such inspection, to make copies and take
extracts therefrom, and to discuss their affairs, finances and business with
their officers and Borrower's Accountants, at such reasonable times during
normal business hours and as often as may be reasonably requested. Each Lender
may with the consent of Agent, which will not be unreasonably denied, accompany
Agent on any such visit or inspection.
2.24 Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall ▇▇▇▇ such books and records to
indicate Agent's security interests in the Collateral, for the benefit of
Lenders.
2.25 Account Covenant; Verification. Borrower shall, at its own expense:
(a) cause all invoices evidencing Accounts and all copies thereof to bear a
notice that such invoices are payable to the lockboxes established in accordance
with subsection 4.26 and (b) use its best efforts to assure prompt payment of
all amounts due or to become due under the Accounts. No discounts, credits or
allowances will be issued, granted or allowed by Borrower to customers and no
returns will be accepted without Agent's prior written consent; provided, that
until Agent notifies Borrower to the contrary, Borrower may presume consent.
Borrower will promptly notify Agent in the event that a customer alleges any
dispute or claim with respect to an Account or of any other circumstances known
to Borrower that may impair the validity or collectibility of an Account. Agent
shall have the right, at any time or times hereafter, to verify the validity,
amount or any other matter relating to an Account, by mail, telephone or in
person. After the occurrence of a Default or an Event of Default, Borrower shall
not, without the prior consent of Agent, adjust, settle or compromise the amount
or payment of any Account, or release wholly or partly any customer or obligor
thereof, or allow any credit or discount thereon.
2.26 Collection of Accounts and Payments. Agent shall establish lockboxes
and blocked accounts (collectively, "Blocked Accounts") with such banks
("Collecting Banks") as are acceptable to Agent (subject to irrevocable
instructions acceptable to Agent as hereinafter set forth) to which Borrower
shall instruct all account debtors to directly remit all payments on Accounts
and in which Borrower will immediately deposit all payments made for Inventory
or other payments constituting proceeds of Collateral in the identical form in
which such payment was made, whether by cash or check. The Collecting Banks
shall acknowledge and agree, in a manner satisfactory to Agent, that all
payments made to the Blocked Accounts are the sole and exclusive property of
Agent, for the benefit of Lenders, and that the Collecting Banks have no right
to setoff against the Blocked Accounts and that all such payments received will
be promptly transferred to Agent's Account. Borrower hereby agrees that all
payments made to such Blocked Accounts or otherwise received by Agent and
whether on the Accounts or as proceeds of other Collateral or otherwise will be
the sole and exclusive property of Agent, for the benefit of Lenders. Borrower
shall irrevocably instruct each Collecting Bank to promptly transfer all
payments or deposits to the Blocked Accounts in to Agent's Account. If Borrower,
or any of its Affiliates, employees, agents or other Persons acting for or in
concert with Borrower, shall receive any monies, checks, notes, drafts or any
other payments relating to and/or proceeds of Accounts or other Collateral,
Borrower or such Persons shall hold such instrument or funds in trust for Agent
and immediately upon receipt thereof, shall remit the same or cause the same to
be remitted, in kind, to the Blocked Accounts or to Agent at its address set
forth in subsection 10.3 below.
Borrower may amend any one or more of the Schedules referred in this
Section 4 (subject to prior notice to Agent, as applicable) and any
representation, warranty, or covenant contained herein which refers to any such
Schedule shall from and after the date of any such amendment refer to such
Schedule as so amended; provided however, that in no event shall the amendment
of any such Schedule constitute a waiver by Agent and Lenders of any Default or
Event of Default that exists notwithstanding the amendment of such Schedule.
SECTION 5. REPORTING AND OTHER AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all Obligations,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 5.
5.1 Financial Statements and Other Reports. Borrower will deliver to Agent
and each Lender (unless specified to be delivered solely to Agent) the financial
statements and other reports contained in the Reporting Rider attached hereto.
5.2 Endorsement. Borrower hereby constitutes and appoints Agent and all
Persons designated by Agent for that purpose as Borrower's true and lawful
attorney-in- fact, with power to endorse Borrower's name to any of the items of
payment or proceeds described in subsection 4.26 above and all proceeds of
Collateral that come into Agent's possession or under Agent's control. Both the
appointment of Agent as Borrower's attorney and Agent's rights and powers are
coupled with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.
5.3 Maintenance of Properties. Borrower will maintain or cause to be
maintained in good repair, working order and condition all material properties
used in the
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business of Borrower and its Subsidiaries and will make or cause to be made all
appropriate repairs, renewals and replacements thereof.
5.4 Compliance with Laws. Borrower will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect;
5.5 Further Assurances. Borrower shall, and shall cause each of its
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Agent such instruments, certificates of title,
mortgages, deeds of trust, or other documents as Agent at any time may
reasonably request to evidence, perfect or otherwise implement the guaranties
and security for repayment of the Obligations provided for in the Loan
Documents.
5.6 Additional Mortgaged Property. Borrower shall as promptly as possible
(and in any event within 60 days after such designation) deliver to Agent a
fully executed mortgage, in form and substance satisfactory to Agent together
with title insurance policies and surveys on any Additional Mortgaged Property
designated by Agent.
5.7 Use of Proceeds and Margin Security. Borrower shall use the proceeds
of all Loans for proper business purposes (as described in the recitals to this
Agreement) consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of any Loan shall be used by Borrower or any of its
Subsidiaries for the purpose of purchasing or carrying margin stock within the
meaning of Regulation G or Regulation U, or in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation T or
Regulation X or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Exchange Act.
5.8 Bailee. If any Collateral is at any time in the possession or control
of any warehouseman, bailee or any of Borrower's agents or processors, Borrower
shall, upon the request of Agent, notify such warehouseman, bailee, agent or
processor of the security interests in favor of Agent, for the benefit of
Lenders, created hereby and shall instruct such Person to hold all such
Collateral for Agent's account subject to Agent's instructions.
SECTION 6. FINANCIAL COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until indefeasible payment in full of all Obligations and
termination of all Lender Letters of Credit, Borrower shall comply with and
shall cause each of its Subsidiaries to comply with all covenants contained in
the Financial Covenant Rider.
SECTION 7. NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Commitments
remain in effect and until indefeasible payment in full of Obligations and
termination of all Lender Letters of Credit, Borrower shall not and will not
permit any of its Subsidiaries to:
7.1 Indebtedness and Liabilities. Directly or indirectly create, incur,
assume, guaranty, or otherwise become or remain directly or indirectly liable,
on a fixed or contingent basis, with respect to any Indebtedness except: (a) the
Obligations; (b) Indebtedness under Capital Leases not to exceed $12,000,000
outstanding at any time in the aggregate; and (c) Indebtedness existing on the
Closing Date and identified on Schedule 7.1. Borrower will not, and will not
permit any of its Subsidiaries to, incur any Liabilities except for Indebtedness
permitted herein and trade payables and normal accruals in the ordinary course
of business not yet due and payable or with respect to which Borrower or any of
its Subsidiaries is contesting in good faith the amount or validity thereof by
appropriate proceedings and then only to the extent that Borrower or any of its
Subsidiaries has established adequate reserves therefor under GAAP.
7.2 Guaranties. Except for endorsements of instruments or items of payment
for collection in the ordinary course of business, guaranty, endorse, or
otherwise, in any way become or be responsible for any obligations of any other
Person, whether directly or indirectly by agreement to purchase the indebtedness
of any other Person or through the purchase of goods, supplies or services, or
maintenance of working capital or other balance sheet covenants or conditions,
or by way of stock purchase, capital contribution, advance or loan for the
purpose of payment or discharging any indebtedness or obligation of such other
Person or otherwise.
7.3 Transfers, Liens and Related Matters.
(A) Transfers. Sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to any of the Collateral,
except that Borrower and its Subsidiaries may (i) sell inventory in the ordinary
course of business; and (ii) make Asset Dispositions if all of the following
conditions are met: (1) the market value of assets sold or otherwise disposed of
in any single transaction or series of related transactions does not exceed
$1,000,000 and the aggregate market value of assets sold or otherwise disposed
of in any Fiscal Year does not exceed $2,500,000; (2) the consideration received
is at least equal to the fair market value of such assets; (3) the sole
consideration received is cash; (4) the net proceeds of such Asset Disposition
are applied as required by subsection 2.4(B); (5) after giving effect to the
sale or other disposition of the assets included within the Asset Disposition
and the repayment of the Obligations with the proceeds thereof, Borrower is in
compliance on a pro forma basis with the covenants set forth in the Financial
Covenant Rider recomputed for the most recently ended month for which
information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (6) no Default or Event of Default
shall then exist or result from such sale or other disposition.
(B) Liens. Except for Permitted Encumbrances, directly or indirectly
create, incur, assume or permit to exist any Lien on or with respect to any of
the Collateral or any proceeds, income or profits therefrom.
(C) No Negative Pledges. Enter into or assume any agreement (other
than the Loan Documents) prohibiting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired.
(D) No Restrictions on Subsidiary Distributions to Borrower. Except
as provided herein, directly or indirectly create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any such Subsidiary to: (1) pay dividends or make any
other distribution on any of such Subsidiary's capital stock owned by Borrower
or any Subsidiary of Borrower; (2) pay any indebtedness owed to Borrower or any
other Subsidiary; (3) make loans or advances to Borrower or any other
Subsidiary; (4) transfer any of its property or assets to Borrower or any other
Subsidiary.
7.4 Investments and Loans. Make or permit to exist investments in or loans
to any other Person, except: (a) Cash Equivalents; and (b) loans and advances to
employees for moving, entertainment, travel and other similar expenses in the
ordinary course of business in an aggregate outstanding amount not in excess of
$1,000,000 at any time.
7.5 Restricted Junior Payments. Directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Junior Payment, except that:
(a) Tax Distributions which may be paid in multiple installments based on
estimates of Borrower's taxable income to allow its shareholders to meet their
tax obligations in a timely manner (including without limitation estimated tax
obligations) less any loss, deduction or credit from such shareholders' income
attributable to such shareholders' ownership interest in Borrower for the
previous tax year; (b) Subsidiaries of Borrower may make Restricted Junior
Payments with respect to their common stock to the extent necessary to permit
Borrower to pay the Obligations, to make Restricted Junior Payments permitted
under clause (c) below, and to permit Borrower to pay expenses incurred in the
ordinary course of business; and (c) Borrower may make distributions and/or
dividends to its shareholders without limitation provided that (i) Borrower
shall have first given Agent notice of its intention to make such payment and
(ii) Borrower shall be in compliance with the terms and conditions of the Loan
Documents both prior to making such payment and after giving effect to such
payment (including Borrower's compliance with the financial covenants calculated
through the date of such payment) and shall have delivered a Compliance
Certificate to Agent demonstrating such compliance, not later than two (2)
Business Days before making such payment.
7.6 Restriction on Fundamental Changes. (a) Enter into any transaction of
merger or consolidation; (b) liquidate, wind-up or dissolve itself (or suffer
any liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, or the capital stock of any of its
Subsidiaries, whether now owned or hereafter acquired; (d) acquire by purchase
or otherwise all or any substantial part of the business or assets of, or stock
or other beneficial ownership of, any Person or (e) issue any capital stock in
Borrower other than through the public markets; provided however, that Borrower
may reincorporate in Delaware, either by merger or roll-up, in conjunction with
any initial public offering of Borrower upon (a) thirty (30) days prior written
notice to Agent and (b) Borrower's execution of all security and documents
required by Agent in order to protect the Lenders' liens, security interests and
other rights and benefits under the Loan Documents.
7.7 Bank Accounts. Establish any new bank accounts, or attempt to amend or
terminate any Blocked Account or lockbox agreement without Agent's prior written
consent.
7.8 Transactions with Affiliates. Directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale or exchange of
property or the rendering of any service) with any Affiliate or with any
officer, director or employee of any Loan Party, except for Tax Distributions
permitted in subsection 7.5 and except for transactions in the ordinary course
of Borrower's business and upon fair and reasonable terms which are fully
disclosed to Agent and Lenders and which are no less favorable to Borrower than
it would obtain in a comparable arm's length transaction with an unaffiliated
Person.
7.9 Conduct of Business. From and after the Closing Date, engage in any
business other than businesses of the type engaged in by Borrower or any
Subsidiary on the Closing Date.
7.10 Tax Consolidations. File or consent to the filing of any consolidated
income tax return with any Person other than any other Borrower or any of their
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Subsidiaries, provided that in the event Borrower files a consolidated return
with any such Person, Borrower's contribution with respect to taxes as a result
of the filing of such consolidated return shall not be greater, nor the receipt
of tax benefits less, than they would have been had Borrower not filed a
consolidated return with such Person.
7.11 Subsidiaries. Establish, create or acquire any new Subsidiaries.
7.12 Fiscal Year; Tax Designation. Change its Fiscal Year; or elect to be
designated as an entity other than a sub-chapter S corporation as defined in
IRC; provided, however, that Borrower may elect to be designated as a
sub-chapter C corporation in connection with an initial public offering
permitted by this Agreement.
7.13 Press Release; Public Offering Materials. Disclose the name of Agent
or any Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public offering
of the capital stock of any Loan Party except as may be required by law;
provided, however, that Borrower may disclose the name of ▇▇▇▇▇▇ Financial, Inc.
in conjunction with any prospectus or other document relating to an initial
offering of the capital stock of Borrower.
SECTION 8. DEFAULT, RIGHTS AND REMEDIES
8.1 Event of Default. "Event of Default" shall mean the occurrence or
existence of any one or more of the following:
(A) Payment. Failure to make payment of any of the Obligations
when due; or
(B) Default in Other Agreements. (1) Failure of Borrower or any of
its Subsidiaries to pay when due any principal or interest on any Indebtedness
(other than the Obligations) or (2) breach or default of Borrower or any of its
Subsidiaries with respect to any Indebtedness (other than the Obligations); if
such failure to pay, breach or default entitles the holder to cause such
Indebtedness having an individual principal amount in excess of $100,000 or
having an aggregate principal amount in excess of $250,000 to become or be
declared due prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower to perform
or comply with any term or condition contained in the Reporting Rider, Section
5.1 or contained in the Financial Covenants Rider or the failure to perform or
comply with any other term or condition of Section 7 which, by its nature, is
not curable; or
(D) Breach of Warranty. Any representation, warranty, certification
or other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing pursuant or
in connection with any Loan Document is false in any material respect on the
date made; or
(E) Other Defaults Under Loan Documents. Borrower or any other Loan
Party defaults in the performance of or compliance with any term contained in
this Agreement or the other Loan Documents and such default is not remedied or
waived within 10 days after receipt by Borrower of notice from Agent, or
Requisite Lenders, of such default (other than occurrences described in other
provisions of this subsection 8.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default); or
(F) Change in Control. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and M. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
together cease to beneficially own and control, directly or indirectly, at least
25% of the issued and outstanding shares of each class of capital stock of
Borrower entitled (without regard to the occurrence of any contingency) to vote
for the election of a majority of the members of the board of directors of
Borrower.
(G) Involuntary Bankruptcy; Appointment of Receiver, etc. (a) A
court enters a decree or order for relief with respect to any Guarantor,
Borrower or any of its Subsidiaries in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed or other similar relief is not granted under any
applicable federal or state law; or (2) the continuance of any of the following
events for 60 days unless dismissed, bonded or discharged: (a) an involuntary
case is commenced against any Guarantor, Borrower or any of its Subsidiaries,
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect; or (b) a receiver, liquidator, sequestrator, trustee,
custodian or other fiduciary having similar powers over any Guarantor, Borrower
or any of its Subsidiaries, or over all or a substantial part of their
respective property, is appointed; or
(H) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) Any
Guarantor, Borrower or any of its Subsidiaries commences a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
any Guarantor, Borrower or any of its Subsidiaries makes any assignment for the
benefit of creditors; or (3) the board of directors of any Guarantor, Borrower
or any of its Subsidiaries adopts any resolution or otherwise authorizes action
to approve any of the actions referred to in this subsection 8.1(H); or
(I) Liens. Any lien, levy or assessment is filed or recorded with
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries by the United States or any
department or instrumentality thereof or by any state, county, municipality or
other governmental agency (other than Permitted Encumbrances) and such lien,
levy or assessment is not stayed, vacated, paid or discharged within 10 days; or
(J) Judgment and Attachments. Any money judgment, writ or warrant of
attachment, or similar process involving (1) an amount in any individual case in
excess of $100,000 or (2) an amount in the aggregate at any time in excess of
$250,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its Subsidiaries or any of their respective assets and
remains undischarged, unvacated, unbonded or unstayed for a period of 30 days,
but in any event not later than 5 days prior to the date of any proposed sale
thereunder; or
(K) Dissolution. Any order, judgment or decree is entered against
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of 20 days, but in any event not later than 5 days prior to
the date of any proposed dissolution or split up; or
(L) Solvency. Borrower ceases to be solvent (as represented by
Borrower in subsection 4.15) or admits in writing its present or prospective
inability to pay its debts as they become due; or
(M) Injunction. Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for 30 days; or
(N) Invalidity of Loan Documents. Any of the Loan Documents for any
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or any Loan Party denies that it has any further liability under any Loan
Documents to which it is a party, or gives notice to such effect; or
(O) Failure of Security. Agent, on behalf of Lenders, does not have
or ceases to have a valid and perfected first priority security interest in the
Collateral (subject to Permitted Encumbrances), in each case, for any reason
other than the failure of Agent or any Lender to take any action within its
control; or
(P) Damage, Strike, Casualty. Any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than 15 consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility of
Borrower or any of its Subsidiaries if any such event or circumstance could
reasonably be expected to have a Material Adverse Effect.
(Q) Licenses and Permits. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
(R) Forfeiture. There is filed against Borrower or any Guarantor any
civil or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within 120 days; and (2) could reasonably be expected to result in
the confiscation or forfeiture of any material portion of the Collateral.
(S) Guarantor Cash Collateral. Guarantor fails to deposit the
Guarantor Cash Collateral with Agent on the Closing Date.
8.2 Suspension of Commitments. Upon the occurrence of any Default or Event
of Default, notwithstanding any grace period or right to cure, Agent may or upon
demand by Requisite Lenders shall, without notice or demand, immediately cease
making [or restrict the amount of] additional Loans and the Commitments shall be
suspended [or restricted]; provided that, in the case of a Default, if the
subject condition or event is waived or cured within any applicable grace or
cure period, the Commitments shall be reinstated.
8.3 Acceleration. Upon the occurrence of any Event of Default described in
the foregoing subsections 8.1(G) or 8.1(H), all Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Borrower, and the Commitments shall thereupon terminate. Upon the occurrence and
during the continuance of any other Event of Default, Agent may, and upon demand
by Requisite Lenders shall, by written notice to Borrower, (a) declare all or
any portion of the Obligations to be, and the same shall forthwith become,
immediately due and payable and the Commitments shall thereupon terminate and
(b) demand that Borrower immediately deposit with Agent an amount
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equal to 105% of the Letter of Credit Reserve to enable Agent or any Lender that
has issued any Lender Letter of Credit to make payments under the Lender Letters
of Credit when required and such amount shall become immediately due and
payable.
8.4 Remedies. If any Event of Default shall have occurred and be
continuing, in addition to and not in limitation of any other rights or remedies
available to Agent and Lenders at law or in equity, Agent may and shall upon the
request of Requisite Lenders exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and may also (a)
require Borrower to, and Borrower hereby agrees that it will, at its expense and
upon request of Agent forthwith, assemble all or part of the Collateral as
directed by Agent and make it available to Agent at a place to be designated by
Agent which is reasonably convenient to both parties; (b) withdraw all cash in
the Blocked Accounts and apply such monies in payment of the Obligations in the
manner provided in subsection 8.7; and (c) without notice or demand or legal
process, enter upon any premises of Borrower and take possession of the
Collateral. Borrower agrees that, to the extent notice of sale of the Collateral
or any part thereof shall be required by law, at least 10 days notice to
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. At any sale
of the Collateral (whether public or private), if permitted by law, Agent or any
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for the purchase of the Collateral or any portion
thereof for the account of Agent or such Lender. Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Borrower shall remain liable for any deficiency. Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter enacted. Agent shall not
be required to proceed against any Collateral but may proceed against Borrower
directly.
8.5 Appointment of Attorney-in-Fact. Borrower hereby constitutes and
appoints Agent as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Agent or otherwise, from time
to time in Agent's discretion while an Event of Default is continuing to take
any action and to execute any instrument that Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, ▇▇▇ for, recover, compound, receive and give acquittance and
receipt for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of any
Account, or release wholly or partly any customer or obligor thereunder or allow
any credit or discount thereon; (c) to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause (a)
above; (d) to file any claims or take any action or institute any proceedings
that Agent may deem necessary or desirable for the collection of or to preserve
the value of any of the Collateral or otherwise to enforce the rights of Agent
and Lenders with respect to any of the Collateral; and (e) to sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral. The appointment of Agent as
Borrower's attorney and Agent's rights and powers are coupled with an interest
and are irrevocable until indefeasible payment in full and complete performance
of all of the Obligations.
8.6 Limitation on Duty of Agent with Respect to Collateral. Beyond the
safe custody thereof, Agent and each Lender shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Agent accords its own property.
Neither Agent nor any Lender shall be liable or responsible for any loss or
damage to any of the Collateral, or for any diminution in the value thereof, by
reason of the act or omission of any warehouseman, carrier, forwarding agency,
consignee, broker or other agent or bailee selected by Borrower or selected by
Agent in good faith.
8.7 Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Agent from or on behalf of Borrower, and Borrower hereby irrevocably
agrees that Agent shall have the continuing exclusive right to apply and to
reapply any and all payments received at any time or times after the occurrence
and during the continuance of an Event of Default against the Obligations in
such manner as Agent may deem advisable notwithstanding any previous entry by
Agent upon any books and records and (b) the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied: first, to
all fees, costs and expenses incurred by or owing to Agent with respect to this
Agreement, the other Loan Documents or the Collateral; second, to all fees,
costs and expenses incurred by or owing to any Lender with respect to this
Agreement, the other Loan Documents or the Collateral; third, to accrued and
unpaid interest on the Obligations; fourth, to the principal amounts of the
Obligations outstanding; and fifth, to any other indebtedness or obligations of
Borrower owing to Agent or any Lender.
8.8 License of Intellectual Property. Borrower hereby assigns, transfers
and conveys to Agent, for the benefit of Lenders, effective upon the occurrence
of any Event of Default hereunder, the non-exclusive right and license to use
all Intellectual Property owned or used by Borrower together with any goodwill
associated therewith, all to the extent necessary to enable Agent to realize on
the Collateral and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all successors,
assigns and transferees of Agent and its successors, assigns and transferees,
whether by voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such right and license is
granted free of charge.
8.9 Waivers, Non-Exclusive Remedies. No failure on the part of Agent or
any Lender to exercise, and no delay in exercising and no course of dealing with
respect to, any right under this Agreement or the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise by Agent
or any Lender of any right under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights in this Agreement and the other Loan Documents are cumulative
and shall in no way limit any other remedies provided by law.
SECTION 9. AGENT
9.1 Agent.
(A) Appointment. Each Lender hereto and, upon obtaining an interest
in any Loan, any participant, transferee or other assignee of any Lender
irrevocably appoints, designates and authorizes ▇▇▇▇▇▇ as Agent to take such
actions or refrain from taking such action as its agent on its behalf and to
exercise such powers hereunder as are delegated by the terms hereof, together
with such powers as are reasonably incidental thereto. Neither the Agent nor any
of its directors, officers, employees or agents shall be liable for any action
so taken except as expressly provided herein. The provisions of this subsection
9.1 are solely for the benefit of Agent and Lenders and neither Borrower nor any
Loan Party shall have any rights as a third party beneficiary of any of the
provisions hereof. Agent may perform any of its duties hereunder, or under the
Loan Documents, by or through its agents or employees.
(B) Nature of Duties. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents. The duties of Agent shall be mechanical and administrative in
nature. Agent shall not have by reason of this Agreement a fiduciary, trust or
agency relationship with or in respect of any Lender, Borrower or any Loan
Party. Each Lender shall make its own appraisal of the credit worthiness of
Borrower, and shall have independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of Borrower, and Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the Closing Date or at any time or
times thereafter, provided that Agent shall provide any Lender with copies of
any notice, report or other document provided to the Agent by the Borrower and
requested by such Lender pursuant to this Agreement. If Agent seeks the consent
or approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender. Agent shall
promptly notify each Lender any time that the applicable percentage of Lenders
have instructed Agent to act or refrain from acting pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted by them hereunder or under any of the Loan Documents, or in
connection herewith or therewith, except that Agent shall be obligated on the
terms set forth herein for performance of its express obligations hereunder, and
except that Agent shall be liable with respect to its own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but Agent shall not be
responsible to any Lender for any recitals, statements, representations or
warranties herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, or sufficiency of this Agreement or any of the
Loan Documents or the transactions contemplated thereby, or for the financial
condition of any Loan Party. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any of the Loan Documents or the financial
condition of any Loan Party, or the existence or possible existence of any
Default or Event of Default. Agent may at any time request instructions from
Lenders with respect to any actions or approvals which by the terms of this
Agreement or of any of the Loan Documents Agent is permitted or required to take
or to grant, and Agent shall be entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents until it shall have received such instructions from the
applicable percentage of the Lenders. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of the applicable percentage of
the Lenders and notwithstanding the instructions of Lenders, Agent shall have no
obligation to take any action if it, in good faith, believes that such action
exposes Agent to any liability.
(D) Reliance. Agent shall be under no duty to examine, inquire into,
or pass upon the validity, effectiveness or genuineness of this Agreement, any
other Loan Document, or any instrument, document or communication furnished
pursuant hereto or in connection herewith. Agent shall be entitled to rely upon
and assume that any written notices, statements, certificates, orders or other
documents or any telephone message or other communication (including any
writing, telex, telecopy or telegram) are genuine, valid, effective and correct
and to have been signed, sent or made by the proper Person, and with respect to
all matters pertaining to this Agreement or any of the Loan Documents and its
duties hereunder or thereunder. Agent shall be entitled to rely upon the advice
of legal counsel, independent accountants, and other experts selected by Agent
in its sole discretion.
(E) Indemnification. Each Lender, in proportion to its Pro Rata
Share, severally, agrees to reimburse and indemnify Agent for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any of the Loan
Documents or any action taken or omitted by Agent under this Agreement or any of
the Loan Documents; provided, however, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements resulting from
Agent's gross negligence or willful misconduct as determined by a court of
competent jurisdiction. The obligations of Lenders under this subsection 9.1(E)
shall survive the payment in full of the Obligations and the
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termination of this Agreement.
(F) ▇▇▇▇▇▇ Individually. With respect to its Commitments and the
Loans made by it, ▇▇▇▇▇▇ shall have and may exercise the same rights and powers
hereunder and is subject to the same obligations and liabilities as and to the
extent set forth herein for any other Lender. The terms "Lenders" or "Requisite
Lenders"; or any similar terms shall, unless the context clearly otherwise
indicates, include ▇▇▇▇▇▇ in its individual capacity as a Lender. ▇▇▇▇▇▇ may
lend money to, and generally engage in any or other business with any Loan Party
as if it were not acting as Agent pursuant hereto.
(G) Successor Agent.
(1) Resignation. Agent may resign from the performance of all
its functions and duties hereunder at any time by giving at least 30 Business
Days' prior written notice to Borrower and the Lenders. Such resignation shall
take effect upon the acceptance by a successor Agent of appointment as provided
below.
(2) Appointment of Successor. Upon any such notice of
resignation pursuant to clause (G)(1) above, Requisite Lenders shall, upon
receipt of Borrower's prior consent which shall not unreasonably be withheld,
appoint a successor Agent. If a successor Agent shall not have been so appointed
within said 30 Business Day period, the retiring Agent, upon notice to Borrower,
shall then appoint a successor Agent who shall serve as Agent until such time,
as Requisite Lenders appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Agent's resignation as Agent under the Loan Documents, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.
(H) Collateral Matters.
(1) Release of Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent upon any property covered by this Agreement or the
Loan Documents (i) upon termination of the Commitments and upon final and
indefeasible payment in full in cash and satisfaction of all Obligations and
termination of this Agreement; (ii) constituting property being sold or disposed
of in accordance with this Agreement if Borrower certifies to Agent that the
sale or disposition is made in compliance with the provisions of this Agreement
(and Agent may rely in good faith conclusively on any such certificate, without
further inquiry); or (iii) constituting property leased to Borrower under a
lease which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
Borrower to be, renewed or extended. In addition during any Fiscal Year Agent
may release Collateral having a book value of not more than $200,000 in the
aggregate. Without limiting any of the foregoing, each Lender agrees to confirm
in writing, upon request by Borrower, the authority to release any property
covered by this Agreement or the Loan Documents conferred upon Agent under this
subsection.
(2) Execution of Releases. So long as no Event of Default is
then continuing, upon confirmation from the requisite percentage (as set forth
in subsection 9.1(H)(1) above) of Lenders, of Agent's authority to release any
Collateral, and upon at least 10 Business Days prior written request by
Borrower, Agent shall, and is hereby irrevocably authorized by Lenders to,
execute such documents as may be necessary to evidence the release of the Liens
upon such Collateral; provided, however, 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 obligation or entail any consequence other than the
release of such Liens without recourse or warranty, and (ii) such release shall
not in any manner discharge, affect or impair the Obligations or any Liens
granted to Agent on behalf of Lenders upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents, and (iii)
such release is not consistent with the terms of this Agreement.
(3) Absence of Duty. Agent shall have no obligation whatsoever
to any Lender or any other Person to assure that the property covered by this
Agreement or the Loan Documents exists or is owned by Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted to Agent
on behalf of Lenders herein or pursuant hereto 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 Loan Documents, it being understood and
agreed that in respect of the property covered by this Agreement or the Loan
Documents 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
property covered by this Agreement or the Loan Documents as one of the Lenders
and that Agent shall have no duty or liability whatsoever to any of the other
Lenders.
(I) Agency for Perfection. Each Lender hereby appoints each other
Lender as agent for the purpose of perfecting Lenders' security interest in
Collateral which, in accordance with Article 9 of the Uniform Commercial Code in
any applicable jurisdiction, can be perfected only by possession. Should any
Lender (other than Agent) 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. The
Agent may file such proofs of claim or documents as may be necessary or
advisable in order to have the claims of the Agent and the Lenders (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Agent and the Lenders, their respective agents, financial advisors and
counsel), allowed in any judicial proceedings relative to Borrower and/or its
Subsidiaries, or any of their respective creditors or property, and shall be
entitled and empowered to collect, receive and distribute any monies, securities
or other property payable or deliverable on any such claims. Any custodian in
any judicial proceedings relative to Borrower and/or its Subsidiaries is hereby
authorized by each Lender to make payments to the Agent and, in the event that
the Agent shall consent to the making of such payments directly to the Lenders,
to pay to the Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Agent, its agents, financial advisors and
counsel, and any other amounts due the Agent. Nothing contained in this
Agreement or the other Loan Documents shall be deemed to authorize the Agent to
authorize or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Loans, or
the rights of any holder thereof, or to authorize the Agent to vote in respect
of the claim of any Lender in any such proceeding, except as specifically
permitted herein.
(J) Exercise of Remedies. Each Lender agrees that it will not have
any right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, it being
understood and agreed that such rights and remedies may be exercised only by
Agent.
9.2 Notice of Default. In the event that the Agent or any Lender shall
acquire actual knowledge, or shall have been notified of any Event of Default,
the Agent or such Lender shall promptly notify the Lenders and the Agent.
9.3 Action by Agent.
The Agent shall be entitled to use its discretion with respect to
exercising or refraining from exercising any rights which may be vested in it
by, and with respect to taking or refraining from taking any action or actions
which it may be able to take under or in respect of, this Agreement, unless the
Agent shall have been instructed by either the Requisite Lenders or all of the
Lenders required for an action hereunder (as applicable) to exercise or refrain
from exercising such rights or to make or refrain from taking such action. The
Agent shall incur no liability under or in respect of this Agreement with
respect to anything which it may do or refrain from doing in the reasonable
exercise of its judgment or which may seem to it to be necessary or desirable in
the circumstances, except for its gross negligence or willful misconduct. Agent
shall not be liable to the Lenders or to any Lender in acting or refraining from
acting under this Agreement in accordance with the instructions of the Requisite
Lenders, or all of the Lenders, as the case may be, and any action taken or
failure to act pursuant to such instructions shall be binding on all Lenders.
9.4 Amendments, Waivers and Consents.
(A) Except as otherwise provided herein, no amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, or consent to any departure by any Loan Party therefrom, shall in any
event be effective unless the same shall be in writing and signed by Requisite
Lenders or Agent at the request of Requisite Lenders, as applicable; provided,
that no amendment, modification, termination, waiver or consent shall, unless in
writing and signed by all Lenders, do any of the following: (i) increase any of
the Commitments; (ii) reduce the principal amount of any Loan or reduce the rate
of interest on or fees payable with respect to any Loan or Letter of Credit;
(iii) change the terms or amount of the Swingline Loan; (iv) change the
definition of Borrowing Base, Eligible Accounts, Eligible Inventory or Eligible
Retail Inventory; (v) change the sub-limits for Letters of Credit and
Acceptances, Eligible Inventory and Eligible Retail Inventory; provided,
however, that Agent shall have the discretion to increase the Borrowing Base
sublimit for Eligible Retail Inventory to a maximum of $4,000,000 without the
consent of any Lender so long as no Default or Event of Default shall have
occurred and be continuing; (vi) change the Letter of Credit Reserve Account;
(vii) reduce the principal amount of any Loan or reduce the rate of interest on
or reduce any fees payable with respect to any Loan or Letter of Credit; (viii)
postpone the schedule date of payment of the principal amount of any Loan or
Letter of Credit or extend the scheduled due date for all or any portion of the
principal of the Loans or any interest or any fees payable or reduce the amount
of, waive or excuse any such payment, or postpone the schedule date of
expiration of the Commitment thereunder or make any determination or grant any
consent thereunder; (ix) amend the definition of the term "Requisite Lenders";
(x) release Collateral except as provided in subsection 9.1(H); (xi) amend or
waive this subsection 9.4; (xi) increase by more than five percent the
percentages contained in the definition of Borrowing Base so long as no Default
or Event of Default shall have occurred and be continuing; or (xii) amend or
waive any Event of Default in respect of subsection 8.1(F); provided, further,
that no amendment, modification, termination, waiver or consent affecting the
rights or duties of Agent under any Loan Document shall in any event be
effective, unless in writing and signed by Agent, in addition to the Lenders
required to take such action, and provided, further, that no amendment,
modification, waiver or consent of any provision relating to the Swingline Loan
shall be effective unless in writing and signed by Swingline Lender;
(B) Each amendment, modification, termination, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No amendment, modification, termination or waiver shall
be required for Agent to take additional Collateral;
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(C) Each Lender grants Agent the right to purchase all, but not less
than all, of such Lender's Commitment, in the event Agent requests the consent
of a Lender and such consent is denied. In such circumstances, Agent may, at its
option, require such Lender to assign its interest in the Loans to Agent or
Agent's designee for a price equal to the then outstanding principal amount
thereof plus accrued and unpaid interest and fees due such Lender, which
interest and fees will be paid when collected from Borrower;
Notwithstanding anything in this subsection 9.4, Agent and Borrower, without the
consent of either Requisite Lenders or all Lenders, may execute amendments to
this Agreement and the Loan Documents which consist solely of the making of
typographical corrections.
9.5 Assignments and Participations in Loans.
(A) Each Lender may assign its rights and delegate its obligations
under this Agreement to an Eligible Assignee; provided, that (a) prior to the
occurrence of an Event of Default which is continuing such Lender shall first
obtain the written consent of Agent and Borrower, which shall not be
unreasonably withheld (unless such assignment is required by operation of law),
(b) the amount of Commitments and Loans of the assigning Lender being assigned
shall in no event be less than the lesser of (i) $15,000,000 or (ii) the entire
amount of the Commitments and Loans of such assigning Lender and (c)(i) each
such assignment shall be of a pro rata portion of all such assigning Lender's
Loans and Commitments hereunder, and (ii) the parties to such assignment shall
execute and deliver to Agent for acceptance and recording a Assignment and
Assumption Agreement together with (x) a processing and recording fee of $3,500
payable to Agent and (y) each of the Notes originally delivered to the assigning
Lender. Upon receipt of all of the foregoing, Agent shall notify Borrower of
such assignment and Borrower shall comply with its obligations under the last
sentence of subsection 2.1(G). To the extent of an assignment authorized under
this subsection 9.5, upon Agent's receipt and acceptance of the Assignment and
Acceptance Agreement and Agent's receipt of the recording fee set forth above,
the assignee shall be considered to be a "Lender" hereunder and Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the assignee. The assigning Lender shall be relieved
of its obligations hereunder with respect to the assigned portion of its
Commitment.
(B) Each Lender may sell participations in all or any part of any
Loans made by it to another Person identified as of June 21, 1998 to Borrower;
provided, that any such participation shall be in a minimum amount of
$5,000,000, and provided, further, that all amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation
and the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
effecting (a) any reduction in the principal amount or an interest rate on any
Loan in which such holder participates; (b) any extension of the Termination
Date or the date fixed for any payment of interest payable with respect to any
Loan in which such holder participates; and (c) any release of substantially all
of the Collateral. Borrower hereby acknowledges and agrees that the participant
under each participation shall for purposes of subsections 2.8, 2.9, 2.10, 9.6
and 10.2 be considered to be a "Lender". No such participant shall sell, pledge,
assign, sub-participate or otherwise transfer its rights or duties under its
participation agreement, without the prior written consent of Agent and
Borrower; except to a parent, subsidiary or affiliate of Participant upon prior
written notice to Agent and no such sale, pledge, assignment, sub-participation
or other transfer shall release Participant from its obligations and liabilities
under the Participation Agreement.
(C) Except as otherwise provided in subsection 9.5(A) no Lender
shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to Eligible Assignees and participants (including prospective
assignees and participants) provided that the Persons obtaining such information
agrees to maintain the confidentiality of such information to the extent
required by subsection 10.18.
(D) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement or the other Loan Documents in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
9.6 Set Off and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized by Borrower at any time or from time to time,
with reasonably prompt subsequent notice to Borrower or to any other Person (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances held by such Lender at any of
its offices for the account of Borrower or any of its Subsidiaries (regardless
of whether such balances are then due to Borrower or its Subsidiaries), and (b)
other property at any time held or owing by such Lender to or for the credit or
for the account of Borrower or any of its Subsidiaries, against and on account
of any of the Obligations which are not paid when due; except that no Lender
shall exercise any such right without the prior written consent of Agent. Any
Lender which has exercised its right to set off shall purchase for cash (and the
other Lenders shall sell) participations in each such other Lender's Pro Rata
Share of the Obligations as would be necessary to cause such Lender to share
such excess with each other Lender in accordance with their respective Pro Rata
Shares. Borrower agrees, to the fullest extent permitted by law, that (a) any
Lender may exercise its right to set off with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such excess
to other Lenders, and (b) any Lender so purchasing a participation in the Loans
made or other Obligations held by other Lenders may exercise all rights of
set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Loans and other
Obligations in the amount of such participation.
9.7 Disbursement of Funds. Agent may, on behalf of Lenders, disburse funds
to Borrower for Loans requested. Each Lender shall reimburse Agent on demand for
all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender
will remit to Agent its Pro Rata Share of any Loan or Advance before Agent
disburses same to Borrower. If Agent elects to require that funds be made
available prior to disbursement to Borrower, Agent shall advise each Lender by
telephone, telex or telecopy of the amount of such Lender's Pro Rata Share of
such requested Loan no later than (a) 10:00 a.m. (Central time) two Business
Days prior to the Funding Date applicable thereto for LIBOR Loans and (b) by
1:00 p.m. Central time on the Funding Date for Base Rate Loans, and each such
Lender shall pay Agent such Lender's Pro Rata Share of such requested Loan, in
same day funds, by wire transfer to Agent's account not later than 12:00 p.m.
Central time on such Funding Date for LIBOR Loans and 3:00 p.m. Central time for
Base Rate Loans.
9.8 Settlements, Payments and Information.
(A) Revolving Advances and Payments; Fee Payments.
(1) Payments of principal in respect of the Term Loans will be
settled on the Business Day received in accordance with the provisions of
Section 2. The Revolving Loan may fluctuate from day to day through Agent's
disbursement of funds to, and receipt of funds from, Borrower. In order to
minimize the frequency of transfers of funds between Agent and each Lender
notwithstanding terms to the contrary set forth in Section 2 and subsection 9.7,
Revolving Advances and repayments (except as set forth in subsection 2.1(E)) may
be settled according to the procedures described in this subsection 9.8.
Notwithstanding these procedures, each Lender's obligation to fund its Pro Rata
Share of Advances made by Agent to Borrower will commence on the date such
Advances are made by Agent. Such payments will be made by such Lender without
set-off, counterclaim or reduction of any kind.
(2) Once each week for the Revolving Loan or more frequently
(including daily), if Agent so elects (each such day being a "Settlement Date"),
Agent will advise each Lender by 12:00 noon Central time as to Base Rate Loans
and 3:00 p.m. Central time as to LIBOR Loans by telephone, telex, or telecopy of
the amount of each such Lender's Pro Rata Share of the Revolving Loan. In the
event payments are necessary to adjust the amount of such Lender's share of the
Revolving Loan to such Lender's Pro Rata Share of the Revolving Loan, the party
from which such payment is due will pay the other, in same day funds, by wire
transfer to the other's account not later than 3:00 p.m. Central time on the
Settlement Date.
(3) On the first Business Day of each month ("Interest
Settlement Date"), Agent will advise each Lender by telephone, telefax or
telecopy of the amount of interest and fees charged to and collected from
Borrower for the preceding month. Provided that such Lender has made all
payments required to be made by it under this Agreement, Agent will pay to such
Lender, by wire transfer to such Lender's account (as specified by such Lender
on the signature page of this Agreement as amended by such Lender from time to
time after the date hereof or in the applicable Assignment and Assumption
Agreement) not later than 2:00 p.m. Central time on the Interest Settlement Date
such Lender's share of such interest and such Lender's Pro Rata Share of such
fees.
(B) Return of Payments
(1) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender without set-off,
counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any other
person pursuant to any solvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement, Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without set-off, counterclaim
or deduction of any kind.
9.9 Dissemination of Information. Agent will provide Lenders with any
information received by Agent from Borrower which is required to be provided to
a Lender hereunder; provided, however, that Agent shall not be liable to Lenders
for any failure to do so, except to the extent that such failure is attributable
to Agent's gross negligence or willful misconduct.
9.10 Discretionary Advances. Agent may, in its sole discretion following
an Event of Default which is continuing, make Revolving Advances on behalf of
Lenders in an aggregate amount of not more than $250,000 irrespective of any
limitations set forth in the Borrowing Base for the purpose of preserving or
protecting the Collateral or for incurring any costs associated with collection
or enforcing rights or remedies against the Collateral or incurred in any action
to enforce this Agreement or any other Loan Document ("Discretionary Advances").
SECTION 10. MISCELLANEOUS
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10.1 Expenses and Attorneys' Fees. Whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
fees, costs and expenses incurred in connection with any matters contemplated by
or arising out of this Agreement or the other Loan Documents including the
following, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand and secured by the Collateral: (a) fees, costs
and expenses incurred by Agent (including attorneys' fees, allocated costs of
internal counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
incurred by Agent (including attorneys' fees, allocated costs of internal
counsel and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the review,
negotiation, preparation, documentation, execution, syndication, and
administration of the Loan Documents, the Loans, and any amendments, waivers,
consents, forbearances and other modifications relating thereto or any
subordination or intercreditor agreements; (c) fees, costs and expenses incurred
by Agent or any Lender in creating, perfecting and maintaining perfection of
Liens in favor of Agent, on behalf of Lenders; (d) fees, costs and expenses
incurred by Agent in connection with forwarding to Borrower the proceeds of
Loans including Agent's or any Lenders' standard wire transfer fee; (e) fees,
costs, expenses and bank charges, including bank charges for returned checks,
incurred by Agent or any Lender in establishing, maintaining and handling lock
box accounts, blocked accounts or other accounts for collection of the
Collateral; (f) fees, costs, expenses (including attorneys' fees and allocated
costs of internal counsel) of Agent or any Lender and costs of settlement
incurred in collecting upon or enforcing rights against the Collateral or
incurred in any action to enforce this Agreement or the other Loan Documents or
to collect any payments due from Borrower or any other Loan Party under this
Agreement or any other Loan Document or incurred in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement, whether in the nature of a "workout" or in connection with any
insolvency or bankruptcy proceedings or otherwise.
10.2 Indemnity. In addition to the payment of expenses pursuant to
subsection 10.1, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Agent and each Lender,
and the officers, directors, employees, agents, consultants, auditors, persons
engaged by Agent or any Lender, to evaluate or monitor the Collateral,
affiliates and attorneys of Agent, Lender and such holders (collectively called
the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the fees and disbursements of counsel for such Indemnitees in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto)
that may be imposed on, incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of this Agreement or the other Loan Documents,
the consummation of the transactions contemplated by this Agreement, the
statements contained in the commitment letters, if any, delivered by Agent or
any Lender, Agent's and each Lender's agreement to make the Loans hereunder, the
use or intended use of the proceeds of any of the Loans or the exercise of any
right or remedy hereunder or under the other Loan Documents (the "Indemnified
Liabilities"); provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction.
10.3 Notices. Unless otherwise specifically provided herein, all notices
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (a) if delivered in person,
when delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Central time or, if not, on the
next succeeding Business Day; (c) if delivered by overnight courier, two days
after delivery to such courier properly addressed; or (d) if by U.S. Mail, four
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.
If to Borrower: SKECHERS U.S.A., INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Agent or ▇▇▇▇▇▇ FINANCIAL, INC.
to ▇▇▇▇▇▇: ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: CAMG Portfolio Manager
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ FINANCIAL, INC.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: CAMG Portfolio Manager
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Lender: Its address indicated on the signature page
hereto, in an Assignment and Assumption Agreement or in a notice to Agent and
Borrower or to such other address as the party addressed shall have previously
designated by written notice to the serving party, given in accordance with this
subsection 10.3.
10.4 Survival of Representations and Warranties and Certain Agreements.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower and Lender set forth in subsections 10.1, 10.2, 10.6,
10.11, 10.14, and 10.15 (Borrower's agreement to pay fees, agreement to
indemnify Lender, the reinstatement of Obligations, agreement as to choice of
law and jurisdiction and Borrower's and Lender's waiver of a jury trial) shall
survive the payment of the Loans and the termination of this Agreement.
10.5 Indulgence Not Waiver. No failure or delay on the part of Agent, any
Lender or any holder of any Note in the exercise of any power, right or
privilege hereunder or under any Note shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
10.6 Marshaling; Payments Set Aside. Neither Agent nor any Lender shall be
under any obligation to marshal any assets in favor of any Loan Party or any
other party or against or in payment of any or all of the Obligations. To the
extent that any Loan Party makes a payment or payments to Agent and/or any
Lender or Agent and/or any Lender enforces its security interests or exercise
its rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
10.7 Entire Agreement. This Agreement and the other Loan Documents embody
the entire agreement among the parties hereto and supersede all prior
commitments, agreements, representations, and understandings, whether written or
oral, relating to the subject matter hereof, and may not be contradicted or
varied by evidence of prior, contemporaneous, or subsequent oral agreements or
discussions of the parties hereto.
10.8 Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents.
10.9 Lenders' Obligations Several; Independent Nature of Lenders' Rights.
The obligation of each Lender hereunder is several and not joint and neither
Agent nor any Lender shall be responsible for the obligation or Commitment of
any other Lender hereunder. In the event that any Lender at any time should fail
to make a Loan as herein provided, the Lenders, or any of them, at their sole
option, may make the Loan that was to have been made by the Lender so failing to
make such Loan. Nothing contained in any Loan Document and no action taken by
Agent or any Lender pursuant hereto or thereto shall be deemed to constitute
Lenders to be a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and, provided Agent fails or refuses to exercise
any remedies against Borrower after receiving the direction of the Requisite
Lenders, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
10.10 Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
10.11 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
10.12 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, provided, however, Borrower may not assign its rights or obligations
hereunder without the written consent of Lenders; provided, further, however,
that Borrower may assign its rights in conjunction with an initial public
offering provided that Borrower complies with Subsection 7.6.
10.13 No Fiduciary Relationship; No Duty; Limitation of Liabilities.
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(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Agent or any Lender to Borrower.
(B) All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by Agent or any Lender shall have
the right to act exclusively in the interest of Agent or such Lender and shall
have no duty of disclosure, duty of loyalty, duty of care, or other duty or
obligation of any type or nature whatsoever to Borrower or any of Borrower's
shareholders or any other Person.
(C) Neither Agent nor any Lender, nor any affiliate, officer,
director, shareholder, employee, attorney, or agent of Agent or any Lender shall
have any liability with respect to, and Borrower hereby waives, releases, and
agrees not to ▇▇▇ any of them upon, any claim for any special, indirect,
incidental, or consequential damages suffered or incurred by Borrower in
connection with, arising out of, or in any way related to, this Agreement or any
of the other Loan Documents, or any of the transactions contemplated by this
Agreement or any of the other Loan Documents. Borrower hereby waives, releases,
and agrees not to ▇▇▇ Agent or any Lender or any of Agent's or any Lender's
affiliates, officers, directors, employees, attorneys, or agents for punitive
damages in respect of any claim in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the transactions
contemplated hereby.
10.14 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE 10 DAYS AFTER THE SAME HAS BEEN
POSTED.
10.15 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. BORROWER,
AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER, AGENT
AND EACH LENDER
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WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
10.16 Construction. Borrower, Agent and each Lender each acknowledge that
it has had the benefit of legal counsel of its own choice and has been afforded
an opportunity to review this Agreement and the other Loan Documents with its
legal counsel and that this Agreement and the other Loan Documents shall be
construed as if jointly drafted by Borrower, Agent and each Lender.
10.17 Counterparts; Effectiveness. This Agreement and any amendments,
waivers, consents, or supplements may be executed via telecopier or facsimile
transmission in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
10.18 Confidentiality. Agent and Lenders shall hold all nonpublic
information obtained pursuant to the requirements hereof and identified as such
by Borrower in accordance with such Person's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
business practices and in any event may make disclosure to such of its
respective affiliates, officers, directors, employees, agents and
representatives as need to know such information in connection with the Loans.
If any Lender or its respective affiliates is otherwise a creditor of a
Borrower, such Lender may use the information in connection with its other
creditors. Agent and Lenders may also make disclosure reasonably required by a
bona fide offeree or assignee (or participation), or as required or requested by
any Governmental Authority or representative thereof, or pursuant to legal
process, or to its accountants, lawyers and other advisors, and shall require
any such offeree or assignee (or participant) to agree (and require any of its
offerees, assignees or participants to agree) to comply with this Section 10.18.
In no event shall Agent or any Lender be obligated or required to return any
materials furnished by Borrower; provided, however, each offeree shall be
required to agree that if it does not become an assignee (or participant) it
shall return all materials furnished to it by Borrower in connection herewith.
SECTION 11. DEFINITIONS AND ACCOUNTING TERMS
11.1 Definitions. The following terms used in this Agreement shall have
the following meanings:
"Accounts" means all "accounts" (as defined in the UCC), accounts
receivable, contract rights and general intangibles relating thereto, notes,
drafts and other forms of obligations owed to or owned by Borrower arising or
resulting from the sale of goods or the rendering of services, whether or not
earned by performance.
"Additional Mortgaged Property" means all real property owned or leased by
Borrower or its Subsidiaries in which Agent requires a mortgage to secure the
Obligations after the Closing Date.
"Advance" shall mean an advance under the Swingline Loan or Revolving
Loan.
"Affiliate" means any Person (other than Agent or any Lender): (a)
directly or indirectly controlling, controlled by, or under common control with,
any Loan party; (b) directly or indirectly owning or holding 5% or more of any
equity interest in Borrower; (c) 5% or more of whose stock or other equity
interest having ordinary voting power for the election of directors or the power
to direct or cause the direction of management, is directly or indirectly owned
or held by Borrower; or (d) which has a senior officer who is also a senior
officer of Borrower. For purposes of this definition, "control" (including with
correlative meaning, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or other equity interest, or
by contract or otherwise.
"Agent" means ▇▇▇▇▇▇ in its capacity as agent for the Lenders under the
Loan Documents and any successor in such capacity appointed pursuant to
subsection 9.1(G).
"Agent's Account" means ABA No. ▇▇▇▇-▇▇▇▇-▇, Account No. 52-98695 at First
National Bank of Chicago, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Reference: ▇▇▇▇▇▇ Business Credit for the benefit of Skechers U.S.A., Inc.
"Agent's Fee Letter" means that certain letter agreement between Agent and
Borrower dated September 4, 1998 in respect to certain fees payable to Agent in
respect of administering this Agreement.
"Agreement" means this Loan and Security Agreement, as it may be amended,
restated, supplemented or otherwise modified form time to time.
"Asset Disposition" means the disposition by Borrower or any of its
Subsidiaries, whether by sale, lease, transfer loss, damage, destruction,
condemnation or otherwise, of any or all of the computer and material handling
equipment that was purchased utilizing the proceeds of Term Loan A.
"Assignment and Assumption Agreement" shall mean an Assignment and
Assumption Agreement substantially in the form of Exhibit A.
"Bank Letter of Credit" means each letter of credit issued by a bank
acceptable to and approved by Agent for the account of Borrower and supported by
a risk participation agreement issued by Agent.
"Base Rate" means a variable rate of interest per annum equal to the
higher of (a) the rate of interest from time to time published by the Board of
Governors of the Federal Reserve System as the "Bank Prime Loan" rate in Federal
Reserve Statistical Release H.15(519) entitled "Selected Interest Rates" or any
successor publication of the Federal Reserve System reporting the Bank Prime
Loan rate or its equivalent or the prime commercial lending rate in effect from
time to time as announced by The Chase Manhattan Bank, N.A., and two other
referenced institutions, prime commercial, or (b) the Federal Funds Effective
Rate, as published by the Federal Reserve Bank of New York, plus one-half of one
percent (0.50%). In the event the Board of Governors of the Federal Reserve
System ceases to publish a Bank Prime Loan rate or its equivalent, the term
"Base Rate" shall mean a variable rate of interest per annum equal to the
highest of the "prime rate", "reference rate", "base rate", or other similar
rate announced from time to time by any of the three largest banks located in
New York City, New York (the understanding that any such rate may merely be
reference rate and may not necessarily represent the lowest or best rate
actually charged to any customer by any such bank).
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate.
"Borrower's Accountants" means the independent certified public
accountants selected by Borrower and its Subsidiaries and reasonably acceptable
to Agent, which selection shall not be modified during the term of this
Agreement without Agent's prior written consent.
"Borrowing Base" has the meaning assigned to that term in subsection
2.1(B)(2).
"Borrowing Base Certificate" means a certificate and schedule duly
executed by an officer of Borrower appropriately completed and in substantially
the form of Exhibit B.
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"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Illinois, Pennsylvania or
California, or is a day on which banking institutions located in any such state
are closed, or for the purposes of LIBOR Loans only, a day on which commercial
banks are open for dealings in Dollar deposits in the London, England (U.K.)
market.
"Cash Equivalents" means: (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six months from the date of acquisition thereof; (b)
commercial paper maturing no more than six months from the date issued and, at
the time of acquisition, having a rating of at least A-1 from Standard & Poor's
Corporation or at least P-1 from ▇▇▇▇▇'▇ Investors Service, Inc.; and (c)
certificates of deposit or bankers' acceptances maturing within six months from
the date of issuance thereof issued by, or overnight reverse repurchase
agreements from any commercial bank organized under the laws of the United
States of America, or any state thereof or the District of Columbia, having
combined capital and surplus of not less than $250,000,000 and not subject to
set off rights in favor of such bank.
"Closing Date" means September 4, 1998.
"Collateral" has the meaning assigned to that term in subsection 2.7.
"Commitment" or "Commitments" means the commitment or commitments of
Lenders to make Loans as set forth in subsections 2.1(A) and/or 2.1(B) and to
provide Lender Letters of Credit as set forth in subsection 2.1(H).
"Compliance Certificate" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in substantially in the form of Exhibit B.
"Default" means a condition, act or event that, after notice or lapse of
time or both, would constitute an Event of Default if that condition, act or
event were not cured or removed within any applicable grace or cure period.
"Default Rate" has the meaning assigned to that term in subsection 2.2.
"Defaulted Amount" means, with respect to any Lender at any time, any
amount required to be paid by such Lender to the Agent or any other Lender
hereunder or under any other Loan Document which has not been so paid.
"Defaulting Lender" means, at any time, any Lender that owes a Defaulted
Amount.
"Discretionary Advance" has the meaning assigned to such term in
subsection 9.10.
"Eligible Assignee" shall mean (a) a commercial bank, savings bank or a
commercial finance company, in each case organized under the laws of the United
States, or any state thereof, and having a combined capital and surplus of at
least $100,000,000 (or $250,000,000 in the case of an assignment of a Revolving
Loan Commitment); (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development (the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000 (of $250,000,000
in the case of an assignment of a Revolving Loan Commitment); provided that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (c) any other
entity which is an "accredited investor" (as defined in Regulation D under the
Securities Act) which extends credit or buys loans as one of its businesses,
including but not limited to, insurance companies, mutual funds and lease
financing companies, and (d) a Person that is primarily engaged in the business
of lending that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person
of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a
Subsidiary; provided, however, that no Affiliate of Borrower shall be an
Eligible Assignee.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of any Loan Party
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate.
"Environmental Claims" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"Environmental Laws" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal of the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"Equipment" means all "equipment" (as defined in the UCC), all furniture,
furnishings, fixtures, machinery, motor vehicles, trucks, trailers, vessels,
aircraft and rolling stock and all parts thereof and all additions and
accessions thereto and replacements therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statues and all rules and
regulations promulgated thereunder.
"ERISA Affiliate", as applied to any Loan Party, means any Person who is a
member of a group which is under common control with any Loan Party, who
together with any Loan Party is treated as single employer within the meaning of
Section 414(b) and (c) of the IRC.
"Federal Funds Effective Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the
immediately following Business Day by the Board of Governors of the Federal
Reserve System as the Federal Funds Rate or Federal Reserve Statistical Release
H.15(519) entitled "Selected Interest Rates" or any successor publication of the
Federal Reserve System reporting the Federal Funds Effective Rate or its
equivalent or, if such rate is not published for any Business Day, the average
of the quotations for the day of the requested Loan received by Agent from three
Federal funds brokers of recognized standing selected by Agent.
"Fiscal Month" means each month of each Fiscal Year.
"Fiscal Year" means each twelve month period ending on the last day of
December in each year.
"Funding Date" means the date of each funding of a Loan or issuance of a
Lender Letter of Credit.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.
"Guarantor" has the meaning ascribed to such term in the Recitals.
"Guarantor Cash Collateral" means $13,250,000 pledged by Guarantor under
the Cash Collateral Pledge Agreement to secure its obligations to Agent pursuant
to the Guaranty.
"Guaranty" means the Guaranty of Borrower's Obligations executed by
Guarantor.
"Hazardous Material" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances", "hazardous
materials", "hazardous wastes", "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (b) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.
"Indebtedness", as applied to any Person, means without duplication: (a)
all indebtedness for borrowed money; (b) obligations under leases which in
accordance with GAAP constitute Capital Leases; (c) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (d) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (e) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is non
recourse to the creditor of that Person; (f) obligations in respect of letters
of credit and (g) any advances under any factoring arrangement.
"Intangible Assets" means all intangible assets (determined in conformity
with GAAP) including, without limitation, goodwill, Intellectual Property,
licenses, organizational costs, deferred amounts, covenants not to compete,
unearned income and restricted funds.
"Intellectual Property" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
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"Interest Determination Date" for a LIBOR Loan will be the second London
Banking Day preceding the beginning of the next Interest Period elected by
Borrower.
"Interest Period" means relative to any LIBOR Loan, the period beginning
on (and including) the date on which such LIBOR Loan is made or continued as, or
converted into, a LIBOR Loan pursuant to subsection 2.2(D), and shall end on
(but exclude) the day which numerically corresponds to such date one, two or
three months thereafter (or, if the applicable month has no numerically
corresponding day, on the last Business Day of such month), in either case as
Borrower may select in its relevant notice pursuant to subsection 2.2; provided,
however:
(a) the initial Interest Period for any LIBOR Loan shall commence on
the Funding Date of such Loan;
(b) in the case of successive Interest Periods, each successive
Interest Period shall commence on the day on which the immediately preceding
Interest Period expires;
(c) if an Interest Period expiration date is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that if any Interest Period expiration date is not a Business Day but is a day
of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the immediately preceding Business Day;
(d) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to part
(e) below, end on the last Business Day of a calendar month;
(e) no Interest Period shall extend beyond the Termination Date;
(f) no Interest Period may extend beyond a scheduled principal
payment date unless the sum of (A) the aggregate principal amount of Loans that
are Base Rate Loans or that have Interest Periods expiring on or before such
date and (B) the amount by which the Maximum Revolving Loan Amount is greater
than the total outstanding Revolving Loan on the date such Interest Period is
being requested, equals or exceeds (ii) the principal amount required to be paid
on the Loans on such scheduled principal payment date; and
(g) there shall be no more than five (5) Interest Periods relating
to LIBOR Loans outstanding at any time.
"Inventory" means all "inventory" (as defined in the UCC), including,
without limitation, finished goods, raw materials, work in process and other
materials and supplies used or consumed in a Person's business, and goods which
are returned or repossessed.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"Landlord Waiver and Consent" means an agreement in form and substance
satisfactory to Agent permitting Agent access to Borrower's retail locations
following a default and the agreement of such landlord as to the priority right
of Agent in any Inventory located thereat.
"Lender Letter of Credit" has the meaning assigned to that term in
subsection 2.1(G).
"Letter of Credit Liability" means, all reimbursement and other
liabilities of Borrower or any of its Subsidiaries with respect to each Lender
Letter of Credit, whether contingent or otherwise, including: (a) the amount
available to be drawn or which may become available to be drawn; (b) all amounts
which have been paid or made available by any Lender issuing a Lender Letter of
Credit or any bank issuing a Bank Letter of Credit to the extent not reimbursed;
and (c) all unpaid interest, fees and expenses related thereto.
"Letter of Credit Reserve" means, at any time, an amount equal to (a) 50%
of the aggregate amount of Letter of Credit Liability with respect to all Lender
Letters of Credit outstanding at such time plus, without duplication, (b) the
aggregate amount theretofore paid by Agent or any Lender under Lender Letters of
Credit and not debited to the Loan Account pursuant to subsection 2.1(G)(2) or
otherwise reimbursed by Borrower.
"Liabilities" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIBOR" means, for each Interest Period, a rate determined in accordance
with the following provisions:
(a) LIBOR will be either: (i) the rate for deposits in U.S. dollars for
the relevant Interest Period commencing on the second London Banking Day
immediately following that Interest Determination Date, that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on that Interest Determination
Date ("LIBOR Telerate") or (ii) the arithmetic mean of the offered rates for
deposits in U.S. dollars for the relevant Interest Period commencing on the
second London Banking Day immediately following that Interest Determination
Date, that appear on the Reuters Screen LIBOR Page as of 11:00 a.m. London time,
on that Interest Determination Date, if at least two such offered rates appear
on the Reuters Screen LIBO Page ("LIBOR Reuters"). "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that service for the
purpose of displaying London interbank offered rates of major banks). "Telerate
Page 3750" means the display designated as page "3750" on the Telerate Services
(or such other page as may replace the 3750 page on that service or such other
service or services as may be nominated by the British Bankers' Association for
the purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified, LIBOR will
be determined as if LIBOR Telerate had been specified. If fewer than two offered
rates appear on the Reuters Screen LIBO Page, or if no rate appears on the
Telerate Page 3750, as applicable, LIBOR in respect of that Interest
Determination Date will be determined as if the parties had specified the rate
described in (b) below.
(b) With respect to an Interest Determination Date on which fewer than two
offered rates appear on the Reuters Screen LIBO Page, as specified in (a)(ii)
above, or on which no rate appears on Telerate Page 3750, as specified in (a)(i)
above, as applicable, LIBOR will be determined on the basis of the rates at
which deposits in U.S. dollars for the relevant Interest Period are offered at
approximately 11:00 a.m. London time, on that Interest Determination Date by
four major banks in the London interbank market selected by Agent ("Reference
Banks") to prime banks in the London interbank market commencing on the second
London Banking Day immediately following that Interest Determination Date and in
a principal amount equal to an amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time. Agent will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR in respect of that
Interest Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m. New York City time, on that Interest Determination Date
by three major banks in the City of New York selected by Agent for loans in U.S.
dollars to leading European banks for the relevant Interest Period commencing on
the second London Banking Day immediately following that Interest Determination
Date and in a principal amount equal to an amount of not less than $1,000,000
that is representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by Agent are not
quoting as mentioned in this sentence, LIBOR with respect to such Interest
Determination Date will be the rate of LIBOR in effect on such date.
The rate determined by either (a) or (b) shall be divided by a number
equal to 1.0 minus the aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on the day
which is two (2) Business Days prior to the beginning of such Interest Period
(including, without limitation, basic, supplemental, marginal, special emergency
or other reserves under any regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with respect
thereto, as now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of such
Board) which are required to be maintained by a member bank of the Federal
Reserve System (such rate to be adjusted to the nearest (1/16 of 1%) or, if
there is not a nearest (1/16 of 1%), to the next higher (1/16 of 1%).
"LIBOR Loans" means at any time that portion of the Loans bearing interest
at rates determined by reference to LIBOR.
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means an advance or advances under the Term Loan
Commitment, the Swingline Loans or the Revolving Loan Commitment.
"Loan Documents" means this Agreement, the Guaranty, the Subsidiary
Guaranty, the Cash Collateral Pledge Agreement and all other documents,
instruments and agreements executed by or on behalf of Borrower, Borrower's
Subsidiaries or any Guarantor and delivered concurrently herewith or at any time
hereafter to or for Agent or any Lender in connection with the Loans, any Lender
Letter of Credit, and any other transaction contemplated by this Agreement, all
as amended, restated, supplemented or modified from time to time.
"Loan Party" means each of Borrower, Borrower's Subsidiaries, any
Guarantor and any other Person (other than Agent or any Lender) which is or
becomes a party to any Loan Document.
"Loan Year" means each period of 12 consecutive months commencing on the
Closing Date and on each anniversary thereof.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London Interbank market.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, operations, prospects, properties, assets or condition (financial or
otherwise) of any Loan Party on an individual basis or taken as a whole or (b)
the ability of any Loan Party to perform its obligations under any Loan Document
to which it is a party or of Agent or any Lender to enforce or collect any of
the Obligations.
"Maximum Revolving Loan Amount" has the meaning assigned to that term in
subsection 2.1(B)(1).
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"Maximum Swingline Loan Amount" means at any time the lesser of (i)
$2,000,000, (ii) the Revolving Loan Commitments of all Lenders at such time and
(iii) that amount which is the Borrowing Base at such time, less the sum of (x)
the Revolving Loan at such time, (y) the Term Loans at such time and (z) the
Letter of Credit Reserve at such time.
"Net Worth" means, as of any date, the sum of the capital stock and
additional paid-in capital plus retained earnings (or less accumulated deficit)
calculated in conformity with GAAP.
"Notes" means the Revolving Note, the Term Notes and the Swingline Note.
"Notice of Borrowing" means a Notice duly executed by an authorized
representative of Borrower appropriately completed and in the form of Exhibit E.
"Notice of Conversion/Continuation" has the meaning assigned to that term
in subsection 2.2(D).
"Obligations" means all obligations, liabilities and indebtedness of every
nature of each Loan Party from time to time owed to Agent or to any Lender under
the Loan Documents (whether incurred before or after the Termination Date)
including the principal amount of all debts, claims and indebtedness, accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, cost and expenses accrued or incurred after the filing of any
petition under any bankruptcy or insolvency law.
"Overadvance Amount" means $2,000,000.
"Permitted Encumbrances" means the following types of Liens: (a) Liens
(other than Liens relating to Environmental Claims for taxes, assessments or
other governmental charges not yet due and payable; (b) statutory Liens of
landlords, carriers, warehousemen, mechanics, materialmen and other similar
liens imposed by law, which are incurred in the ordinary course of business for
sums not more than 30 days delinquent; (c) Liens incurred or deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money; (d) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
any Loan Party or any of its Subsidiaries; (e) Liens for purchase money
obligations, provided that (i) the purchase of the asset subject to any such
Lien is permitted under subsection 6.5, (ii) the Indebtedness secured by any
such Lien is permitted under subsection 7.1, and (iii) such Lien encumbers only
the asset so purchased; (f) Liens in favor of Agent, on behalf of Lenders, and
(g) Liens securing not more than $2,500,000 in lease purchase debt on specified
equipment as set forth on Schedule 11.1.A.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Pro Rata Share" means (a) with respect to matters relating to a
particular Commitment of a Lender, the percentage obtained by dividing (i) such
Commitment of that Lender by (ii) all such Commitments of all Lenders and (b)
with respect to all other matters, the percentage obtained by dividing (i) the
Total Loan Commitment of a Lender by (ii) the Total Loan Commitments of all
Lenders, in either case as such percentage may be adjusted by assignments
permitted pursuant to subsection 9.5; provided, however, if any Commitment is
terminated pursuant to the terms hereof, then "Pro Rata Share" means the
percentage obtained by dividing (x) the aggregate amount of such Lender's
outstanding Loans related to such Commitment by (y) the aggregate amount of all
outstanding Loans related to such Commitment.
"Projections" means Borrower's forecasted consolidated and consolidating;
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a division by division and
Subsidiary by Subsidiary basis consistent with Borrower's historical financial
statements and based upon good faith estimates and assumptions by Borrower
believed to be reasonable at the time made, together with appropriate supporting
details and a statement of underlying assumptions.
"Requisite Lenders" means Lenders, (other than a Defaulting Lender),
holding or being responsible of 51% or more of the sum of (a) outstanding Loans,
(b) outstanding Letter of Credit Liability and (c) unutilized Commitments of all
Lenders which are not Defaulting Lenders.
"Restricted Junior Payment" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of Borrower
or any of its Subsidiaries now or hereafter outstanding, except a dividend
payable solely with shares of the class of stock on which such dividend is
declared; (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any Indebtedness owing to any Affiliate or in respect of any
shares of any class of stock of Borrower or any of its Subsidiaries now or
hereafter outstanding, or the issuance of a notice of an intention to do any of
the foregoing; (c) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of stock of Borrower or any of its Subsidiaries now or hereafter outstanding;
and (d) any payment by Borrower or any of its Subsidiaries of any management,
consulting or similar fees to any Affiliate, whether pursuant to a management
agreement or otherwise.
"Revolving Advance" means each advance made by Lender(s) pursuant to
subsection 2.1(B).
"Revolving Loan" means the outstanding balance of all Revolving Advances
and any amounts added to the principal balance of the Revolving Loan pursuant to
this Agreement.
"Revolving Loan Commitment" means (a) as to any Lender, the commitment of
such Lender to make Revolving Advances pursuant to subsection 2.1(B), and to
purchase participations in Lender Letters of Credit pursuant to subsection
2.1(G) and without duplication to purchase participation in the Swingline Loan
pursuant to subsection 2.1(D) in the aggregate amount set forth on the signature
page of this Agreement opposite such Lender's signature or in the most recent
Assignment and Assumption Agreement, if any, executed by such Lender and (b) as
to all Lenders, the aggregate commitment of all Lenders to make Revolving
Advances and to purchase participations in Lender Letters of Credit.
"Revolving Note" means each promissory note of Borrower in form and
substance reasonably acceptable to Agent, issued to evidence the Revolving Loan
Commitments.
"Scheduled Installment" has the meaning assigned to that term in
subsection 2.1(A).
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of stock (or equivalent ownership
or controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" has the meaning ascribed to such term in the
Recitals.
"Subsidiary Guaranty" means the Continuing Guaranty of Borrower's
Obligations executed by Subsidiary Guarantor.
"Swingline Advance" means each advance made by Swingline Lender pursuant
to subsection 2.1(D).
"Swingline Lender" means ▇▇▇▇▇▇, or if ▇▇▇▇▇▇ shall resign as Swingline
Lender, another Lender selected by Agent and reasonably acceptable to Borrower.
"Swingline Loan" means the outstanding balance of all Swingline Advances
and any amounts added to the principal balance of the Swingline Loan pursuant to
this Agreement.
"Swingline Note" means the promissory note of Borrower in form and
substance acceptable to Agent, issued to evidence the Swingline Loan.
"Tangible Net Worth" of any Person means as of any date, an amount equal
to: (a) Net Worth of such Person; less (b) Intangible Assets of such Person;
less (c) prepaid expenses of such Person in excess of $250,000; less (d) all
obligations owed to such Person by any Affiliate of such Person or any of its
Subsidiaries; and less (e) all loans by such Person to its officers,
stockholders, Subsidiaries or employees (determined in each case in conformity
with GAAP) plus (f) the unpaid amount of Term Loan B.
"Tax Distributions" means, for so long as Borrower is a Subchapter S
corporation, dividends declared and paid by Borrower to its shareholders with
respect to any tax year in which Borrower earns taxable income in an amount
equal to the product of (a) income related to such person's ownership interest
in Borrower multiplied by (b) the sum of the highest effective individual
federal and state income tax rates in a state in which such shareholder resides
which were applicable in such year.
"Term Loans" means the unpaid balance of the term loans made pursuant to
subsection 2.1(A).
"Term Loan A" means the advances made pursuant to subsection 2.1(A)(1).
"Term Loan B" means the advances made pursuant to subsection 2.1(A)(2).
"Term Loan Commitment" means (a) as to any Lender, the commitment of such
Lender to make its Pro Rata share of the Term Loans in the maximum aggregate
amount set forth on the signature page of this Agreement opposite such Lender's
signature or in the most recent Assignment and Assumption Agreements, if any,
executed by such Lender and (b) as to all Lenders, the aggregate commitment of
all Lenders to make the Term Loans.
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"Term Note" means the promissory notes of Borrower in form and substance
acceptable to Agent, issued to evidence the Term Loan Commitment.
"Total Loan Commitment" means as to any Lender the aggregate commitments
of such Lender with respect to its Revolving Loan Commitment and Term Loan
Commitment.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Illinois, as amended from time to time, and any successor statute.
"Working Capital" means as to any Person: (a) current assets; less (b)
current liabilities; and less (c) the amount of any obligations owed to such
Person or any of its Subsidiaries by any Affiliate of such Person or any of its
Subsidiaries.
11.2 Accounting Terms. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 5.1 shall be prepared in
accordance with GAAP (as in effect at the time of such preparation) on a
consistent basis. In the event any "Accounting Changes" (as defined below) shall
occur and such changes affect financial covenants, standards or terms in this
Agreement, then Borrower and Lenders agree to enter into negotiations in order
to amend such provisions of this Agreement so as to equitably reflect such
accounting Changes with the desired result that the criteria for evaluating the
financial condition of Borrower shall be the same after such Accounting Changes
as if such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrower and Requisite
Lenders, (A) all financial covenants, standards and terms in this Agreement
shall be calculated and/or construed as if such Accounting Changes had not been
made, and (B) Borrower shall prepare footnotes to each Compliance Certificate
and the financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "Accounting Changes" means(a)
changes in accounting principles required by GAAP and implemented by Borrower;
and (b) changes in accounting principles recommended by Borrower's Accountants.
All such adjustments resulting from expenditures made subsequent to the Closing
Date (including, but not limited to, capitalization of costs and expenses or
payment of pre-Closing Date liabilities) shall be treated as expenses in the
period the expenditures are made and deducted as part of the calculation of
EBITDA in such period.
11.3 Other Definitional Provisions. References to "Sections,"
"subsections," "Riders," "Exhibits," "Schedules", and "Addendums" shall be to
Sections, subsections, Riders, Exhibits, Schedules and Addendums, respectively,
of this Agreement unless otherwise specifically provided. Any of the terms
defined in subsection 11.1 may, unless the context otherwise requires, be used
in the singular or the plural depending on the reference. In this Agreement,
words importing any gender include the other genders; the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; references to agreements and other contractual instruments shall be
deemed to include subsequent amendments, assignments, and other modifications
thereto, but only to the extent such amendments, assignments and other
modifications are not prohibited by the terms of this Agreement or any other
Loan Document; references to Persons include their respective permitted
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such
11.4 Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
SKECHERS U.S.A., INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------
Title: Chief Financial
Officer
-------------------
FEIN:
-------------------
▇▇▇▇▇▇ FINANCIAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
---------------------
Title: Assistant Vice
President
------------------
Revolving Loan Commitment:
$120,000,000
Term Loan A Commitment:
$2,775,000
Term Loan B Commitment:
$13,250,000
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RIDERS
A. Conditions Rider
B. Reporting Rider
C. Financial Covenants Rider
EXHIBITS:
A. Borrowing Base Certificate
B. Compliance Certificate
C. Inventory Report
D. Reconciliation Report
E. Notice of Borrowing
F. Notice of Conversion/Continuation
SCHEDULES:
3.1(A) List of Closing Documents
4.1(B) Capitalization of Loan Parties
4.6 Business and Trade Names (Present and Past Five Years); Location of
Principal Place of Business, Books and Records and Collateral
4.12 Intellectual Property
4.12(A) Licensing Agreements
4.19 Bank Accounts
4.20 Employee Matters
7.1 Indebtedness
7.11 Subsidiaries
11.1. A Other Liens
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CONDITIONS RIDER
This Conditions Rider is attached to and made a part of that certain
Amended and Restated Loan and Security Agreement dated as of September 4, 1998
and entered into among Borrower, Agent and Lenders.
(A) Closing Deliveries. Agent shall have received, in form and
substance satisfactory to Agent and Lenders, all documents, instruments and
information identified on Schedule 3.1(A) and all other agreements, notes,
certificates, orders, authorizations, financing statements, mortgages and other
documents which Agent may at any time reasonably request.
(B) Security Interests. Agent and Lenders shall have received
satisfactory evidence that all security interests and liens granted to Agent for
the benefit of Lenders pursuant to this Agreement or the other Loan Documents
have been duly perfected and constitute first priority liens on the Collateral,
subject only to Permitted Encumbrances.
(C) Representations and Warranties. The representations and
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Schedules or Exhibits as a result of any disclosures made by
Borrower to Agent after the Closing Date and approved by Agent.
(D) Fees. With respect to Loans or Lender Letters of Credit to be
made or issued on the Closing Date, Borrower shall have paid all fees due to
Agent, Lender or any participant of any Lender and payable on the Closing Date.
(E) No Default. No event shall have occurred and be continuing or
would result from funding a Loan or issuing a Lender Letter of Credit requested
by Borrower that would constitute an Event of Default or a Default.
(F) Performance of Agreements. Each Loan Party shall have performed
in all material respects all agreements and satisfied all conditions which any
Loan Document provides shall be performed by it on or before that Funding Date.
(G) No Prohibition. No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Agent
or any Lender from making any Loans or issuing any Lender Letters of Credit.
(H) No Litigation. There shall not be pending or, to the knowledge
of Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting any
Loan Party or any of its Subsidiaries or any property of any Loan Party or any
of its Subsidiaries that has not been disclosed to Agent by Borrower in writing,
and there shall have occurred no development in any such action, charge, claim,
demand, suit, proceeding, petition, governmental investigation or arbitration
that, in the opinion of Agent, would reasonably be expected to have a Material
Adverse Effect.
(I) Initial Funding Date. Solely in respect of the initial funding
of Loans, Borrower's tax assumptions, capital, organization, ownership and legal
structure must be satisfactory to Agent and not impair the ability of the Agent
to enforce any claims against the Collateral; all Collateral must be freely
pledgeable as collateral security for the Loans subject to Borrower's reasonable
commercial efforts to obtain, where applicable, landlord consents and
warehouseman waivers in accordance with procedures to be determined by mutual
agreement of Agent and Borrower.
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REPORTING RIDER
This Reporting Rider is attached and made a part of that certain Amended
and Restated Loan and Security Agreement, dated as of September 4, 1998 and
entered into among Borrower, Agent and Lenders.
(A) Monthly Financials. As soon as available and in any event within
forty-five (45) days after the end of each month, Borrower will deliver (1) the
consolidated and consolidating balance sheet of Borrower and its Subsidiaries as
at the end of such month and the related consolidated and consolidating
statements of income, stockholders' equity and cash flow for such month and for
the period from the beginning of the then current Fiscal Year to the end of such
month, and (2) a schedule of the outstanding Indebtedness for borrowed money of
Borrower and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan.
(B) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrower will
deliver: (1) the consolidated balance sheet of Borrower and its Subsidiaries as
at the end of such year and the related consolidated statements of income,
stockholders' equity and cash flow for such Fiscal Year; (2) a schedule of the
outstanding Indebtedness of Borrower and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the principal
amount and amount of accrued and unpaid interest with respect to each such debt
issue or loan; and (3) a report with respect to the financial statements from
Borrower's Accountants, which report shall be unqualified as to going concern
and scope of audit of Borrower and its Subsidiaries and shall state that (a)
such consolidated financial statements present fairly the consolidated financial
position of Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (b) that
the examination by Borrower's Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (4) copies of the consolidating financial statements of
Borrower and its Subsidiaries, including (a) consolidating balance sheets of
Borrower and its Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (b) related consolidating statements of income of
Borrower and its Subsidiaries showing intercompany eliminations.
(C) Accountants' Certification and Reports. Together with each
delivery of consolidated financial statements of Borrower and its Subsidiaries
pursuant to paragraph (C) above, Borrower will deliver a written statement by
Borrower's Accountants (1) stating that the examination has included a review of
the terms of this Agreement as same relate to accounting matters and (2) stating
whether, in connection with the examination, any condition or event that
constitutes a Default or an Event of Default has come to their attention and, if
such a condition or event has come to their attention, specifying the nature and
period of existence thereof. Promptly upon receipt thereof, Borrower will
deliver copies of all significant reports submitted to Borrower by Borrower's
Accountants in connection with each annual, interim or special audit of the
financial statements of Borrower made by Borrower's Accountants, including the
comment letter submitted by Borrower's Accountants to management in connection
with their annual audit.
(D) Compliance Certificate. Together with the delivery of each set
of financial statements referenced in paragraphs (A), (B) and (C) above,
Borrower will deliver a Compliance Certificate, together with copies of the
calculations and work-up employed to determine Borrower's compliance or
noncompliance with the financial covenants set forth in the Financial Covenants
Rider.
(E) Borrowing Base Certificates, Registers and Journals. On the
first Business Day of each week, Borrower shall deliver to Agent: (1) a
Borrowing Base Certificate in the form of Exhibit A updated to reflect the most
recent sales and collections of Borrower and an assignment schedule of all
Accounts created by Borrower; (2) an invoice register or sales journal
describing all sales of Borrower, in form and substance satisfactory to Agent,
and, if Agent so requests, copies of invoices evidencing such sales and proofs
of delivery relating thereto; (3) a cash receipts journal; and (4) an adjustment
journal, setting forth all adjustments to Borrower's accounts receivable.
(F) Reconciliation Reports, Inventory Reports and Listings and
Agings. On the Closing Date and on the first Business Day of each week
thereafter, Borrower will deliver to Agent: (1) an aged trial balance of all
then existing Accounts; and (2) an Inventory Report duly executed by an officer
of Borrower and substantially in the form of Exhibit C as of the last day of the
previous week. On the first Business Day of each week and five (5) days after
the last day of each month, and from time to time upon the request of Agent,
Borrower will deliver to Agent: (1) a reconciliation report duly executed by the
chief executive officer of chief financial officer of Borrower and substantially
in the form of Exhibit D as at the last day of such period; (2) an aged trial
balance of all then existing accounts payable; and (3) a detailed inventory
listing and cover summary report. All such reports shall be in form and
substance satisfactory to Agent.
(G) Management Report. Together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to paragraphs (A) and (B)
above, Borrower will deliver a management report (to the extent provided to
Borrower): (1) describing the operations and financial condition of Borrower and
its Subsidiaries for the month then ended and the portion of the current Fiscal
Year then elapsed; (2) setting forth in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the most recent Projections for the current Fiscal
Year delivered to Lenders pursuant to paragraph (L) below; and (3) discussing
the reasons for any significant variations. The information above shall be
presented in reasonable detail and shall be certified by the chief financial
officer of Borrower to the effect that such information fairly presents the
results of operations and financial condition of Borrower and its Subsidiaries
as at the dates and for the periods indicated.
(H) Appraisals. From time to time, upon the request of Agent,
Borrower will obtain and deliver to Agent, at Borrower's expense, appraisal
reports in form and substance and from appraisers satisfactory to Agent, stating
the then current fair market and orderly liquidation values of all or any
portion of the Collateral; provided, however, so long as no Default or Event of
Default is continuing, Agent shall not request an appraisal as to any particular
category of Collateral to be performed more than once every Loan Year at
Borrower's expense.
(I) Government Notices. Borrower will deliver to Agent promptly
after receipt copies of all notices, requests, subpoenas, inquiries or other
writings received from any governmental agency concerning any Employee Benefit
Plan, the violation or alleged violation of any Environmental Laws, the storage,
use or disposal of any Hazardous Material, the violation or alleged violation of
the Fair Labor Standards Act or Borrower's payment or non-payment of any taxes
including any tax audit.
(J) Events of Default, etc. Promptly (but in any event not later
than three (3) Business Days) upon any officer of Borrower obtaining knowledge
of any of the following events or conditions, Borrower shall deliver a
certificate of Borrower's chief executive officer specifying the nature and
period of existence of such condition or event and what action Borrower has
taken, is taking and proposes to take with respect thereto: (1) any condition or
event that constitutes an Event of Default or Default; (2) any notice of default
that any Person has given to Borrower or any of its Subsidiaries or any other
action taken with respect to a claimed default; or (3) any Material Adverse
Effect.
(K) Projections. As soon as available and in any event not later
than each April 30 and October 31, Borrower will deliver consolidated and
consolidating Projections of Borrower and its Subsidiaries for the forthcoming
twelve (12) months on a month to month basis.
(L) Other Information. With reasonable promptness, Borrower will
deliver such other information and data as Agent may reasonably request from
time to time.
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FINANCIAL COVENANTS RIDER
This Financial Covenants Rider is attached and made a part of that certain
Amended and Restated Loan and Security Agreement, dated as of September 4, 1998
and entered into among Borrower, Agent & Lenders.
(A) Tangible Net Worth. Prior to June 30, 1998, Borrower shall
maintain Tangible Net Worth of at least $13,000,000. On or after June 30, 1998,
Borrower shall maintain Tangible Net Worth of at least $20,000,000 as at the end
of each Fiscal Month.
(B) Working Capital. Prior to June 30, 1998, Borrower shall maintain
Working Capital as at the end of each Fiscal Month of at least $10,000,000. On
and after June 30, 1998, Borrower shall maintain Working Capital of at least
$14,000,000 as at the end of each Fiscal Month.
(C) Ratio of Indebtedness to Tangible Net Worth. As at the end of
each Fiscal Month, the ratio of (a) Borrower's Indebtedness, on a consolidated
basis, to (b) Borrower's Tangible Net Worth shall not be greater than 4.0:1.0.
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