LOAN AND SECURITY AGREEMENT between INTERNATIONAL PLAYTHINGS, INC., as Borrower, and CITICAPITAL COMMERCIAL CORPORATION, as Lender Dated as of December 21, 2006
Exhibit
4.48
EXECUTION
VERSION
between
INTERNATIONAL
PLAYTHINGS, INC.,
as
Borrower,
and
CITICAPITAL
COMMERCIAL CORPORATION,
as
Lender
Dated
as of December 21, 2006
TABLE
OF CONTENTS
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Page
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ARTICLE
I DEFINITIONS
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1
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SECTION
1.1
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General
Definitions
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1
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SECTION
1.2
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Accounting
Terms and Determinations
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17
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SECTION
1.3
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Other
Terms; Headings
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17
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ARTICLE
II THE CREDIT FACILITIES
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18
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SECTION
2.1
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The
Loans
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18
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SECTION
2.2
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Procedure
for Borrowing; Notices of Borrowing; Notices of Continuation;
Notices of
Conversion
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18
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SECTION
2.3
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Application
of Proceeds
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21
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SECTION
2.4
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Maximum
Amount of the Facility; Mandatory Prepayments; Optional
Prepayments
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21
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SECTION
2.5
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Maintenance
of Loan Account; Statements of Account
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22
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SECTION
2.6
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Collection
of Receivables
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22
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SECTION
2.7
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Term
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23
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SECTION
2.8
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Payment
Procedures
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24
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SECTION
2.9
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Letters
of Credit
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24
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ARTICLE
III SECURITY
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26
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SECTION
3.1
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General
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26
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SECTION
3.2
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Further
Security; Lender Affiliates
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26
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SECTION
3.3
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Recourse
to Security
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27
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SECTION
3.4
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Special
Provisions Relating to Inventory
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27
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SECTION
3.5
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Special
Provisions Relating to Receivables
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28
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SECTION
3.6
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Special
Provisions Relating to Equipment
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29
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SECTION
3.7
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Continuation
of Liens, Etc
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30
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SECTION
3.8
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Real
Property
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30
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SECTION
3.9
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Power
of Attorney
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31
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ARTICLE
IV INTEREST, FEES AND EXPENSES
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31
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SECTION
4.1
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Interest
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31
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SECTION
4.2
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Interest
and Letter of Credit Fees After Event of Default
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32
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SECTION
4.3
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Closing
Fee
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32
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SECTION
4.4
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Unused
Line Fee; Letter of Credit Fees
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32
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SECTION
4.5
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Early
Termination Fee
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32
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SECTION
4.6
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Calculations
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33
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SECTION
4.7
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Indemnification
in Certain Events
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33
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SECTION
4.8
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Taxes
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33
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-i-
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ARTICLE
V CONDITIONS OF LENDING
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34
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SECTION
5.1
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Conditions
to Initial Loan or Letter of Credit
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34
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SECTION
5.2
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Conditions
Precedent to Each Loan and Each Letter of Credit
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38
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ARTICLE
VI REPRESENTATIONS AND WARRANTIES
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38
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SECTION
6.1
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Representations
and Warranties of the Borrower; Reliance by the
Lender
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38
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ARTICLE
VII COVENANTS OF THE BORROWER
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46
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SECTION
7.1
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Affirmative
Covenants
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46
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SECTION
7.2
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Negative
Covenants
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56
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ARTICLE
VIII FINANCIAL COVENANTS
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61
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SECTION
8.1
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Tangible
Net Worth
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62
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SECTION
8.2
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Fixed
Charge Coverage Ratio
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62
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SECTION
8.3
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Capital
Expenditures
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62
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SECTION
8.4
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Business
Plan
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62
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ARTICLE
IX EVENTS OF DEFAULT
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62
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SECTION
9.1
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Events
of Default
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62
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SECTION
9.2
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Acceleration,
Termination and Cash Collateralization
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64
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SECTION
9.3
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Other
Remedies
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65
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SECTION
9.4
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License
for Use of Software and Other Intellectual Property
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66
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SECTION
9.5
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No
Marshalling; Deficiencies; Remedies Cumulative
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66
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SECTION
9.6
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Waivers
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66
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SECTION
9.7
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Further
Rights of the Lender
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67
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SECTION
9.8
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Interest
and Letter of Credit Fees After Event of Default
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67
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ARTICLE
X ASSIGNMENTS AND PARTICIPATIONS
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68
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SECTION
10.1
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Assignments
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68
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SECTION
10.2
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Participations
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68
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SECTION
10.3
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Disclosure
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68
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ARTICLE
XI GENERAL PROVISIONS
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68
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SECTION
11.1
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Notices
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68
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SECTION
11.2
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Delays;
Partial Exercise of Remedies
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68
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SECTION
11.3
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Right
of Setoff
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68
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SECTION
11.4
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Indemnification;
Reimbursement of Expenses of Collection
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69
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SECTION
11.5
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Amendments
and Waivers
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70
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SECTION
11.6
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Counterparts;
Telecopied Signatures
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70
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SECTION
11.7
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Severability
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70
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-ii-
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SECTION
11.8
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Maximum
Rate
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70
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SECTION
11.9
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Entire
Agreement; Successors and Assigns; Interpretation
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71
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SECTION
11.10
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LIMITATION
OF LIABILITY
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71
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SECTION
11.11
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GOVERNING
LAW
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72
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SECTION
11.12
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SUBMISSION
TO JURISDICTION
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72
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SECTION
11.13
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SERVICE
OF PROCESS
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72
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SECTION
11.14
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JURY
TRIAL
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73
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SECTION
11.15
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Publicity
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73
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SCHEDULES
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Schedule
6.1(a)
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-
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Foreign
Jurisdictions
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Schedule
6.1(b)
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-
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Locations
of Collateral and Real Property
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Schedule
6.1(f)
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-
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Consents
and Authorizations
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Schedule
6.1(g)
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-
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Ownership;
Subsidiaries
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Schedule
6.1(i)
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-
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Financial
Data
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Schedule
6.1(k)
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-
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Joint
Ventures and Partnerships
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Schedule
6.1(r)
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-
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Judgments;
Litigation
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Schedule
6.1(x)
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-
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ERISA
Plans
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Schedule
6.1(y)
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-
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Intellectual
Property
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Schedule
6.1(z)
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-
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Labor
Contracts
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Schedule
6.1(dd)
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-
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Material
Contracts
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Schedule
6.1(gg)
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-
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Affiliate
Transactions
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Schedule
7.1(q)
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-
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Billing
Practices
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Schedule
7.2(o)
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Executive
Compensation
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Schedule
7.2(t)
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-
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Bank
Accounts
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EXHIBITS
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Exhibit
A
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-
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Note
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Exhibit
B
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-
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Guaranty
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Exhibit
C
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-
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Compliance
Certificate
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Exhibit
D
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-
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Notice
of Borrowing
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Exhibit
E
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-
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Notice
of Continuation
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Exhibit
F
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-
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Notice
of Conversion
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Exhibit
G
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-
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Letter
of Credit Request
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Exhibit
H
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-
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Borrowing
Base Certificate
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Exhibit
I
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-
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Perfection
Certificate
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Exhibit
J
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-
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Landlord
Estoppel and Agreement
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-iii-
LOAN
AND SECURITY AGREEMENT,
dated as
of December 21, 2006, between INTERNATIONAL PLAYTHINGS, INC., a Delaware
corporation (the “Borrower”), and CITICAPITAL COMMERCIAL CORPORATION, a Delaware
corporation (the “Lender”).
WITNESSETH
:
WHEREAS,
the
Borrower wishes to obtain a revolving credit facility; and
WHEREAS,
upon
the terms and subject to the conditions set forth herein, the Lender is willing
to make loans and other extensions of credit to the Borrower in an aggregate
amount not to exceed $13,000,000;
NOW,
THEREFORE,
the
Borrower and the Lender hereby agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.1 General
Definitions.
As used
herein, the following terms shall have the meanings herein specified (to
be
equally applicable to both the singular and plural forms of the terms
defined):
“Advance”
means
a
Base Rate Advance or a LIBOR Rate Advance.
“Affiliate”
means,
as to any Person, any other Person who directly or indirectly controls,
is under
common control with, is controlled by or is a director, officer, manager
or
general partner of such Person. As used in this definition, “control” (including
its correlative meanings, “controlled by” and “under common control with”) means
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of voting
securities or partnership or other ownership interests, by contract or
otherwise), provided
that, in
any event, any Person who owns directly or indirectly ten percent (10%)
or more
of the securities having ordinary voting power for the election of the
members
of the board of directors or other governing body of a corporation or ten
percent (10%) or more of the partnership or other ownership interests of
any
other Person (other than as a limited partner of such other Person) will
be
deemed to control such corporation, partnership or other Person.
“Agreement”
means
this Loan and Security Agreement, as amended, supplemented or otherwise
modified
from time to time.
“Auditors”
means
Berenson LLP, Deloitte Touch Tomatsu and any other nationally recognized
firm of
independent public accountants selected by the Borrower and reasonably
satisfactory to the Lender.
“Bankruptcy
Code”
means
Title 11 of the United States Code entitled “Bankruptcy,”
as
that
title may be amended from time to time, or any successor statute.
“Base
Rate”
means
the rate of interest publicly announced from time to time by Citibank,
N.A. as
its base rate.
“Base
Rate Advance”
means
an Advance that bears interest as provided in Section 4.1(a).
“Borrowing”
has
the
meaning specified in Section 2.2(a).
“Borrowing
Base”
has
the
meaning specified in Section 2.1(a).
“Borrowing
Base Certificate”
has
the
meaning specified in Section 7.1(k)(iv).
“Business
Day”
means
any day other than a Saturday, a Sunday or any other day on which commercial
banks in New York, New York are required or permitted by law to close.
When used
in connection with any LIBOR Rate Advance, a Business Day shall also exclude
any
day on which commercial banks are not open for dealings in Dollar deposits
in
the London interbank market.
“Business
Plan”
means
a
business plan of the Borrower and its Subsidiaries, consisting of projected
balance sheets, related cash flow statements and related profit and loss
statements, and availability forecasts, excess availability forecasts and
covenant compliance forecasts, together with appropriate supporting details
and
a statement of the underlying assumptions, which covers a one-year period
and
which is prepared on a monthly basis.
“Canadian
Receivables Account”
means
the Borrower’s deposit account number 2501-0000000 held with Toronto Dominion
Canada Trust.
“Capital
Expenditures”
means
expenditures for any fixed assets or improvements, replacements, substitutions
or additions thereto or therefor which have a useful life of more than
one year,
and shall include all commitments, payments in respect of Capitalized Lease
Obligations and leasehold improvements.
“Capitalized
Lease Obligations”
means
any rental obligation which, under GAAP, is or will be required to be
capitalized on the books of the lessee, taken at the amount thereof accounted
for as Indebtedness (net of Interest Expense) in accordance with
GAAP.
“Cash
Equivalents”
means
(i) securities issued, guaranteed or insured by the United States or any of
its agencies with maturities of not more than one year from the date acquired;
(ii) certificates of deposit with maturities of not more than one year from
the date acquired, issued by (A) the Lender or its Affiliates; (B) any
U.S. federal or state chartered commercial bank of recognized standing
which has
capital and unimpaired surplus in excess of $500,000,000; or (C) any bank
or its holding company that has a short-term commercial paper rating of
at least
A-1 or the equivalent by Standard & Poor’s Ratings Services or at least P-1
or the equivalent by Xxxxx’x Investors Service, Inc.; (iii) repurchase
agreements and reverse repurchase agreements with terms of not more than
seven
days from the date acquired, for securities of the type described in
clause (i) above and entered into only with commercial banks having the
qualifications described in clause (ii) above or such other financial
institutions with a short-term commercial paper rating of at least A-1
or the
equivalent by Standard & Poor’s Ratings Services or at least P-1 or the
equivalent by Xxxxx’x Investors Service, Inc.; (iv) commercial paper, other
than commercial paper issued by the Guarantor or any of its Affiliates,
issued
by any Person incorporated under the laws of the United States or any state
thereof and rated at least A-1 or the equivalent thereof by Standard &
Poor’s Ratings Services or at least P-1 or the equivalent thereof by Xxxxx’x
Investors Service, Inc., in each case with maturities of not more than
one year
from the date acquired; and (v) investments in money market funds
registered under the Investment Company Act of 1940, which have net assets
of at
least $500,000,000 and at least eighty-five percent (85%) of whose assets
consist of securities and other obligations of the type described in
clauses (i) through (iv) above.
-2-
“Closing
Date”
means
the date of execution and delivery of this Agreement.
“Code”
has
the
meaning specified in Section 1.3.
“Collateral”
means
all Receivables, Equipment, General Intangibles, Inventory, Investment
Property
and all other personal property of the Borrower and all other collateral
specified in this Agreement and in the Security Documents.
“Collateralization”
and
“Collateralize”
each
means, with respect to any Letter of Credit, the deposit by the Borrower
in a
cash collateral account established and controlled by or on behalf of the
Lender
of an amount equal to 105% of the undrawn amount of such Letter of
Credit.
“Collections”
means
all cash, funds, checks, notes, instruments, any other form of remittance
tendered by account debtors in respect of payment of Receivables of the Borrower
and any other payments received by the Borrower with respect to any
Collateral.
“Compliance
Certificate”
has
the
meaning specified in Section 7.1(k)(iii).
“Contingent
Obligation”
means
any direct, indirect, contingent or non-contingent guaranty or obligation
for
the Indebtedness of another Person, except endorsements in the ordinary
course
of business.
“Continuation”
has
the
meaning specified in Section 2.2(b).
“Control
Agreement”
means
a
control agreement, in form and substance satisfactory to the Lender, among
the
Borrower or one of its Subsidiaries, the Lender and the applicable securities
intermediary or depository bank with respect to the applicable Securities
Account and related Investment Property or deposit account, as the case
may
be.
“Convert,”
“Conversion”
and
“Converted”
each
refers to conversion of Advances of one Type into Advances of another Type
pursuant to Section 2.2(c).
“Default”
means
any of the events specified in Section 9.1, whether or not any of the
requirements for the giving of notice, the lapse of time, or both, or any
other
condition, has been satisfied.
-3-
“Dollars”
and
the
sign “$”
means
freely transferable lawful currency of the United States of
America.
“EBEB
Receivable”
means
any Receivable that is on the payment terms specified under the heading
“EBEB
Receivable” on Schedule 7.1(q).
“EBITDA”
means,
for any period, with respect to the Borrower and its Subsidiaries on a
consolidated basis (i) net income (as that term is determined in accordance
with GAAP) for such period, plus (ii) the amount of depreciation and
amortization of fixed and intangible assets deducted in determining such
net
income for such period, plus (iii) all Interest Expense and all fees for
the use of money or the availability of money, including commitment, facility
and like fees and charges upon Indebtedness (including Indebtedness to
the
Lender) paid or payable during such period, without duplication, plus
(iv) all tax liabilities paid or accrued during such period, without
duplication, plus (v) all corporate overhead expenses, less (vi) the
amount of all gains (or plus the amount of all losses) realized during
such
period upon the sale or other disposition of property or assets that are
sold or
otherwise disposed of outside the ordinary course of business that is included
in the calculation of net income for such period.
“Eligible
Inventory”
means
only such Inventory of the Borrower located in or in transit to the United
States consisting of finished goods, which is free from any claim of title
or
Lien in favor of any Person (other than Liens in favor of the Lender) and
with
respect to which no event has occurred and no condition exists which could
reasonably be expected to impair substantially the Borrower’s ability to use or
sell such Inventory in the ordinary course of its business and which the
Lender,
in its sole discretion, shall deem eligible to serve as collateral for
Advances
or Letters of Credit, based on such considerations as the Lender may deem
appropriate from time to time. No Inventory of the Borrower shall be Eligible
Inventory unless the Lender has a perfected first priority Lien thereon.
The
value of Eligible Inventory shall be computed at the lower of cost or market
value. Any Inventory of the Borrower that is not in the control or possession
of
the Borrower and is covered by a warehouse receipt, a xxxx of lading or
other
document of title (other than electronic bills of lading held with TradeCard,
Inc.) shall in no event be Eligible Inventory unless such warehouse receipt,
xxxx of lading or document of title is in the name of or held by the Lender,
provided
that no
Inventory will be Eligible Inventory if such Inventory is shipped to the
Borrower or any of its customers “free-on-board,” direct shipped or drop
shipped, except for Inventory shipped to the Borrower that is in the Borrower’s
possession. No Inventory of the Borrower shall be Eligible Inventory unless
(i) it is located on property owned by the Borrower; or (ii) it is
located on property leased by the Borrower or in a contract warehouse which
is
subject to a Landlord Estoppel and Agreement executed by the mortgagee,
lessor
or contract warehouseman, as the case may be, and segregated or otherwise
separately identifiable from goods of others, if any, stored on the premises
other than Inventory located at the Lackawanna Warehouse. No Inventory
of the
Borrower shall be Eligible Inventory if it is (i) in transit, unless such
Inventory is in transit to the Borrower’s warehouse and is fully insured on
terms satisfactory to the Lender in its sole discretion, with the Lender
being
named as lender loss payee on the policy evidencing such insurance, or
(ii) consigned to or from the Borrower. In addition, and without limitation
of the foregoing, the Lender may treat any Inventory as ineligible
if:
(a) it
is not
owned solely by the Borrower or the Borrower does not have sole and good,
valid
and marketable title thereto; or
-4-
(b) it
is
packing or shipping materials or maintenance supplies; or
(c) it
is
goods returned or rejected by the Borrower’s customers as defective;
or
(d) it
(i) is excess (as so reserved by the Borrower from time to time or as
otherwise determined by the Lender), (ii) is obsolete, defective, damaged,
slow moving (which shall include any Inventory that the Borrower has had
on hand
for at least (A) two years or (B) one year if such Inventory is not
advertised in the Borrower’s current catalog or is not the subject of recent
sales) or unmerchantable, (iii) is samples or inventory on hand which is
used for promotional and other sales activities, (iv) does not otherwise
conform to the representations and warranties contained in the Loan Documents
or
(v) is Store Inventory; or
(e) it
is
repossessed, attached, seized, made subject to a writ or distress warrant,
levied upon or brought within the possession of any receiver, trustee,
custodian
or assignee for the benefit of creditors; or
(f) it
is
goods acquired by the Borrower in or as part of a “bulk” transfer or sale of
assets and such acquisition is not consummated in the ordinary course of
business unless the Borrower has complied with all applicable bulk sales
or bulk
transfer laws in connection with such acquisition; or
(g) it
is the
subject of voluntary recall by the Borrower or a recall by or in cooperation
with the United States Consumer Products Safety Commission or any other
Governmental Authority.
“Eligible
Receivables”
means
and includes only those unpaid Receivables of the Borrower, without duplication,
which (i) arise out of a bona fide sale of goods or rendition of services
of the kind ordinarily sold or rendered by the Borrower in the ordinary
course
of its business, (ii) are made to a Person competent to contract therefor
who is not an Affiliate or an employee of the Borrower and is not controlled
by
an Affiliate of the Borrower, (iii) are not subject to renegotiation or
redating, (iv) are free and clear of any Lien in favor of any Person other
than Liens in favor of the Lender and Liens permitted under Section 7.2(i),
(v) mature as stated in the invoice or other supporting data covering such
sale or services, (vi) conform to the Borrower’s customary historical
practices and (vii) are denominated in Dollars or Canadian dollars. If any
Receivable is denominated in Canadian dollars, such Receivable shall be
valued
in Dollars using the prevailing currency conversion rate on the applicable
date
for the purposes hereof. No Receivable of the Borrower shall be an Eligible
Receivable (i) unless the Lender has a perfected first priority Lien
thereon, (ii) if it is more than sixty days past its due date in the case
of a Standard Receivable, (iii) it is more than thirty days past its due
date in the case of an EBEB Receivable or (iv) unless the delivery of the
goods or the rendition of the services giving rise to such Receivable has
been
completed. The Lender may treat any Receivable as ineligible if:
(a) any
warranty contained in this Agreement or in any other Loan Document with
respect
to such Receivable or in any assignment or statement of warranties or
representations relating to such Receivable delivered by the Borrower to
the
Lender has been breached or is untrue in any material respect or the Borrower
is
not in compliance with all applicable laws with respect to such Receivable;
or
-5-
(b) the
account debtor or any Affiliate of the account debtor has disputed liability,
has or has asserted a right of setoff or has made any claim with respect
to any
other Receivable due from such account debtor or Affiliate to the Borrower,
to
the extent of the amount of such dispute or claim, or the amount of such
actual
or asserted right of setoff, as the case may be; or
(c) the
account debtor or any of its assets or any Affiliate of the account debtor
or
any of its assets is the subject of an Insolvency Event or, in the sole
discretion of the Lender, is likely to become the subject of an Insolvency
Event, unless such account debtor or Affiliate has been provided with a
debtor
in possession credit facility pursuant to Section 364 of the Bankruptcy
Code or a similar arrangement reasonably acceptable to the Lender;
or
(d) the
account debtor or any Affiliate of the account debtor has called a meeting
of
its creditors to obtain any general financial accommodation; or
(e) the
account debtor is also a supplier to or creditor of the Borrower, to the
extent
of the aggregate amount owed by the Borrower to the account debtor;
or
(f) the
sale
or rendition of services is to an account debtor outside the United States
of
America or Canada, unless it is on letter of credit, banker’s acceptance or
other terms acceptable to the Lender; or
(g) fifty
percent (50%) or more of the aggregate balance of the accounts of any account
debtor and its Affiliates to the Borrower are unpaid more than sixty days
past
their due dates, in the case of Standard Receivables, or thirty days past
their
due dates, in the case of EBEB Receivables; or
(h) the
account debtor is the United States of America or any department, agency
or
instrumentality thereof, unless the Borrower assigns its right to payment
under
such Receivable to the Lender as collateral hereunder in full compliance
with
(including, without limitation, the filing of a written notice of the assignment
and a copy of the assignment with, and receipt of acknowledgment thereof
by, the
appropriate contracting and disbursing offices pursuant to) the Assignment
of
Claims Act of 1940, as amended (31 U.S.C. § 3727; 41 U.S.C. § 15);
or
(i) the
Lender believes, in its sole discretion, that collection of such Receivable
is
insecure or that such Receivable may not be paid by reason of the account
debtor’s inability or unwillingness to pay.
-6-
“Environmental
Laws”
means
all federal, state and local statutes, laws (including common or case law),
rulings, regulations or governmental, administrative or judicial policies,
directives, orders or interpretations applicable to the business or property
of
a Person relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water,
land
surface or subsurface strata) including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of any
Hazardous Materials.
“Equipment”
means
all machinery, equipment, furniture, fixtures, leasehold improvements,
conveyors, tools, materials, storage and handling equipment, hydraulic
presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, embedded computer programs and
supporting information, printers, keyboards, screens, peripherals and input
or
output devices, molds, dies, stamps, and other equipment of every kind
and
nature and wherever situated now or hereafter owned by a Person or in which
a
Person may have any interest as lessee or otherwise (to the extent of such
interest), together with all additions and accessions thereto, all replacements
and all accessories and parts therefor, all manuals, blueprints, know-how,
warranties and records in connection therewith and all rights against suppliers,
warrantors, manufacturers, and sellers or others in connection therewith,
together with all substitutes for any of the foregoing.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000
et seq., amendments thereto, successor statutes, and regulations or guidelines
promulgated thereunder.
“ERISA
Affiliate”
means
any entity required to be aggregated with the Borrower under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code.
“Event
of Default”
means
the occurrence of any of the events specified in Section 9.1.
“Excess
Availability”
means
the difference between (i) the lesser of (A) the Borrowing Base and
(B) the Maximum Amount of the Facility and (ii) the sum of
(A) the aggregate outstanding amount of the Loans and (B) the
aggregate undrawn amount available under the Letters of Credit.
“Existing
Lender”
means
Citibank, N.A., as successor-by-merger to Citibank, F.S.B.
“Expiration
Date”
means
the earlier of (i) December 21, 2008 and (ii) the date of
termination of the Lender’s obligations to make Loans pursuant to the terms
hereof.
“Federal
Reserve Board”
means
the Board of Governors of the Federal Reserve System or any Person succeeding
to
the functions thereof.
“Financial
Covenants”
means
the covenants set forth in Article VIII.
-7-
“Financial
Statements”
means,
with respect to a Loan Party or the Parent, the balance sheets, profit
and loss
statements, statements of cash flow, and statements of changes in intercompany
accounts, if any, of such Loan Party or the Parent for the period specified,
prepared in accordance with GAAP and consistent with prior practices and,
except
in the case of annual audited Financial Statements, a comparison in reasonable
detail to (i) the projected balance sheets, profit and loss statements,
statements of cash flow and statements of changes in intercompany accounts
set
forth in the Business Plan for the same year-to-date and month-to-date
periods
and (ii) the balance sheets, profit and loss statements, statements of cash
flow, and statements of changes in intercompany accounts for the same
year-to-date and month-to-date periods of the immediately preceding
year.
“Fixed
Charge Coverage Ratio”
means
(without duplication), for any period, with respect to the Borrower and
its
Subsidiaries on a consolidated basis (except in the case of clause (Y)(iv)
hereof), as of the date of determination thereof, the ratio of (X) EBITDA
for such period to (Y) (i) all principal amounts of Indebtedness (including
Indebtedness to the Lender to the extent such amounts may not be reborrowed
as
provided by this Agreement) paid or payable during such period, plus
(ii) all Interest Expense and all fees for the use of money or the
availability of money, including commitment, facility and like fees and
charges
upon Indebtedness (including Indebtedness to the Lender) paid or payable
during
such period, without duplication, plus (iii) without limitation of the
restrictions specified in Section 7.2(h), all loans and Investments made or
required to be made with respect to any Person during such period (including,
without limitation, intercompany loans and Investments), plus (iv) without
limitation of the restrictions specified in Section 7.2(h) and (j), all
cash dividends, stock repurchases or other distributions paid or payable
in
cash, all cash withdrawals made, and all Affiliate’s employees’ salaries,
management fees, and cash corporate overhead expenses paid or payable in
cash,
in each case during such period, plus (v) all Capital Expenditures paid or
payable during such period other than Capital Expenditures financed with
the
proceeds of Indebtedness (other than proceeds of Loans), plus (vi) all tax
liabilities paid or accrued during such period, without
duplication.
“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.
“General
Intangibles”
means
all present and future general intangibles as defined in the Code including,
without limitation, documents, certificates, patents, patent applications,
copyrights (registered and unregistered), licenses, permits, franchise
rights,
authorizations, customer and supplier lists, rights of indemnification,
contribution and subrogation, leases, computer tapes, programs, discs and
software, trade secrets, computer service contracts, trademarks, trade
names,
service marks, service names, domain names, logos, goodwill, deposits,
causes of
action (including, without limitation, commercial tort claims), choses
in
action, judgments, designs, blueprints, plans, know-how, drafts, acceptances,
letters of credit, book accounts, deposit and other accounts and all money,
balances, credits, deposits or other financial assets therein or represented
thereby, credits and reserves and all forms of obligations whatsoever owing,
instruments, documents of title, leasehold rights in any goods, and books,
ledgers, files and records with respect to any collateral or
security.
-8-
“Governing
Documents”
means,
with respect to any Person, the certificate of incorporation and bylaws
or
similar organizational documents of such Person.
“Governmental
Authority”
means
any nation or government, any state or other political subdivision thereof
or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions thereof or pertaining thereto.
“Guarantor”
means
Grand Toys International, Inc., a Nevada corporation.
“Guaranty”
means
the guaranty by the Guarantor in favor of the Lender, substantially in
the form
of Exhibit B, as amended, supplemented or otherwise modified from time to
time.
“Hazardous
Materials”
means
any and all pollutants, contaminants and toxic, caustic, radioactive and
hazardous materials, substances and wastes including, without limitation,
petroleum or petroleum distillates, asbestos or urea formaldehyde foam
insulation or asbestos-containing materials, whether or not friable,
polychlorinated biphenyls, radon gas, infectious or medical wastes and
all other
substances or wastes of any nature that are regulated under any Environmental
Laws.
“Hedging
Agreement”
means
any interest rate protection agreement, foreign currency exchange agreement,
commodity price protection agreement or other interest or currency exchange
rate
or commodity price hedging agreement.
“Indebtedness”
means,
with respect to any Person, as of the date of determination thereof (without
duplication of the same obligation under any other clause hereof), (i) all
obligations of such Person for borrowed money of any kind or nature, including
funded and unfunded debt, (ii) all obligations of such Person under Hedging
Agreements (including, without limitation, all payments such Person would
have
to make in the event of an early termination of a Hedging Agreement calculated
as of the date Indebtedness of such Person is being determined hereunder)
or
arrangements therefor, regardless of whether the same is evidenced by any
note,
debenture, bond or other instrument, (iii) all obligations of such Person
to pay the deferred purchase price of property or services (other than
current
trade accounts payable under normal trade terms and accrued expenses and
which
are incurred in the ordinary course of business that are not overdue for
a
period greater than six months or that are contested in good faith by
appropriate proceedings), (iv) all obligations of such Person to acquire or
for the acquisition or use of any fixed asset, including Capitalized Lease
Obligations (other than, in any such case, any portion thereof representing
interest or deemed interest or payments in respect of taxes, insurance,
maintenance or service), or improvements which are payable over a period
longer
than one year, regardless of the term thereof or the Person or Persons
to whom
the same are payable, (v) the then outstanding amount of withdrawal or
termination liability incurred under ERISA, (vi) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing
right
to be secured) a Lien on any asset of such Person whether or not the
Indebtedness is assumed by such Person, (vii) all Indebtedness of others to
the extent guaranteed by such Person, (viii) all obligations of such Person
created or arising under any conditional sale or other title retention
agreement
with respect to property acquired by such Person (even though the rights
and
remedies of the seller or lender under such agreements in the event of
default
are limited to repossession or sale of such property), (ix) all obligations
or such Person to purchase, redeem, retire, defease or otherwise acquire
for
value any Interests of such Person, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends and (x) all reimbursement or other
obligations of such Person in respect of letters of credit, bankers acceptances,
surety bonds, performance bonds or similar instruments issued or accepted
by
banks or other financial institutions for the account of such Person, whether
or
not matured.
-9-
“Insolvency
Event”
means,
with respect to any Person, the occurrence of any of the following:
(i) such Person shall be adjudicated insolvent or bankrupt or institutes
proceedings to be adjudicated insolvent or bankrupt, or shall generally
fail to
pay or admit in writing its inability to pay its debts as they become due,
(ii) such Person shall seek dissolution or reorganization or the
appointment of a receiver, trustee, custodian or liquidator for it or a
substantial portion of its property, assets or business or to effect a
plan or
other arrangement with its creditors, (iii) such Person shall make a
general assignment for the benefit of its creditors, or consent to or acquiesce
in the appointment of a receiver, trustee, custodian or liquidator for
a
substantial portion of its property, assets or business, (iv) such Person
shall file a voluntary petition under any bankruptcy, insolvency or similar
law,
(v) such Person shall take any corporate or similar act in furtherance of
any of the foregoing, or (vi) such Person, or a substantial portion of its
property, assets or business, shall become the subject of an involuntary
proceeding or petition for (A) its dissolution or reorganization or
(B) the appointment of a receiver, trustee, custodian or liquidator, and
(I) such proceeding shall not be dismissed or stayed within sixty days or
(II) such receiver, trustee, custodian or liquidator shall be appointed;
provided,
however,
that the
Lender shall have no obligation to make any Advance or cause to be issued
any
Letter of Credit during the pendency of any sixty-day period described
in
clause (I).
“Interest
Expense”
means,
for any period, all interest with respect to Indebtedness (including, without
limitation, the interest component of Capitalized Lease Obligations) accrued
or
capitalized during such period (whether or not actually paid during such
period)
determined in accordance with GAAP.
“Interest
Period”
means
the period commencing on the date of a LIBOR Rate Advance and ending one,
two or
three months thereafter; provided,
however,
that
(i) the Borrower may not select any Interest Period that ends after the
Expiration Date; (ii) whenever the last day of an Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business
Day,
except that, if such extension would cause the last day of such Interest
Period
to occur in the next following calendar month, then the last day of such
Interest Period shall occur on the next preceding Business Day; and
(iii) if there is no corresponding date of the month that is one, two or
three months, as the case may be, after the first day of an Interest Period,
such Interest Period shall end on the last Business Day of such first,
second or
third month, as the case may be.
“Interests”
has
the
meaning specified in Section 7.2(j).
“Internal
Revenue Code”
means
the Internal Revenue Code of 1986, any amendments thereto, any successor
statute
and any regulations and guidelines promulgated thereunder.
-10-
“Internal
Revenue Service”
or
“IRS”
means
the United States Internal Revenue Service and any successor
agency.
“Inventory”
means
all present and future goods intended for sale, lease or other disposition
including, without limitation, all raw materials, work in process, finished
goods and other retail inventory, goods in the possession of outside processors
or other third parties, consigned goods (to the extent of the consignee’s
interest therein), materials and supplies of any kind, nature or description
which are or might be used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of any such goods, all documents
of
title or documents representing the same and all records, files and writings
with respect thereto.
“Investment”
in
any
Person means, as of the date of determination thereof, (i) any payment or
contribution, or commitment to make a payment or contribution, by a Person
including, without limitation, property contributed or committed to be
contributed by such Person for or in connection with its acquisition of
any
stock, bonds, notes, debentures, partnership or other ownership interest
or any
other security of the Person in whom such Investment is made or (ii) any
loan, advance or other extension of credit or guaranty of or other surety
obligation for any Indebtedness of such Person in whom the Investment is
made.
In determining the aggregate amount of Investments outstanding at any particular
time, (i) a guaranty (or other surety obligation) shall be valued at not
less than the principal outstanding amount of the primary obligation;
(ii) returns of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution) shall be deducted;
(iii) earnings, whether as dividends, interest or otherwise, shall not be
deducted; and (iv) decreases in the market value shall not be deducted
unless such decreases are computed in accordance with GAAP.
“Investment
Property”
means
all present and future investment property, including without limitation,
all
(i) securities, whether certificated or uncertificated, and including
stocks, bonds, debentures, notes, bills, certificates, warrants, options,
rights
and shares, (ii) security entitlements, (iii) securities accounts,
(iv) commodity contracts, (v) commodity accounts and
(vi) dividends and other distributions in respect of any of the
foregoing.
“Items
of Payment”
means
checks, drafts and other documents and instruments evidencing remittances
in
payment by account debtors to the Borrower.
“Lackawanna
Warehouse”
means
the Borrower’s Property located at 00X Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
00000.
“Landlord
Estoppel and Agreement”
means
a
landlord waiver, mortgagee waiver, bailee letter or similar acknowledgment
of
any lessor, warehouseman or processor in possession of any Collateral or
on
whose property any Collateral is located, substantially in the form of
Exhibit J.
“Letter
of Credit Agreement”
means
the collective reference to any and all agreements from time to time entered
into by the Lender and Citibank, N.A. or another bank acceptable to the
Lender
(each, an “issuing
bank”)
pursuant to which an issuing bank issues Letters of Credit for the account
of
the Borrower in accordance with the terms of this Agreement.
-11-
“Letters
of Credit”
means
all letters of credit issued for the account of the Borrower under
Section 2.9, and all amendments, renewals, extensions or replacements
thereof.
“Liabilities”
of
a
Person as of the date of determination thereof means the liabilities of
such
Person on such date as determined in accordance with GAAP. Liabilities
to
Affiliates of such Person shall be treated as Liabilities except where
eliminated by consolidation in financial statements prepared in accordance
with
GAAP or as otherwise provided herein.
“LIBOR
Rate”
means,
with respect to each Interest Period, the reserve adjusted rate per
annum equal
to
the one, two or three-month London Interbank Offered Rate, as applicable,
that
appears in the “Money Rates” section of The Wall Street Journal on the first day
of such Interest Period; provided,
however,
that if
The Wall Street Journal no longer publishes such one, two or three-month
London
Interbank Offered Rate, reference shall be made to the Dow Xxxxx Market
Service
(formerly Telerate) page 3750 for such London Interbank Offered
Rate.
“LIBOR
Rate Advance”
means
an Advance that bears interest as provided in Section 4.1(b).
“Lien”
means
any lien, claim, charge, pledge, security interest, assignment, hypothecation,
deed of trust, mortgage, lease, conditional sale, retention of title or
other
preferential arrangement having substantially the same economic effect
as any of
the foregoing, whether voluntary or imposed by law.
“Loan
Account”
has
the
meaning specified in Section 2.5.
“Loan
Documents”
means
this Agreement and all documents and instruments to be delivered by the
Borrower
or the Guarantor under or in connection with this Agreement, as each of
the same
may be amended, supplemented or otherwise modified from time to time, including,
without limitation, the Note, the Guaranty, the Lockbox Agreement, the
Letter of
Credit Agreement and any Control Agreement.
“Loan
Party”
means
the Borrower or the Guarantor.
“Loans”
has
the
meaning specified in Section 2.1(a).
“Lockbox”
has
the
meaning specified in Section 2.6(a).
“Lockbox
Agreement”
means
a
lockbox agreement among the Borrower, the Lender and the Lockbox Bank,
in form
and substance satisfactory to the Lender, as amended, supplemented or otherwise
modified from time to time.
“Lockbox
Bank”
means
Citibank, N.A. or any successor or any other bank acceptable to the Lender
to
provide lockbox services under a Lockbox Agreement.
“Lockbox
Effective Date”
means
the date that is sixty days after the Closing Date.
-12-
“Material
Adverse Effect”
means
(i) a material adverse effect on the business, prospects, operations,
results of operations, assets, liabilities or condition (financial or otherwise)
of a Loan Party, (ii) the impairment of (A) a Loan Party’s ability to
perform its obligations under the Loan Documents to which it is a party
or
(B) the ability of the Lender to enforce the Obligations or realize upon
the Collateral or (iii) a material adverse effect on the value of the
Collateral or the amount that the Lender would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in
the
liquidation of the Collateral.
“Material
Contract”
means
any contract or other arrangement to which the Borrower is a party (other
than
the Loan Documents) for which breach, nonperformance, cancellation or failure
to
renew could reasonably be expected to have a Material Adverse Effect. The
Borrower’s distribution agreement with Epoch Company and any other distribution
agreement that comprised more than 10% of the Borrower’s sale revenues in the
previous fiscal year shall be deemed a Material Contract.
“Material
Indebtedness”
means
Indebtedness (other than the Loans), or obligations in respect of one or
more
Hedging Agreements, of either Loan Party in an aggregate principal amount
exceeding $250,000. For purposes of this definition, the “principal amount” of
the obligations of either Loan Party in respect of any Hedging Agreement
at any
time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Loan Party would be required to pay if such Hedging
Agreement were terminated at such time.
“Maximum
Amount of the Facility”
means
Thirteen Million Dollars ($13,000,000).
“Multiemployer
Plan”
means
a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the
Borrower or any ERISA Affiliate has contributed within the past six years
or
with respect to which the Borrower or any ERISA Affiliate may incur any
liability.
“Note”
has
the
meaning specified in Section 2.1(c).
“Notice
of Borrowing”
has
the
meaning specified in Section 2.2(a).
“Notice
of Continuation”
has
the
meaning specified in Section 2.2(b).
“Notice
of Conversion”
has
the
meaning specified in Section 2.2(c).
“Obligations”
means
and includes all loans (including the Loans), advances (including the Advances),
debts, liabilities, obligations, covenants and duties owing by the Loan
Parties
to (i) the Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, which may arise under,
out
of, or in connection with, this Agreement, the Note, the other Loan Documents
or
any other agreement executed in connection herewith or therewith or
(ii) the Existing Lender or any of its Affiliates of any kind or nature,
present or future, whether or not evidenced by any note, guaranty, lease
agreement or other instrument or agreement, whether or not for the payment
of
money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit (including, without limitation,
the Letters of Credit) or payment of any draft drawn or other payment
thereunder, loan, guaranty, indemnification, transaction under any Hedging
Agreement, any agreement for cash management services or in any other manner,
whether direct or indirect (including those acquired by assignment, purchase,
discount or otherwise), whether absolute or contingent, due or to become
due,
now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest (including interest accruing on or after
an
Insolvency Event, whether or not such interest constitutes an allowed claim),
charges, expenses, commitment, facility, closing and collateral management
fees,
letter of credit fees, cash management and other fees, interest, charges,
expenses, fees, attorneys’ fees and disbursements, and any other sum chargeable
to either of the Loan Parties under this Agreement, the Note, the Guaranty,
the
other Loan Documents, any Hedging Agreement, any agreement for cash management
services, any lease agreement or any other agreement executed in connection
herewith or therewith.
-13-
“Operating
Account”
means
the Borrower’s account number 00000000 held with Citibank, N.A.
“Parent”
means
Grand Toys International Limited, a Hong Kong company.
“PBGC”
means
the Pension Benefit Guaranty Corporation and any Person succeeding to the
functions thereof.
“Pension
Plan”
means
a
pension plan (as defined in Section 3(2) of ERISA) subject to Title IV
of ERISA (other than a Multiemployer Plan) which the Borrower or any ERISA
Affiliate sponsors or maintains, or to which it makes, is making, or is
obligated to make contributions, or, in the case of a multiple employer
plan (as
described in Section 4064(a) of ERISA), has made contributions at any time
during the immediately preceding five plan years.
“Permitted
Liens”
means
such of the following as to which no enforcement, collection, execution,
levy or
foreclosure proceeding shall have been commenced and be continuing (unless
such
enforcement, collection, levy or foreclosure is being contested by the
applicable Loan Party in good faith by appropriate proceedings diligently
conducted and for which adequate reserves are being maintained in accordance
with GAAP): (i) Liens for taxes, assessments and other governmental charges
or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen and other like Persons arising by operation
of
law in the ordinary course of business for sums which are not yet due and
payable, (ii) deposits or pledges (other than Liens on Receivables of the
Borrower) to secure the payment of worker’s compensation, unemployment insurance
or other social security benefits or obligations, public or statutory
obligations, surety or appeal bonds, bid or performance bonds, or other
obligations of a like nature incurred in the ordinary course of business,
(iii) zoning restrictions, easements, encroachments, licenses, restrictions
or covenants on the use of any Property which do not materially impair
either
the use of such Property in the operation of the business of the applicable
Loan
Party or the value of such Property, (iv) inchoate Liens arising under
ERISA to secure current service pension liabilities as they are incurred
under
the provisions of employee benefit plans from time to time in effect, and
(v) rights of general application reserved to or vested in any Governmental
Authority to control or regulate any Property, or to use any Property in
a
manner which does not materially impair the use of such Property for the
purposes for which it is held by the applicable Loan Party, provided
that the
foregoing Liens under clauses (i) through (v) hereof do not secure
liabilities in excess of $200,000 in the aggregate at any time, and provided,
further,
that
Permitted Liens shall not include any Lien securing Indebtedness.
-14-
“Person”
means
any individual, sole proprietorship, partnership, limited liability company,
joint venture, trust, unincorporated organization, joint stock company,
association, corporation, institution, entity, party or government (including
any division, agency or department thereof) or any other legal entity,
whether
acting in an individual, fiduciary or other capacity, and, as applicable,
the
successors, heirs and assigns of each.
“Plan”
means
any employee benefit plan, as defined in Section 3(3) of ERISA, maintained
or contributed to by the Borrower or any ERISA Affiliate or with respect
to
which any of them may incur liability even if such plan is not covered
by ERISA
pursuant to Section 4(b)(4) thereof.
“Prohibited
Transaction”
has
the
meaning specified in Section 6.1(x)(v).
“Property”
means
any real property owned, leased or controlled by the Borrower or any Subsidiary
of the Borrower.
“Qualification”
or
“Qualified”
means,
with respect to any report of independent public accountants covering Financial
Statements, a material qualification to such report (i) resulting from a
limitation on the scope of examination of such Financial Statements or
the
underlying data with respect to the Borrower or the Guarantor, (ii) as to
the capability of the Borrower or the Guarantor to continue operations
as a
going concern or (iii) which could be eliminated by changes in Financial
Statements or notes thereto with respect to the Borrower or the Guarantor
covered by such report (such as by the creation of or increase in a reserve
or a
decrease in the carrying value of assets) and which if so eliminated by
the
making of any such change and after giving effect thereto would result
in a
Default or an Event of Default.
“Receivables”
means
all present and future accounts, contracts, contract rights, promissory
notes,
chattel paper, tax refunds, rights to receive tax refunds, rights to receive
payments under bonds and insurance policies (including, without limitation,
claims under health care insurance policies), insurance proceeds, royalties,
claims against third parties of every kind or nature, and rights to receive
payments under letters of credit, together with all supporting obligations
and
all right, title, security and guaranties with respect to any of the foregoing,
including any right of stoppage in transit.
“Reportable
Event”
means
any of the events described in Section 4043 of ERISA and the regulations
thereunder, other than a reportable event for which the thirty-day notice
requirement to the PBGC has been waived.
“Requirement
of Law”
means
(i) the Governing Documents, (ii) any law, treaty, rule, regulation,
order or determination of an arbitrator, court or other Governmental Authority
or (iii) any franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, or other right or approval binding
on a
Loan Party or any of its property.
-15-
“Responsible
Officer”
means
the President, the Chief Executive Officer, the chief financial officer
or the
Chief Operating Officer of a Loan Party.
“Securities
Account”
has
the
meaning specified in Section 8-501 of the Code.
“Security
Documents”
means
this Agreement, the Lockbox Agreement, any Control Agreement and any other
agreement delivered in connection herewith which purports to xxxxx x Xxxx
in
favor of the Lender to secure all or any of the Obligations.
“Solvent”
means,
when used with respect to any Person, that as of the date as to which such
Person’s solvency is to be measured:
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(i)
|
the
fair saleable value of its assets is in excess of (A) the total
amount of its liabilities (including contingent, subordinated,
absolute,
fixed, matured, unmatured, liquidated and unliquidated liabilities)
and
(B) the amount that will be required to pay the probable liability
of
such Person on its debts as such debts become absolute and
matured;
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(ii)
|
it
has sufficient capital to conduct its business;
and
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(iii)
|
it
is able to meet its debts as they
mature.
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“Standard
Receivable”
means
any Receivable that is on the payment terms specified under the heading
“Standard Receivable” on Schedule 7.1(q).
“Store
Inventory”
means
damaged or defective Inventory in the possession of the Borrower.
“Subsidiary”
means,
as to any Person, a corporation or other entity in which that Person directly
or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors
or
other governing body, or to appoint the majority of the managers of, such
corporation or other entity.
“Tangible
Net Worth”
means,
as to the Borrower and its Subsidiaries on a combined basis, the amount
by which
the sum of the total assets (other than goodwill, customer lists, organizational
expenses, covenants not to compete, patents, copyrights, trademarks, research
and development costs, training costs, treasury stock, deferred tax assets,
unamortized debt discount and deferred charges, Indebtedness or Receivables
owed
to the Borrower or its Subsidiaries by Affiliates and all other intangible
assets) of the Borrower and its Subsidiaries exceeds the total Liabilities
of
the Borrower and its Subsidiaries.
“Termination
Event”
means
(i) a Reportable Event with respect to any Pension Plan or Multiemployer
Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Pension Plan during a plan year in which it was a “substantial employer” (as
defined in Section 4001(a)(2) of ERISA); (iii) the providing of notice
of intent to terminate a Pension Plan in a distress termination (as described
in
Section 4041(c) of ERISA); (iv) the institution by the PBGC of
proceedings to terminate a Pension Plan or Multiemployer Plan; (v) any
event or condition that is reasonably likely (A) to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan, or (B) to
result in termination of a Multiemployer Plan pursuant to Section 4041A of
ERISA; or (vi) the partial or complete withdrawal, within the meaning of
Sections 4203 and 4205 of ERISA, of the Borrower or any ERISA Affiliate
from a Multiemployer Plan.
-16-
“Type”
means
a
Base Rate Advance or a LIBOR Rate Advance.
SECTION
1.2 Accounting
Terms and Determinations.
Unless
otherwise defined or specified herein, all accounting terms used in this
Agreement shall be construed in accordance with GAAP, applied on a basis
consistent in all material respects with the Financial Statements delivered
to
the Lender on or before the Closing Date. All accounting determinations
for
purposes of determining compliance with Article VIII shall be made in
accordance with GAAP as in effect on the Closing Date and applied on a
basis
consistent in all material respects with the audited Financial Statements
delivered to the Lender on or before the Closing Date. The Financial Statements
required to be delivered hereunder from and after the Closing Date, and
all
financial records, shall be maintained in accordance with GAAP. If GAAP
shall
change from the basis used in preparing the audited Financial Statements
delivered to the Lender on or before the Closing Date, the Compliance
Certificates required to be delivered pursuant to Section 7.1 shall include
calculations setting forth the adjustments necessary to demonstrate how
the
Borrower is in compliance with the Financial Covenants based upon GAAP
as in
effect on the Closing Date.
SECTION
1.3 Other
Terms; Headings.
Unless
otherwise defined herein, terms used herein that are defined in the Uniform
Commercial Code, from time to time in effect in the State of New York (the
“Code”), shall have the meanings given in the Code. An Event of Default shall
“continue” or be “continuing” unless and until such Event of Default has been
waived or cured within any grace period specified therefor under
Section 9.1. The headings and the Table of Contents are for convenience
only and shall not affect the meaning or construction of any provision
of this
Agreement. Whenever the context may require, any pronoun shall include
the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and
effect as the word “shall”. Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document
herein
or in any other Loan Document shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented
or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein or in any other Loan Document), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”,
and words of similar import, shall be construed to refer to this Agreement
in
its entirety and not to any particular provision hereof, (iv) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules
to,
this Agreement and (v) the words “asset” and “property” shall be construed
to have the same meaning and effect and to refer to any and all tangible
and
intangible assets and properties, including cash, securities, accounts
and
contract rights.
-17-
ARTICLE
II
THE
CREDIT FACILITIES
SECTION
2.1 The
Loans.
(a) The
Lender agrees, subject to Section 2.4 and the other terms and conditions of
this Agreement, to make revolving credit loans (the “Loans”) to the Borrower,
from time to time from the Closing Date to but excluding the Expiration
Date, at
the Borrower’s request to the Lender, in an aggregate principal amount at any
one time outstanding which, when combined with the aggregate undrawn amount
of
all unexpired Letters of Credit, does not exceed (i) 85% of Eligible
Receivables plus (ii) 50% of Eligible Inventory located in the United
States plus (iii) 40% of Eligible Inventory in transit to the United States
(the “Borrowing Base”), provided that, unless the Borrower has delivered an
executed Landlord Estoppel and Agreement to the Lender with respect to
the
Lackawanna Warehouse, there shall be a reserve against the Borrowing Base
in an
amount equal to three months’ of the Borrower’s lease or rent payments with
respect to such warehouse; and provided, however, that, in addition and
after
giving effect to the advance rates and other limitations contained herein,
in no
event shall the aggregate amount of the Loans and the Letters of Credit
outstanding at any time (x) in respect of Eligible Inventory exceed
$4,500,000, (y) in respect of Eligible Receivables under which account
debtors are located in Canada exceed $2,000,000 USD or (z) exceed the
Maximum Amount of the Facility.
(b) The
Lender, at any time in the exercise of its sole discretion, may
(i) establish and increase or decrease reserves against Eligible
Receivables and Eligible Inventory, (ii) reduce the advance rates against
Eligible Receivables and Eligible Inventory, or thereafter increase such
advance
rates to any level equal to or below the advance rates in effect on the
Closing
Date and (iii) impose additional restrictions (or eliminate the same) to
the standards of eligibility set forth in the definitions of “Eligible
Receivables” and “Eligible Inventory.”
(c) The
Loans
shall be evidenced by a promissory note payable to the order of the Lender,
substantially in the form of Exhibit A (as amended, supplemented or
otherwise modified from time to time, the “Note”), executed by the Borrower and
delivered to the Lender on the Closing Date. The Note shall be in a stated
maximum principal amount equal to the Maximum Amount of the
Facility.
(d) The
Loans
shall be payable in full, with all interest accrued thereon, on the Expiration
Date. The Borrower may borrow, repay and reborrow Loans, in whole or in
part, in
accordance with the terms hereof.
SECTION
2.2 Procedure
for Borrowing; Notices of Borrowing; Notices of Continuation; Notices of
Conversion.
(a) Except
as
specified in Section 2.2(f), each borrowing of a Loan (each, a “Borrowing”)
shall be made on notice, given not later than 12:00 Noon (New York time)
on the
third Business Day prior to the date of the proposed Borrowing in the case
of a
LIBOR Rate Advance, and not later than 12:00 Noon (New York time) on the
date of
the proposed Borrowing in the case of a Base Rate Advance, by the Borrower
to
the Lender. Each such notice of a Borrowing shall be by telephone, confirmed
immediately in writing (by telecopier or otherwise as permitted hereunder),
substantially in the form of Exhibit D (a “Notice of Borrowing”),
specifying therein the requested (i) date of such Borrowing, (ii) Type
of Advance comprising such Borrowing, (iii) principal amount of such
Borrowing and (iv) Interest Period, in the case of a LIBOR Rate
Advance.
-18-
(b) With
respect to any Borrowing consisting of a LIBOR Rate Advance, the Borrower
may,
subject to the provisions of Section 2.2(d) and so long as all the
conditions set forth in Article V have been fulfilled, elect to maintain
such Borrowing or any portion thereof as a LIBOR Rate Advance by selecting
a new
Interest Period for such Borrowing, which new Interest Period shall commence
on
the last day of the Interest Period then ending. Each selection of a new
Interest Period (a “Continuation”) shall be made by notice given not later than
12:00 Noon (New York time) on the third Business Day prior to the date
of any
such Continuation by the Borrower to the Lender. Such notice by the Borrower
of
a Continuation shall be by telephone, confirmed immediately in writing
(by
telecopier or otherwise as permitted hereunder), substantially in the form
of
Exhibit E (a “Notice of Continuation”), specifying whether the Advance
subject to the requested Continuation comprises part (or all) of the Loans
and
the requested (i) date of such Continuation, (ii) Interest Period and
(iii) aggregate amount of the Advance subject to such Continuation, which
shall comply with all limitations on Loans hereunder. Unless, on or before
12:00
Noon (New York time) of the third Business Day prior to the expiration
of an
Interest Period, the Lender shall have received a Notice of Continuation
from
the Borrower for the entire Borrowing consisting of the LIBOR Rate Advance
outstanding during such Interest Period, any amount of such Advance comprising
such Borrowing remaining outstanding at the end of such Interest Period
(or any
unpaid portion of such Advance not covered by a timely Notice of Continuation)
shall, upon the expiration of such Interest Period, be Converted to a Base
Rate
Advance.
(c) The
Borrower may on any Business Day upon notice (each such notice, a “Notice
of Conversion”) given to the Lender, and subject to the provisions of
Section 2.2(d), Convert the entire amount of or a portion of an Advance of
one Type into an Advance of another Type; provided,
however,
that any
Conversion of a LIBOR Rate Advance into a Base Rate Advance shall be made
on,
and only on, the last day of an Interest Period for such LIBOR Rate Advance.
Each such Notice of Conversion shall be given not later than 12:00 Noon
(New
York time) on the Business Day prior to the date of any proposed Conversion
into
a Base Rate Advance and on the third Business Day prior to the date of
any
proposed Conversion into a LIBOR Rate Advance. Subject to the restrictions
specified above, each Notice of Conversion shall be by telephone, confirmed
immediately in writing (by telecopier or otherwise as permitted hereunder),
substantially in the form of Exhibit F, specifying (i) the requested
date of such Conversion, (ii) the Type of Advance to be Converted,
(iii) the requested Interest Period, in the case of a Conversion into a
LIBOR Rate Advance, and (iv) the amount of such Advance to be Converted and
whether such amount comprises part (or all) of the Loans. Each Conversion
shall
be in an aggregate amount not less than $500,000 or an integral multiple
of
$50,000 in excess thereof.
-19-
(d) Anything
in subsection (b) or (c) above to the contrary
notwithstanding,
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(i)
|
if,
at least one Business Day before the date of any requested LIBOR
Rate
Advance, the introduction of or any change in or in the interpretation
of
any law or regulation makes it unlawful, or any central bank
or other
Governmental Authority asserts that it is unlawful, for the Lender
or any
of its Affiliates to perform its obligations hereunder to make
a LIBOR
Rate Advance or to fund or maintain a LIBOR Rate Advance hereunder
(including in the case of a Continuation or a Conversion), the
Lender
shall promptly give written notice of such circumstance, and
the right of
the Borrower to select a LIBOR Rate Advance for such Borrowing
or any
subsequent Borrowing (including a Continuation or a Conversion)
shall be
suspended until the circumstances causing such suspension no
longer exist,
and any Advance comprising such requested Borrowing shall be
a Base Rate
Advance;
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(ii)
|
if,
at least one Business Day before the first day of any Interest
Period, the
Lender is unable to determine the LIBOR Rate for LIBOR Rate Advances
comprising any requested Borrowing, Continuation or Conversion,
the Lender
shall promptly give written notice of such circumstance to the
Borrower,
and the right of the Borrower to select or maintain LIBOR Rate
Advances
for such Borrowing or any subsequent Borrowing shall be suspended
until
the Lender shall notify the Borrower that the circumstances causing
such
suspension no longer exist, and any Advance comprising such Borrowing
shall be a Base Rate Advance;
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(iii)
|
if
the Lender shall, at least one Business Day before the date of
any
requested Borrowing or Continuation of, or Conversion into, a
LIBOR Rate
Advance, notify the Borrower that the LIBOR Rate for Advances
comprising
such Borrowing, Continuation or Conversion will not adequately
reflect the
cost to the Lender of making or funding Advances for such Borrowing,
the
right of the Borrower to select LIBOR Rate Advances shall be
suspended
until the Lender shall notify the Borrower that the circumstances
causing
such suspension no longer exist, and any Advance comprising such
Borrowing
shall be a Base Rate Advance;
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(iv)
|
there
shall not be outstanding at any time more than five Borrowings
which
consist of LIBOR Rate Advances;
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-20-
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(v)
|
each
Borrowing which consists of LIBOR Rate Advances shall be in an
amount
equal to $500,000 or a whole multiple of $50,000 in excess thereof;
and
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(vi)
|
if
a Default has occurred and is continuing, no LIBOR Rate Advances
may be
borrowed or continued as such and no Base Rate Advance may be
Converted
into a LIBOR Rate Advance.
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(e) Each
Notice of Borrowing, Notice of Continuation and Notice of Conversion shall
be
irrevocable and binding on the Borrower. The Borrower agrees to indemnify
the
Lender against any loss, cost or expense incurred by the Lender as a result
of
(i) default by the Borrower in making a Borrowing of, Conversion into or
Continuation of a LIBOR Rate Advance after the Borrower has given notice
requesting the same, (ii) default by the Borrower in payment when due of
the principal amount of or interest on any LIBOR Rate Advance or (iii) the
making of a payment or prepayment of a LIBOR Rate Advance on a day which
is not
the last day of an Interest Period with respect thereto, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds
acquired by the Lender to fund such Advance.
(f) Anything
in subsection (a) above notwithstanding, the Lender agrees, commencing on
the date on which the Borrower has established a controlled disbursement
account
with Citibank, N.A. or one of its Affiliates, subject to Section 2.4,
Article V and the other terms and conditions of this Agreement, to make
Loans consisting of Base Rate Advances in such amounts and on such dates
as
shall be necessary to fund, on any Business Day, payment of all checks,
drafts,
documents and instruments presented for payment against such controlled
disbursement account.
SECTION
2.3 Application
of Proceeds.
The
proceeds of the Loans shall be used by the Borrower to refinance existing
Indebtedness, for its general corporate and working capital purposes and
for
expenses incurred by the Borrower in connection herewith.
SECTION
2.4 Maximum
Amount of the Facility; Mandatory Prepayments; Optional
Prepayments.
(a) In
no
event shall the sum of the aggregate outstanding principal balances of
the Loans
and the aggregate undrawn amount of all unexpired Letters of Credit exceed
the
lesser of (i) the Borrowing Base and (ii) the Maximum Amount of the
Facility.
(b) In
addition to any prepayment required as a result of an Event of Default
hereunder, the Loans shall be subject to mandatory prepayment as
follows:
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(i)
|
immediately
upon discovery by or notice to the Borrower that any of the lending
limits
set forth in Section 2.1(a) or Section 2.4(a) has been exceeded,
the Borrower shall pay the Lender an amount sufficient to reduce
the
outstanding balances of the Loans, Collateralize outstanding
Letters of
Credit, or any combination thereof, to the applicable maximum
allowed
amount, and such amount shall become due and payable by the Borrower
without the necessity of a demand by the Lender;
and
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-21-
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(ii)
|
the
entire outstanding principal amount of the Loans, together with
all
accrued and unpaid interest thereon and all fees, costs and expenses
payable by the Borrower hereunder, shall become due and payable
on the
Expiration Date.
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(c) The
Borrower may, at any time and from time to time, prepay the Loans, in whole
or
in part (subject, in the case of the prepayment in full of all the Loans
and the
termination of the Lender’s obligation to make Loans and to cause Letters of
Credit to be issued, to the additional requirements of Section 4.5) upon at
least two Business Days’ irrevocable notice by the Borrower to the Lender in the
case of Base Rate Advances, and four Business Days’ irrevocable notice by the
Borrower to the Lender in the case of LIBOR Rate Advances, specifying the
date
and amount of prepayment, provided
that
LIBOR Rate Advances may not be optionally prepaid other than on the last
day of
any Interest Period with respect thereto. If such notice is given, the
Borrower
shall make such prepayment, and the payment amount specified in such notice
shall be due and payable, on the date specified therein accompanied by
the
amount of accrued and unpaid interest thereon.
SECTION
2.5 Maintenance
of Loan Account; Statements of Account.
The
Lender shall maintain an account on its books in the name of the Borrower
(the
“Loan Account”) in which the Borrower will be charged with all Loans and
Advances made by the Lender to the Borrower or for the Borrower’s account,
including the Loans, interest, fees, expenses and any other Obligations.
The
Loan Account will be credited with all amounts received by the Lender from
the
Borrower or for the Borrower’s account, including, as set forth below, all
amounts received from the Lockbox Bank. The Lender shall send the Borrower
a
monthly statement reflecting the activity in the Loan Account. Each such
statement shall be an account stated and shall be final, conclusive and
binding
on the Borrower, absent manifest error.
SECTION
2.6 Collection
of Receivables.
(a) Commencing
on the Lockbox Effective Date, the Borrower shall maintain, pursuant to
(i) the Lockbox Agreement, a lockbox in the Borrower’s name subject to the
security interest of the Lender (the “Lockbox”) and (ii) a Control
Agreement, a blocked account in the name of the Borrower subject to the
security
interest of the Lender into which Items of Payment shall be deposited.
Items of
Payment received from the Lockbox will be processed in accordance with
the
Lockbox Agreement. The Borrower shall instruct its account debtors located
in
the United States such that, on and subsequent to the Lockbox Effective
Date,
such account debtors shall remit all Items of Payment to the
Lockbox.
(b) Commencing
on the Lockbox Effective Date and notwithstanding the obligation of the
Borrower
to instruct its account debtors located in the United States to remit all
Items
of Payment to the Lockbox, if the Borrower receives any Items of Payment
or any
other Collections of any kind from any account debtor located in the United
States, the Borrower shall deposit, within one Business Day of its receipt
thereof, such Items of Payment and all other Collections and other cash,
checks
or other funds from time to time received by the Borrower from any source,
into
a deposit account of the Borrower subject to a Control Agreement. The Borrower
will at all times (i) not commingle any Items of Payment received by it
with any of its other funds or property, but will segregate them from its
other
assets and will hold them in trust and for the account and as the property
of
the Lender until depositing them in a deposit account subject to a Control
Agreement and (ii) endorse any Item of Payment received by it for deposit
into such a deposit account.
-22-
(c) The
Borrower shall, by the close of business on each Business Day commencing
on the
Lockbox Effective Date, cause each bank party to a Control Agreement (other
than
any bank holding a Canadian Receivables Account) to wire transfer to an
account
designated by the Lender all amounts on deposit at such time, and the Lender
shall apply any and all such amounts to the Obligations in any order as
the
Lender may elect in its sole and absolute discretion and remit any remainder
to
the Operating Account, provided
that
such banks may from time to time withdraw from such accounts their customary
service fees, returned item amounts and other expenses, to the extent permitted
to be withdrawn under the applicable Control Agreement.
(d) Until
the
Lockbox Effective Date, the Borrower shall deposit all Items of Payment
into the
Operating Account.
(e) Commencing
on the Lockbox Effective Date, the Borrower shall instruct all of its account
debtors located in Canada (each a “Canadian Account Debtor”) to remit all Items
of Payment to the Canadian Receivables Account. Commencing on the Closing
Date,
if the Borrower receives any Items of Payment or any other Collections
of any
kind from any Canadian Account Debtor, the Borrower shall deposit, within
one
Business Day of its receipt thereof, such Items of Payment and all other
Collections and other cash, checks or other funds from time to time received
by
the Borrower from any Canadian Account Debtor, into the Canadian Receivables
Account. If the amount on deposit in the Canadian Receivables Account exceeds
CND$200,000 at any time after the Lockbox Effective Date, the Borrower
shall
immediately transfer the amount of such excess (after converting such funds
into
Dollars) to a deposit account of the Borrower subject to a Control Agreement
as
specified in Section 2.6(b). In addition, if an Event of Default has
occurred and is continuing at any time after the Lockbox Effective Date,
the
Borrower shall transfer any amounts on deposit in the Canadian Receivables
Account (after converting such funds into Dollars) to a deposit account
of the
Borrower subject to a Control Agreement as specified in Section 2.6(b) by
the close of business on each Business Day.
SECTION
2.7 Term.
The
term of this Agreement shall be for a period from the Closing Date to but
not
including December 22, 2008 unless sooner terminated in accordance with the
terms of this Agreement. Notwithstanding the foregoing, the Borrower shall
have
no right to terminate this Agreement at any time that any principal of
or
interest on any of the Loans is outstanding, except upon prepayment of
all
Obligations and the satisfaction of all other conditions set forth in the
Loan
Documents with respect thereto.
-23-
SECTION
2.8 Payment
Procedures.
(a) The
Borrower hereby authorizes the Lender to charge the Loan Account with the
amount
of all principal, interest, fees, expenses and other payments to be made
hereunder and under the other Loan Documents. The Lender may, but shall
not be
obligated to, discharge the Borrower’s payment obligations hereunder by so
charging the Loan Account.
(b) All
payments to be made by the Borrower hereunder and under the Note, whether
on
account of principal, interest, fees or otherwise, shall be made without
setoff,
deduction or counterclaim and shall be made prior to 2:00 p.m. (New York
time) on the due date thereof to the Lender.
(c) 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
(except as specified in clause (ii) of the definition of Interest Period)
and such extension of time shall be included in the computation of the
amount of
interest due hereunder.
SECTION
2.9 Letters
of Credit.
(a) The
Lender, upon the request of the Borrower, shall cause Citibank, N.A. or
another
bank acceptable to the Lender to issue for the account of the Borrower
Letters
of Credit of a tenor and containing terms acceptable to the Lender and
the
issuer of such Letter of Credit, in a maximum aggregate face amount outstanding
at any time not to exceed Two Million Dollars ($2,000,000), provided
that
(i) the Lender shall have no obligation to cause to be issued any Letter of
Credit with an expiration date after the Expiration Date and (ii) if a
Letter of Credit is issued with an expiration date after the Expiration
Date,
the Borrower shall Collateralize such Letter of Credit in full immediately.
The
term of any Letter of Credit shall not exceed three hundred sixty days
from the
date of issuance, subject to renewal in accordance with the terms thereof,
but
in no event to a date beyond the Expiration Date. All Letters of Credit
shall be
subject to the limitations set forth in Section 2.4, and a sum equal to the
aggregate amount of all outstanding Letters of Credit shall be included
in
calculating outstanding amounts for purposes of determining compliance
with
Section 2.4. Upon each drawing or payment under a Letter of Credit, the
amount of such drawing or payment for all purposes under this Agreement
shall
become and be deemed to be, without any further action on the part of any
Person, a Loan made by the Lender on the date of such drawing or payment
(but
without any requirement for compliance with the conditions precedent to
the
making of Loans contained in this Agreement).
(b) Whenever
the Borrower desires the issuance of a Letter of Credit, the Borrower shall
deliver to the Lender a written notice no later than 12:00 Noon (New York
time)
at least ten Business Days (or such shorter period as may be agreed to
by the
Lender) in advance of the proposed date of issuance of a letter of credit
request substantially in the form attached as Exhibit G (a “Letter of
Credit Request”). The transmittal by the Borrower of each Letter of Credit
Request shall be deemed to be a representation and warranty by the Borrower
that
the Letter of Credit may be issued in accordance with and will not violate
any
of the requirements of this Section 2.9. Prior to the date of issuance of
each Letter of Credit, the Borrower shall provide to the Lender a precise
description of the documents and the text of any certificate to be presented
by
the beneficiary of such Letter of Credit which, if presented by such beneficiary
on or prior to the expiration date of such Letter of Credit, would require
the
issuing bank to make payment under such Letter of Credit. The Lender, in
its
reasonable judgment, may require changes in any such documents and certificates.
No Letter of Credit shall require payment against a conforming draft to
be made
thereunder prior to the second Business Day after the date on which such
draft
is presented.
-24-
(c) Upon
any
request for a drawing under any Letter of Credit by the beneficiary thereof,
(i) the Borrower shall be deemed to have timely given a Notice of Borrowing
to the Lender for a Loan on the date on which such drawing is honored in
an
amount equal to the amount of such drawing and (ii) without regard to
satisfaction of the applicable conditions specified in Section 5.2 and the
other terms and conditions of borrowings contained herein, the Lender shall, on
the date of such drawing, make a Loan comprised of a Base Rate Advance
in the
amount of such drawing, the proceeds of which shall be applied directly
by the
Lender to reimburse the issuing bank for the amount of such drawing or
payment.
(d) As
between the Borrower and the Lender, the Borrower assumes all risks of
the acts
and omissions of the Lender and the issuing bank (other than for the gross
negligence or willful misconduct of the Lender or such issuing bank) or
misuse
of the Letters of Credit by the respective beneficiaries of such Letters
of
Credit. In furtherance and not in limitation of the foregoing, the Lender
shall
not be responsible (i) for the accuracy, genuineness or legal effects of
any document submitted by any party in connection with the application
for and
issuance of or any drawing honored under such Letters of Credit even if
it
should in fact prove to be in any or all respects invalid, inaccurate,
fraudulent or forged, (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign
any
such 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, (iii) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex,
telecopy or otherwise, whether or not they be in cipher, (iv) for errors in
interpretation of technical terms, (v) for any loss or delay in the
transmission or otherwise of any document required to make a drawing under
any
such Letter of Credit, or of the proceeds thereof, (vi) for the
misapplication by the beneficiary of any such Letter of Credit, of the
proceeds
of any drawing honored under such Letter of Credit, and (vii) for any
consequences arising from causes beyond the control of the issuing bank
or the
Lender, provided
that the
foregoing shall not release the Lender or the issuing bank for any liability
for
its gross negligence or willful misconduct. None of the above shall affect,
impair, or prevent the vesting of any of the Lender’s rights or powers
hereunder. Any action taken or omitted to be taken by the Lender under
or in
connection with any Letter of Credit, if taken or omitted in the absence
of
gross negligence or willful misconduct of the Lender, shall not create
any
liability of the Lender to the Borrower.
-25-
(e) The
obligations of the Borrower to reimburse the Lender for drawings honored
under
the Letters of Credit shall be unconditional and irrevocable and shall
be paid
strictly in accordance with the terms of this Agreement under all circumstances
including, without limitation, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit, any
Letter
of Credit Agreement or any other agreement or instrument relating thereto
(the
“Letter of Credit Related Documents”); (ii) the existence of any claim,
setoff, defense or other right which the Borrower or any Affiliate of the
Borrower may have at any time against a beneficiary or any transferee of
any
Letter of Credit (or any Persons or entities for whom any such beneficiary
or
transferee may be acting), the Lender or any other Person, whether in connection
with this Agreement, the other Loan Documents, the transactions contemplated
herein or therein or any unrelated transaction; (iii) any draft, demand,
certificate or other documents presented under any Letter of Credit proving
to
be forged, fraudulent or invalid in any respect or any statement therein
being
untrue or inaccurate in any respect; (iv) the surrender or impairment of
any security for the performance or observance of any of the terms of any
of the
Loan Documents; (v) failure of any drawing under a Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of
any
drawing; or (vi) that a Default or Event of Default shall have occurred and
be continuing.
ARTICLE
III
SECURITY
SECTION
3.1 General.
To
secure the prompt and complete payment and performance when due (whether
at
stated maturity, by acceleration or otherwise) of all of the Obligations,
the
Borrower hereby grants to the Lender a lien on and security interest in
all of
its right, title and interest in and to all the Collateral including, without
limitation, its Receivables, Equipment, General Intangibles, Inventory,
Investment Property and all other personal property, wherever located,
whether
now owned or hereafter acquired, and all additions and accessions thereto
and
substitutions and replacements therefor and improvements thereon, and all
proceeds (whether in the form of cash or other property) and products thereof
including, without limitation, all proceeds of insurance covering the same
and
all tort claims in connection therewith. As further security for the
Obligations, and to provide other assurances to the Lender, the Lender
shall
receive, among other things, the Lockbox Agreement and any Control Agreement.
This Agreement shall constitute a security agreement for purposes of the
Code.
SECTION
3.2 Further
Security; Lender Affiliates.
The
Borrower also grants to the Lender, as further security for all of the
Obligations, a security interest in all of its right, title and interest
in and
to all property of the Borrower in the possession of or deposited with
or in the
custody of the Lender or any Affiliate of the Lender or any representative,
agent or correspondent of the Lender and in all present and future deposit
accounts as that term is defined in the Code. For purposes of this Agreement,
any property in which the Lender or any such Affiliate has any security
or title
retention interest shall be deemed to be in the custody of the Lender or
of such
Affiliate. The security interest granted in Section 3.1 shall be deemed to
be in favor of the Lender for the benefit of itself and any Affiliate of
the
Lender to which the Borrower owes any Obligations.
-26-
SECTION
3.3 Recourse
to Security.
Recourse to security shall not be required for any Obligation hereunder
and the
Borrower hereby waives any requirement that the Lender exhaust any right
or take
any action against any of the Collateral before proceeding to enforce the
Obligations against the Borrower.
SECTION
3.4 Special
Provisions Relating to Inventory.
(a) All
Inventory.
The
security interest in the Inventory granted to the Lender hereunder shall
continue through all steps of manufacture and sale and attach without further
act to raw materials, work in process, finished goods, returned goods,
documents
of title and warehouse receipts, and to proceeds resulting from the sale
or
other disposition of such Inventory. Until all of the Obligations have
been
satisfied, all Letters of Credit have been terminated or Collateralized
and the
Lender has no obligation to make Loans or to cause Letters of Credit to
be
issued hereunder, the Lender’s security interest in such Inventory and in all
proceeds thereof shall continue in full force and effect and the Lender
shall
have, in its sole and absolute discretion at any time if an Event of Default
has
occurred and is continuing or the Lender believes that fraud has occurred,
the
right to take physical possession of such Inventory and to maintain it
on the
premises of the Borrower, in a public warehouse, or at such other place
as the
Lender may deem appropriate. If the Lender exercises such right to take
possession of such Inventory, the Borrower will, upon demand, and at the
Borrower’s cost and expense, assemble such Inventory and make it available to
the Lender at a place or places convenient to the Lender.
(b) Location
of Inventory; Cash Sales.
All
Inventory of the Borrower shall be maintained at the locations therefor
shown on
Schedule 6.1(b), except for Inventory moved from such locations solely for
the purpose of sale in the ordinary course of the Borrower’s business and
Inventory in transit in the ordinary course of the Borrower’s business. If sales
are made for cash, the Borrower shall immediately deliver to the Lender
the
checks or other forms of payment which it receives, together with any necessary
endorsements.
(c) Further
Assurances.
The
Borrower will perform any and all steps that the Lender may request to
perfect
the Lender’s security interests in the Borrower’s Inventory including, without
limitation, placing and maintaining signs, executing and filing financing
or
continuation statements in form and substance satisfactory to the Lender,
maintaining stock records and conducting lien searches. In each case, the
Borrower shall take such action as promptly as possible after requested
by the
Lender but in any event within five Business Days after any such request
is made
except that the Borrower shall take such action immediately upon the Lender’s
request following the occurrence of an Event of Default. If any of the
Borrower’s Inventory is in the possession or control of any Person other than a
purchaser in the ordinary course of business or a public warehouseman where
the
warehouse receipt is in the name of or held by the Lender, the Borrower
shall
notify such Person of the Lender’s security interest therein and, upon request,
instruct such Person to acknowledge in writing its agreement to hold all
such
Inventory for the benefit of the Lender and subject to the Lender’s
instructions. If so requested by the Lender, the Borrower (as promptly
as
possible after requested by the Lender but in any event within five Business
Days after any such request is made) will deliver (i) to the Lender
warehouse receipts, bills of lading and other documents of title covering
any of
the Borrower’s Inventory showing the Lender as the beneficiary thereof and
(ii) to the warehouseman such agreements relating to the release of
warehouse Inventory as the Lender may request. A physical verification
of all of
the Borrower’s Inventory wherever located will be taken by the Borrower at least
every twelve months and, in any case, as often as reasonably requested
by the
Lender and a copy of such physical verification shall be promptly thereafter
submitted to the Lender. The Borrower shall also submit to the Lender a
report
of the annual physical Inventory of the Borrower as observed and tested
by its
public accountants in accordance with generally accepted auditing standards
and
GAAP. If so requested by the Lender, the Borrower shall execute and deliver
to
the Lender a confirmatory written instrument, in form and substance satisfactory
to the Lender, listing all its Inventory, but any failure to execute or
deliver
the same shall not limit or otherwise affect the Lender’s security interest in
and to such Inventory. The Borrower will not permit any Person other than
the
Lender to be listed as the assignee of or secured party for any of the
Borrower’s electronic bills of lading or other documents of title.
-27-
(d) Inventory
Records.
The
Borrower shall maintain full, accurate and complete records of its Inventory
describing the kind, type and quantity of such Inventory and the Borrower’s cost
therefor, withdrawals therefrom and additions thereto, including a perpetual
inventory for raw materials, work in process, finished goods and goods
recalled
or subject to recall.
SECTION
3.5 Special
Provisions Relating to Receivables.
(a) Invoices,
Etc.
On the
Lender’s request therefor, the Borrower shall furnish to the Lender copies of
invoices to customers and shipping and delivery receipts or warehouse receipts
thereof. The Borrower shall deliver to the Lender (i) the originals of all
letters of credit, notes, and instruments in its favor, (ii) such
endorsements or assignments related thereto as the Lender may reasonably
request
and (iii) the written consent of the issuer of any letter of credit to the
assignment of the proceeds of such letter of credit by the Borrower to
the
Lender.
(b) Records,
Collections, Etc.
The
Borrower shall promptly report to the Lender all customer credits and all
returns, repossessions and recoveries of Inventory that are not in the
ordinary
course of its business, providing the Lender with a description of such
Inventory. The Borrower shall not, without the Lender’s prior written consent,
settle or adjust any dispute or claim, or grant any discount (except ordinary
trade discounts), credit or allowance or accept any return of merchandise,
except in the ordinary course of its business. Upon the occurrence and
during
the continuance of an Event of Default or at any time that the Lender believes
that fraud has occurred, the Lender may (i) settle or adjust disputes or
claims directly with account debtors for amounts and upon terms which it
considers advisable and (ii) notify account debtors on the Borrower’s
Receivables that such Receivables have been assigned to the Lender, and
that
payments in respect thereof shall be made directly to the Lender. Where
the
Borrower receives collateral of any kind or nature by reason of transactions
between itself and its customers or account debtors, the Borrower will
hold the
same on the Lender’s behalf, subject to the Lender’s instructions, and as
property forming part of the Borrower’s Receivables. Where the Borrower sells
goods or services to a customer which also sells goods or services to it
or
which may have other claims against it, the Borrower will so advise the
Lender
immediately to permit the Lender to establish a reserve therefor. The Borrower
hereby irrevocably authorizes and appoints the Lender, or any Person the
Lender
may designate, as its attorney-in-fact, at the Borrower’s sole cost and expense,
to exercise, if an Event of Default has occurred and is continuing or the
Lender
believes that fraud has occurred, all of the following powers, which being
coupled with an interest, shall be irrevocable until all of the Obligations
have
been indefeasibly paid and satisfied in full in cash: (A) to receive, take,
endorse, sign, assign and deliver, all in the name of the Lender or the
Borrower, any and all checks, notes, drafts, and other documents or instruments
relating to the Collateral; (B) to receive, open and dispose of all mail
addressed to the Borrower and to notify postal authorities to change the
address
for delivery thereof to such address as the Lender may designate; and
(C) to take or bring, in the name of the Lender or the Borrower, all steps,
actions, suits or proceedings deemed by the Lender necessary or desirable
to
enforce or effect collection of the Borrower’s Receivables or file and sign the
Borrower’s name on a proof of claim in bankruptcy or similar document against
any obligor of the Borrower. The Borrower shall maintain a record of its
electronic chattel paper that identifies the Lender as the assignee thereof
and
otherwise in a manner such that the Lender has control over such chattel
paper
for purposes of the Code.
-28-
SECTION
3.6 Special
Provisions Relating to Equipment.
(a) Location.
Each
item of Equipment of the Borrower, now owned or hereafter acquired, will
be kept
at the location shown on Schedule 6.1(b) and may not be moved without the
prior written consent of the Lender. The Borrower shall at all times hereafter
keep correct and accurate records itemizing and describing the location,
kind,
type, age and condition of its Equipment, the Borrower’s cost therefor and
accumulated depreciation thereof, and retirements, sales, or other dispositions
thereof, all of which records shall be available during the Borrower’s usual
business hours on demand to any of the officers, employees or agents of
the
Lender.
(b) Repair.
The
Borrower shall keep all of its Equipment in a satisfactory state of repair
and
satisfactory operating condition in accordance with industry standards,
ordinary
wear and tear excepted, and will, consistent with the exercise of its reasonable
business judgment, make all repairs and replacements when and where necessary
and practical, will not waste or destroy it or any part thereof, and will
not be
negligent in the care or use thereof. The Borrower shall repair and maintain
all
of its Equipment in accordance with industry practices in a manner sufficient
to
continue the operation of its business as heretofore conducted. The Borrower
will use or cause its Equipment to be used in accordance with law and the
manufacturer’s instructions. The Borrower shall keep its Equipment separate
from, and will not annex or affix any of its Equipment to, any part of
any
Property or any other realty.
-29-
(c) Disposal.
Where
the Borrower is permitted to dispose of any of its Equipment under this
Agreement or by any consent thereto hereafter given by the Lender, the
Borrower
shall do so at arm’s length, in good faith and by obtaining the maximum amount
of recovery practicable therefor and without impairing the operating integrity
or value of its remaining Equipment.
SECTION
3.7 Continuation
of Liens, Etc.
The
Borrower shall defend the Collateral against all claims and demands of
all
Persons at any time claiming any interest therein, other than claims relating
to
Liens permitted by the Loan Documents. The Borrower agrees to comply with
the
requirements of all state and federal laws to grant to the Lender valid
and
perfected first priority security interests in the Collateral and shall
obtain a
Control Agreement from any securities intermediary or depository bank (other
than the Lockbox Bank) in possession of any of the Borrower’s Investment
Property or deposit accounts. The Lender is hereby authorized by the Borrower
to
sign the Borrower’s name on any document or instrument as may be necessary or
desirable to establish and maintain the Liens covering the Collateral and
the
priority and continued perfection thereof or file any financing or continuation
statements or similar documents or instruments covering the Collateral
whether
or not the Borrower’s signature appears thereon. The Borrower agrees, from time
to time, at the Lender’s request, to file notices of Liens, financing
statements, similar documents or instruments, and amendments, renewals
and
continuations thereof, and cooperate with the Lender’s representatives, in
connection with the continued perfection (and the priority status thereof)
and
protection of the Collateral and the Lender’s Liens thereon. The Borrower agrees
that the Lender may file a carbon, photographic or other reproduction of
this
Agreement (or any financing statement related hereto) as a financing
statement.
SECTION
3.8 Real
Property.
If the
Borrower acquires any Property after the date hereof, the Borrower shall,
at the
expense of the Borrower, take all steps necessary or desirable to grant
the
Lender a perfected first priority Lien thereon. Concurrently with any such
granting, the Borrower shall deliver to the Lender:
(a) a
mortgagee’s title policy (i) dated the date of any mortgage or deed of
trust in favor of the Lender with respect to such Property (a “Mortgage”) and in
an amount satisfactory to the Lender, (ii) insuring that such Mortgage
creates a valid first Lien on such Property free and clear of all Liens
except
the Lien in favor of the Lender and other Liens that are satisfactory to
the
Lender, (iii) naming the Lender as the insured thereunder, (iv) in the
form of ALTA Loan Policy-1992, and (v) containing revolving endorsements
and such other endorsements and effective coverage as the Lender may request,
together with evidence that all premiums in respect of such policy have
been
paid by or on behalf of the Borrower;
(b) a
survey
of any such Property, satisfactory in form and substance to the Lender
and
certified within a reasonable period before the date of any such Mortgage
by an
independent public surveyor satisfactory to the Lender, meeting the minimum
standard detail requirements for ALTA/ACSM surveys, and showing (i) the
exact location and dimensions of such Property and the improvements thereon,
(ii) the exact location of all lot and street lines, required height and
setback lines, all means of access to and all easements relating to such
Property, (iii) the names of all streets and alleys abutting such Property
and (iv) the absence of any encroachments, rights-of-way or easements on
such Property or any encroachments by the improvements thereon on adjoining
property, or any other defects except Liens permitted hereunder, together
with a
surveyor’s certificate satisfactory to the Lender;
-30-
(c) an
opinion of the Borrower’s legal counsel with respect to such Mortgage and any
other matters related thereto, which opinion shall be in form and substance
reasonably satisfactory to the Lender; and
(d) evidence
reasonably satisfactory to the Lender that all recording taxes and other
fees
and expenses related to the transactions described in this Section 3.8 have
been paid in full by the Borrower.
SECTION
3.9 Power
of Attorney.
In
addition to all of the powers granted to the Lender in this Article III,
the Borrower hereby appoints and constitutes the Lender as the Borrower’s
attorney-in-fact to sign the Borrower’s name on any of the documents,
instruments and other items described in Section 3.7, to make any filings
under the Uniform Commercial Code covering any of the Collateral, to request
at
any time from customers indebted on its Receivables verification of information
concerning such Receivables and the amount owing thereon (provided
that any
verification shall only occur if an Event of Default has occurred and is
continuing), and, upon the occurrence and during the continuance of an
Event of
Default, (i) to convey any item of Collateral to any purchaser thereof and
(ii) to make any payment or take any act necessary or desirable to protect
or preserve any Collateral. The Lender’s authority hereunder shall include,
without limitation, the authority to execute and give receipt for any
certificate of ownership or any document, to transfer title to any item
of
Collateral and to take any other actions arising from or incident to the
powers
granted to the Lender under this Agreement. This power of attorney is coupled
with an interest and is irrevocable.
ARTICLE
IV
INTEREST,
FEES AND EXPENSES
SECTION
4.1 Interest.
The
Borrower shall pay to the Lender interest on the Advances, payable monthly
in
arrears on the first day of each month, commencing with the month immediately
following the Closing Date, and on the Expiration Date, at the following
rates
per
annum:
(a) Base
Rate Advances.
If such
Advance is a Base Rate Advance, at a fluctuating rate which is equal to
the Base
Rate then in effect, each change in such fluctuating rate to take effect
simultaneously with the corresponding change in the Base Rate.
(b) LIBOR
Rate Advances.
If such
Advance is a LIBOR Rate Advance, at a rate which is equal at all times
during
the Interest Period for such LIBOR Rate Advance to (i) the LIBOR Rate plus
(ii) one and three-quarters percent (1.75%).
-31-
SECTION
4.2 Interest
and Letter of Credit Fees After Event of Default.
From
the date of occurrence of any Event of Default until the earlier of the
date
upon which (i) all Obligations shall have been paid and satisfied in full
and all Letters of Credit have expired or been terminated or (ii) such
Event of Default shall have been waived, interest on the Loans shall be
payable
on demand at a rate per
annum
equal to
the rate that would be otherwise applicable thereto under Section 4.1 plus
up to an additional two percent (2%) and the letter of credit fee pursuant
to
Section 4.3(b) shall be payable at the rate that would otherwise apply
under Section 4.3(b) plus up to an additional two percent
(2%).
SECTION
4.3 Closing
Fee.
On the
Closing Date, the Borrower shall pay to the Lender a non-refundable closing
fee
in the amount of $65,000.
SECTION
4.4 Unused
Line Fee; Letter of Credit Fees.
(a) The
Borrower shall pay to the Lender on the first day of each month, commencing
with
the month immediately following the Closing Date, and on the Expiration
Date, in
arrears, an unused line fee equal to three-eighths of one percent (.37%)
per annum
of the
difference, if positive, between (i) the Maximum Amount of the Facility and
(ii) the average daily aggregate outstanding amount of the Loans plus the
average daily aggregate undrawn amount of all unexpired Letters of Credit
during
the immediately preceding month or portion thereof.
(b) The
Borrower shall promptly pay to the Lender (i) an issuance fee in an amount
equal to .13% of the face amount of each Letter of Credit issued in connection
herewith for the Lender’s own account and (ii) all fees charged to the
Lender by any issuer of a Letter of Credit which relate directly to the
issuance, amending or drawing under Letters of Credit. In addition, the
Borrower
shall pay to the Lender on the first day of each month, commencing with
the
month immediately following the Closing Date, and on the Expiration Date,
in
arrears, a fee equal to 1.75% per annum
on the
daily average of the amount of the Letters of Credit outstanding during
the
preceding month or during the interim period ending on the Expiration Date,
as
the case may be.
SECTION
4.5 Early
Termination Fee.
The
Borrower shall have the right to terminate this Agreement at any time on
ninety
days’ prior written notice to the Lender, provided
that, on
the date of such termination, all Obligations, including all amounts required
for the Collateralization of Letters of Credit and interest, fees and expenses
payable to the date of such termination, shall be paid in full. If (a) the
Borrower gives such notice to terminate or (b)(i) the Loans are paid in
full or substantially in full and (ii) the Lender’s obligation to make
Loans or to cause Letters of Credit to be issued is terminated, including
as a
result of the Lender terminating, in accordance with Section 9.2(b), such
obligation, the Borrower shall pay a fee to the Lender in an amount equal
to
(A) $150,000 if such termination or payment occurs prior to the first
anniversary of the Closing Date and (B) $75,000 if such termination or
payment occurs on or after the first anniversary but prior to the second
anniversary of the Closing Date, provided
that no
such fee shall be due if the Obligations are, or are deemed to have been,
paid
or repaid with the proceeds of loans made by the Lender or any of its
Affiliates.
-32-
SECTION
4.6 Calculations.
All
calculations of interest and fees hereunder shall be made by the Lender
on the
basis of a year of 360 days for the actual number of days elapsed in the
period
for which such interest or fees are payable. Each determination by the
Lender of
an interest rate, fee or other payment hereunder shall be conclusive and
binding
for all purposes, absent manifest error.
SECTION
4.7 Indemnification
in Certain Events.
If,
after the Closing Date, (i) any change in or in the interpretation of any
law or regulation is introduced including, without limitation, with respect
to
reserve requirements, applicable to the Lender or any other banking or
financial
institution from which the Lender borrows funds or obtains credit, (ii) the
Lender complies with any future guideline or request from any central bank
or
other Governmental Authority or (iii) the Lender determines that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency
charged
with the interpretation or administration thereof has or would have the
effect
described below, or the Lender complies with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, and in the case of any event set forth
in
this clause (iii), such adoption, change or compliance has or would have
the direct or indirect effect of reducing the rate of return on the Lender’s
capital as a consequence of its obligations hereunder to a level below
that
which the Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Lender’s policies as the case may be with respect
to capital adequacy) by an amount deemed by the Lender to be material,
and any
of the foregoing events described in clauses (i), (ii) and (iii) increases
the cost to the Lender of funding or maintaining the Loans, or reduces
the
amount receivable in respect thereof by the Lender, then the Borrower shall,
upon demand, pay to the Lender additional amounts sufficient to indemnify
the
Lender against such increase in cost or reduction in amount
receivable.
SECTION
4.8 Taxes.
(a) Any
and
all payments by the Borrower hereunder or under the Note shall be made
free and
clear of and without deduction for any and all present or future taxes,
levies,
imposts, deductions, charges or withholdings and penalties, interest and
all
other liabilities with respect thereto (“Taxes”), including any Taxes imposed
under Section 7701(l) of the Internal Revenue Code, excluding in the case
of the Lender, taxes imposed on its net income (including, without limitation,
any taxes imposed on branch profits) and franchise taxes imposed on it
by any
applicable jurisdiction. If the Borrower shall be required by law to deduct
any
Taxes from or in respect of any sum payable hereunder or under any Loan
to or
for the benefit of the Lender, (A) the sum payable shall be increased as
may be necessary so that after making all required deductions of Taxes
(including deductions of Taxes applicable to additional sums payable under
this
Section 4.8) the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (B) the Borrower shall make such
deductions and (C) the Borrower shall pay the full amount so deducted to
the relevant taxation authority or other authority in accordance with applicable
law.
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(b) In
addition, the Borrower agrees to pay any present or future stamp, documentary,
excise, privilege, intangible or similar taxes or levies that arise at
any time
or from time to time (i) from any payment made under any and all Loan
Documents, or (ii) from the execution or delivery by the Borrower of, or
from the filing or recording or maintenance of, or otherwise with respect
to the
exercise by the Lender of its rights under, any and all Loan Documents
(hereinafter referred to as “Other Taxes”).
(c) The
Borrower indemnifies the Lender for the full amount of (i) Taxes imposed on
or with respect to amounts payable hereunder, (ii) Other Taxes and
(iii) any Taxes (other than Taxes imposed by any jurisdiction on amounts
payable under this Section 4.8) paid by the Lender and any liability
(including penalties, interest and expenses) arising solely therefrom or
with
respect thereto.
(d) Within
thirty days after the date of any payment of Taxes or Other Taxes, the
Borrower
will, upon request, furnish to the Lender the original or a certified copy
of a
receipt evidencing payment thereof.
(e) Without
prejudice to the survival of any other agreement of the Borrower hereunder,
the
agreements and obligations of the Borrower contained in this Section 4.8
shall survive the indefeasible payment in full of the Obligations.
ARTICLE
V
CONDITIONS
OF LENDING
SECTION
5.1 Conditions
to Initial Loan or Letter of Credit.
The
obligation of the Lender to make the initial Loan or to cause to be issued
the
initial Letter of Credit is subject to the satisfaction of the following
conditions prior to or concurrent with such initial Loan or Letter of
Credit:
(a) The
Lender shall have received the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
satisfactory to the Lender and its counsel:
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(i)
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the
Note, duly executed by the
Borrower;
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(ii)
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the
Guaranty, duly executed by the
Guarantor;
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(iii)
|
completed
requests for information, dated on or before the date of the
initial Loan
or Letter of Credit, listing all effective financing statements
filed
against the Borrower on file with the Secretary of State of the
State of
Delaware;
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(iv)
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a
completed perfection certificate, substantially in the form of
Exhibit I
signed by a Responsible Officer of the
Borrower;
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(v)
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an
initial Borrowing Base Certificate, duly executed by the Borrower’s chief
financial officer;
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(vi)
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(A) the
draft unaudited Financial Statements for the fiscal year ended
December 31, 2005, reviewed by the Auditors, and the draft unaudited
Financial Statements for the eleven-month period ended November 30,
2006, reviewed by the chief operating officer of the Borrower,
(B) a
certificate executed by the Borrower’s chief financial officer certifying
that, since December 31, 2005, (I) there has been no change,
occurrence, development or event which has had or could reasonably
be
expected to have a Material Adverse Effect (except as disclosed
therein,
which disclosure shall not limit any of the Lender’s rights and remedies
with respect thereto), (II) all data, reports and information (other
than projections and budgets) heretofore or contemporaneously
furnished by
or on behalf of the Borrower in writing to the Lender, the Auditors
or
Xxxxxx Group LLC for purposes of or in connection with this Agreement
or
any other Loan Document, or any transaction contemplated hereby
or
thereby, are true and accurate in all material respects as of
the date or
certification thereof and are not incomplete by omitting to state
any
material fact necessary to make such data, reports and information
not
misleading at such time, and (III) all projections and budgets
heretofore furnished to the Lender or the Auditors for purposes
of or in
connection with this Agreement or any other Loan Document, or
any
transaction contemplated hereby or thereby, have been prepared
in good
faith based on assumptions believed by the Borrower to be reasonable
at
the time of preparation, and (C) a Certificate signed by the chief
financial officer of the Borrower, certifying the Borrower’s Tangible Net
Worth and Fixed Charge Coverage Ratio as of November 30,
2006;
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(vii)
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a
payoff letter, duly executed by the Existing Lender, containing,
among
other things, an acknowledgment of the termination of all of
the Existing
Lender’s liens on and security interests in any assets of the Borrower
upon the payment in full of the outstanding amount owed to the
Existing
Lender specified therein, and an authorization of the Lender
to file
termination statements under the Code with respect to all financing
statements filed by the Existing Lender under the Code naming
the Borrower
as Debtor and to record a release of any other Lien of the Existing
Lender
encumbering any property of the
Borrower;
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(viii)
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an
opinion of counsel for each Loan Party covering such matters
incident to
the transactions contemplated by this Agreement as the Lender
may
reasonably require, which such counsel is hereby requested by
the Borrower
on behalf of the Loan Parties to
provide;
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(ix)
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certificates
of insurance required by this Agreement and the other Loan Documents,
together with loss payee endorsements for all such policies naming
the
Lender as lender loss payee and an additional
insured;
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(x)
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a
copy of the Business Plan for the period commencing January 1, 2007,
accompanied by a certificate executed by the Borrower’s chief financial
officer certifying to the Lender that the Business Plan has been
prepared
in good faith on the basis of assumptions which were believed
to be
reasonable in the context of the conditions existing on the date
hereof,
and represents, as of the date hereof, the Borrower’s good faith estimate
of its future financial
performance;
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(xi)
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copies
of the Governing Documents of each Loan Party and a copy of the
resolutions of the Board of Directors of each Loan Party authorizing
the
execution, delivery and performance of this Agreement, the other
Loan
Documents to which such Loan Party is or is to be a party, and
the
transactions contemplated hereby and thereby, attached to which
is a
certificate of the Secretary or an Assistant Secretary of such
Loan Party
certifying (A) that such copies of the Governing Documents and
resolutions relating to such Loan Party are true, complete and
accurate
copies thereof, have not been amended or modified since the date
of such
certificate and are in full force and effect, (B) the incumbency,
names and true signatures of the officers of such Loan Party
authorized to
sign the Loan Documents to which it is a party and (C) that attached
thereto is a list of all persons authorized to execute and deliver
Notices
of Borrowing, Notices of Continuation and Notices of Conversion
on behalf
of the Borrower;
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(xii)
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a
certified copy of a certificate of the Secretary of State of
the state of
incorporation of each Loan Party, dated within ten days of the
Closing
Date, listing the certificate of incorporation of such Loan Party
and each
amendment thereto on file in such official’s office and certifying that
(A) such amendments are the only amendments to such certificate of
incorporation on file in that office, (B) such Loan Party has paid
all franchise taxes to the date of such certificate and (C) such Loan
Party is in good standing in that
jurisdiction;
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(xiii)
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a
good standing certificate from the Secretary of State of each
state in
which each Loan Party is qualified as a foreign corporation,
each dated
within ten days of the Closing
Date;
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(xiv)
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a
letter from the Borrower to the Auditors and acknowledged by
the Auditors
authorizing the Lender to discuss the financial condition of
the Loan
Parties with the Auditors and their personnel and directing the
Auditors
to cooperate with the Lender with respect
thereto;
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(xv)
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a
consent to the assignment to the Lender of the proceeds of each
letter of
credit issued in favor of the Borrower, duly executed by the
issuer
thereof;
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(xvi)
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evidence
that the Borrower maintains a record of its electronic chattel
paper that
identifies the Lender as the assignee thereof and otherwise in
a manner
such that the Lender has control over such chattel paper for
purposes of
the Code; and
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(xvii)
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such
other agreements, instruments, documents and evidence as the
Lender deems
necessary in its sole and absolute discretion in connection with
the
transactions contemplated hereby.
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(b) There
shall be no pending or, to the knowledge of the Borrower after due inquiry,
threatened litigation, proceeding, inquiry or other action (i) seeking an
injunction or other restraining order, damages or other relief with respect
to
the transactions contemplated by this Agreement or the other Loan Documents
or
(ii) which affects or could affect the business, prospects, operations,
assets, liabilities or condition (financial or otherwise) of either Loan
Party,
except, in the case of clause (ii), where such litigation, proceeding,
inquiry or other action could not reasonably be expected to have a Material
Adverse Effect.
(c) The
Borrower shall have (i) paid (A) all reasonable fees and expenses of
the Lender in connection with the negotiation, preparation, execution and
delivery of the Loan Documents (including, without limitation, all of the
Lender’s examination, audit, appraisal and travel expenses and the fees and
expenses of counsel to the Lender) and (B) the closing fee payable under
Section 4.3 and all other fees referred to in this Agreement that are
required to be paid on the Closing Date and (ii) delivered at least
$2,000,000 in cash by wire transfer to the Lender, which cash shall be
used by
the Lender to repay a portion of the Borrower’s existing Indebtedness to the
Existing Lender.
(d) (i) All
termination statements under the Code necessary to cause the Lender to
have a
first priority security interest in the Collateral shall have been filed
or
authorized to be filed and (ii) all consents or authorizations specified in
Schedule 6.1(f) shall have been obtained.
(e) No
change, occurrence, event or development or event involving a prospective
change
that could reasonably be expected to have a Material Adverse Effect shall
have
occurred and be continuing.
(f) The
Lender and its counsel shall have performed (i) a review satisfactory to
the Lender of all of the Material Contracts and other assets (including,
without
limitation, leases of operating facilities) of the Borrower, the financial
condition of each Loan Party, including all of its tax, litigation,
environmental and other potential contingent liabilities, the corporate
and
capital structure of each Loan Party and the cash management and management
information systems of the Borrower, (ii) a pre-closing audit and
collateral review and (iii) reviews and investigations of such other
matters as the Lender and its counsel deem appropriate, in each case with
results satisfactory to the Lender.
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(g) The
Loan
Parties shall be in compliance with all Requirements of Law and Material
Contracts, other than such noncompliance that could not reasonably be expected
to have a Material Adverse Effect.
(h) The
Liens
in favor of the Lender shall have been duly perfected and shall constitute
first
priority Liens, and the Collateral shall be free and clear of all Liens
other
than Liens in favor of the Lender and Permitted Liens.
(i) After
giving effect to all Loans to be made and all Letters of Credit to be issued
on
the Closing Date, Excess Availability shall be no less than
$2,000,000.
SECTION
5.2 Conditions
Precedent to Each Loan and Each Letter of Credit.
The
obligation of the Lender to make any Loan or to cause to be issued any
Letter of
Credit is subject to the satisfaction of the following conditions
precedent:
(a) all
representations and warranties contained in this Agreement and the other
Loan
Documents shall be true and correct on and as of the date of such Loan
or Letter
of Credit as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have
been
true and correct as of such earlier date;
(b) no
Default or Event of Default shall have occurred and be continuing or would
result from the making of the requested Loan or the issuance of the requested
Letter of Credit as of the date of such request; and
(c) no
Material Adverse Effect shall have occurred.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES
SECTION
6.1 Representations
and Warranties of the Borrower; Reliance by the Lender.
The
Borrower represents and warrants as follows:
(a) Organization,
Good Standing and Qualification.
The
Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of
Delaware, (ii) has the corporate power and authority to own its properties
and assets and to transact the businesses in which it presently is, or
proposes
to be, engaged and (iii) is duly qualified, authorized to do business and
in good standing in each jurisdiction where it presently is, or proposes
to be,
engaged in business, except to the extent that the failure to so qualify
or be
in good standing could not reasonably be expected to have a Material Adverse
Effect. Schedule 6.1(a) specifies the jurisdiction in which the Borrower is
organized and all the jurisdictions in which the Borrower is qualified
to do
business as a foreign corporation as of the Closing Date.
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(b) Locations
of Offices, Records and Collateral.
The
address of the principal place of business and chief executive office of
the
Borrower is, and the books and records of the Borrower and all of its chattel
paper and records of its Receivables are maintained exclusively in the
possession of the Borrower at, the address of the Borrower specified in
Schedule 6.1(b). There is no location at which the Borrower maintains any
Collateral other than the locations specified in Schedule 6.1(b).
Schedule 6.1(b) specifies all Property of the Borrower, and indicates
whether each location specified therein is leased or owned by the
Borrower.
(c) Authority.
The
Borrower has the requisite corporate power
and
authority to execute, deliver and perform its obligations under each of
the Loan
Documents to which it is a party. All corporate action necessary for the
execution, delivery and performance by the Borrower of the Loan Documents
to
which it is a party (including the consent of shareholders where
required) has been taken.
(d) Enforceability.
This
Agreement is and, when executed and delivered, each other Loan Document
to which
the Borrower is a party, will be, the legal, valid and binding obligation
of the
Borrower enforceable in accordance with its terms, except as enforceability
may
be limited by (i) bankruptcy, insolvency or similar laws affecting
creditors’ rights generally and (ii) general principles of
equity.
(e) No
Conflict.
The
execution, delivery and performance by each of the Loan Parties of each
Loan
Document to which it is a party do not and will not contravene (i) any of
the Governing Documents of such Loan Party, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any
Liens upon any of its properties except in favor of the Lender.
(f) Consents
and Filings.
No
consent, authorization or approval of, or filing with or other act by,
any
shareholders of the Borrower or any Governmental Authority or any other
Person
is required in connection with the execution, delivery, performance, validity
or
enforceability of this Agreement or any other Loan Document, the consummation
of
the transactions contemplated hereby or thereby or the continuing operations
of
a Loan Party following such consummation, except (i) those that have been
obtained or made and are specified in Schedule 6.1(f) and (ii) the
filing of financing and termination statements under the Code.
(g) Ownership;
Subsidiaries.
The
capital stock of the Guarantor and its Subsidiaries is owned by the Persons
and
in the amounts specified in Schedule 6.1(g). Schedule 6.1(g) sets
forth the exact correct legal name of each of the Guarantor and the Subsidiaries
of the Guarantor, in each case as specified in the public record of the
jurisdiction of its organization, and of the Persons that own the capital
stock therein.
(h) Solvency.
The
Borrower is Solvent and will be Solvent upon the completion of all transactions
contemplated to occur on or before the Closing Date (including, without
limitation, the Loans to be made and the Letters of Credit to be issued
on the
Closing Date).
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(i) Financial
Data.
The
Borrower has provided to the Lender complete and accurate copies of its
draft
unaudited Financial Statements for the fiscal year ended December 31, 2005,
reviewed by the Auditors, and draft unaudited Financial Statements for
the
eleven-month period ended November 30, 2006 reviewed by the chief operating
officer of the Borrower. Such Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved
and
fairly present the financial position, results of operations and cash flows
of
the Borrower and its Subsidiaries for each of the periods covered. Except
as
specified in Schedule 6.1(i), the Borrower and its Subsidiaries have no
Contingent Obligation or liability for taxes, unrealized losses, unusual
forward
or long-term commitments or long-term leases, which is not reflected in
such
Financial Statements or the footnotes thereto. During the period from
December 31, 2005 to and including the date hereof, there has been no sale,
transfer or other disposition by the Borrower or any of its Subsidiaries
of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any capital stock of any other Person)
material in relation to the financial condition of the Borrower and its
Subsidiaries at November 30, 2006. Since December 31, 2005 and except
as provided in Schedule 6.1(i), (i) there has been no change,
occurrence, development or event which has had or could reasonably be expected
to have a Material Adverse Effect and (ii) none of the capital stock of
either Loan Party has been redeemed, retired, purchased or otherwise acquired
for value by such Loan Party.
(j) Accuracy
and Completeness of Information.
All
data, reports and information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Borrower to the Lender or its representatives,
the Auditors or Xxxxxx Group LLC are or will be true and accurate in all
material respects as of the date or certification of such data, reports
and
information and are not and will not be incomplete by omitting to state
any
material fact necessary to make such data, reports and information not
misleading at such time. There are no facts now known to any Responsible
Officer
of the Borrower which individually or in the aggregate could reasonably
be
expected to have a Material Adverse Effect and which have not been specified
herein, in the Financial Statements, or any certificate, opinion or other
written statement previously furnished by the Borrower to the
Lender.
(k) No
Joint Ventures or Partnerships.
Except
as specified in Schedule 6.1(k), the Borrower is not engaged in any joint
venture or partnership with any other Person.
(l) Corporate
and Trade Name.
During
the past year, the Borrower has not been known by or used any other corporate,
trade or fictitious name except for (i) its name as set forth in the
introductory paragraph and on the signature page of this Agreement, which
is the
exact correct legal name of the Borrower and (ii) Cambitoys.
(m) No
Actual or Pending Material Modification of Business.
There
exists no actual or, to the best of the Borrower’s knowledge after due inquiry,
threatened termination, cancellation or limitation of, or any modification
or
change in, the business relationship of the Borrower with any customer
or group
of customers which individually or in the aggregate could reasonably be
expected
to have a Material Adverse Effect.
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(n) No
Broker’s or Finder’s Fees.
No
broker or finder brought about the obtaining, making or closing of the
Loans or
financial accommodations afforded hereunder or in connection herewith by
the
Lender or any of its Affiliates. No broker’s or finder’s fees or commissions
will be payable by the Borrower to any Person in connection with the
transactions contemplated by this Agreement.
(o) Investment
Company.
The
Borrower is not an “investment company,” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940, as amended. Neither
the
making of any Loans, the issuance of any Letters of Credit or the application
of
the proceeds or repayment thereof by the Borrower or the beneficiary of
any
Letter of Credit, nor the consummation of the other transactions contemplated
by
this Agreement or the other Loan Documents, will violate any provision
of such
Act or any rule, regulation or order of the Securities and Exchange Commission
thereunder.
(p) Margin
Stock.
The
Borrower does not own any “margin stock” as that term is defined in Regulation U
of the Federal Reserve Board.
(q) Taxes
and Tax Returns.
In each
case except as specified in Schedule 6.1(q),
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(i)
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The
Borrower has properly completed and timely filed all income tax
returns it
is required to file. The information filed is complete and accurate
in all
material respects. All deductions taken in such income tax returns
are
appropriate and in accordance with applicable laws and regulations,
except
deductions that may have been disallowed but are being challenged
in good
faith and for which adequate reserves have been established in
accordance
with GAAP.
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(ii)
|
All
taxes, assessments, fees and other governmental charges for periods
beginning prior to the date hereof have been timely paid (or,
if not yet
due, adequate reserves therefor have been established) by it
and the
Borrower has no liability for taxes in excess of the amounts
so paid or
reserves so established.
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(iii)
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No
deficiencies for taxes have been claimed, proposed or assessed
by any
taxing or other Governmental Authority against the Borrower and
no tax
Liens have been filed with respect thereto. There are no pending
or
threatened audits, investigations or claims for or relating to
any
liability of the Borrower for taxes and there are no matters
under
discussion with any Governmental Authority which could result
in an
additional liability for taxes. The federal income tax returns
of the
Borrower have never been audited by the Internal Revenue Service.
No
extension of a statute of limitations relating to taxes, assessments,
fees
or other governmental charges is in effect with respect to the
Borrower.
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(iv)
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The
Borrower is not a party to, and has no obligations under, any
written tax
sharing agreement or agreement regarding payments in lieu of
taxes.
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(r) No
Judgments or Litigation.
Except
as specified in Schedule 6.1(r), no judgments, orders, writs or decrees are
outstanding against the Borrower, nor is there now pending or, to the knowledge
of the Borrower after due inquiry, threatened litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against the
Borrower that (i) individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Agreement, the Note, any other
Loan
Document or the consummation of the transactions contemplated hereby or
thereby.
(s) Title
to Property.
The
Borrower has (i) good and marketable fee simple title to or valid leasehold
interests in all of its Property and (ii) good and marketable title to all
of its other property, in each case free and clear of Liens other than
Liens
permitted by Section 7.2(i).
(t) No
Other Indebtedness.
On the
Closing Date and after giving effect to the transactions contemplated hereby,
the Borrower has no Indebtedness other than Indebtedness permitted under
Section 7.2(a).
(u) Investments;
Contracts.
The
Borrower (i) has not committed to make any Investment; (ii) is not a
party to any indenture, agreement, contract, instrument or lease, or subject
to
any charter, bylaw or other corporate or similar restriction or any injunction,
order, restriction or decree, which could materially and adversely affect
its
business, operations, assets or financial condition; (iii) is not a party
to any “take or pay” contract as to which it is the purchaser; and (iv) has
no material contingent or long-term liability, including any management
contracts, which could reasonably be expected to have a Material Adverse
Effect.
(v) Compliance
with Laws.
On the
Closing Date, after giving effect to the transactions contemplated hereby,
the
Borrower is not in default under any term of any Requirement of Law other
than
any default which, when taken together with all other similar defaults,
could
not reasonably be expected to have a Material Adverse Effect or would not
require more than $50,000 to remediate.
(w) Rights
in Collateral; Priority of Liens.
All of
the Collateral of the Borrower is owned or leased by it free and clear
of any
and all Liens in favor of third parties, other than Liens in favor of the
Lender
and Permitted Liens. Upon the proper filing of (i) a financing statement
with the Secretary of State of the State of Delaware naming the Borrower
as
debtor and the Lender as secured party and describing the Collateral and
(ii) any termination statements necessary to terminate any of the Existing
Lender’s Liens, the Liens granted by the Borrower pursuant to the Loan Documents
constitute valid, enforceable and perfected first priority Liens on the
Collateral.
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(x) ERISA.
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(i)
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Neither
the Borrower nor any ERISA Affiliate maintains or contributes
to any Plan,
other than those specified in
Schedule 6.1(x).
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(ii)
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The
Borrower and each ERISA Affiliate have fulfilled all contribution
obligations for each Plan (including obligations related to the
minimum
funding standards of ERISA and the Internal Revenue Code), and
no
application for a funding waiver or an extension of any amortization
period pursuant to Sections 303 and 304 of ERISA or Section 412
of the Internal Revenue Code has been made with respect to any
Plan.
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(iii)
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No
Termination Event has occurred nor has any other event occurred
that is
likely to result in a Termination Event. Neither the Borrower
or any ERISA
Affiliate, nor any fiduciary of any Plan, is subject to any direct
or
indirect liability with respect to any Plan under any Requirement
of Law
or agreement, except for ordinary funding obligations which are
not past
due.
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(iv)
|
Neither
the Borrower nor any ERISA Affiliate is required to or reasonably
expects
to be required to provide security to any Plan under Section 307 of
ERISA or Section 401(a)(29) of the Internal Revenue
Code.
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(v)
|
The
Borrower and each ERISA Affiliate are in compliance in all material
respects with all applicable provisions of ERISA and the Internal
Revenue
Code with respect to all Plans. There has been no prohibited
transaction
as defined in Section 406 of ERISA or Section 4975 of the Internal
Revenue Code (a “Prohibited Transaction”) with respect to any Plan or any
Multiemployer Plan. The Borrower and each ERISA Affiliate have
made when
due any and all payments required to be made under any agreement
relating
to a Multiemployer Plan or any Requirement of Law pertaining
thereto. With
respect to each Plan and Multiemployer Plan, the Borrower and
each ERISA
Affiliate have not incurred any liability to the PBGC and have
not had
asserted against them any penalty for failure to fulfill the
minimum
funding requirements of ERISA other than for payments of premiums
in the
ordinary course of business.
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|
(vi)
|
Each
Plan which is intended to qualify under Section 401(a) of the
Internal Revenue Code has received a favorable determination
letter from
the IRS and no event has occurred which would cause the loss
of such
qualification.
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(vii)
|
The
aggregate actuarial present value of all benefit liabilities
(whether or
not vested) under each Pension Plan, determined on a plan termination
basis, as disclosed in, and as of the date of, the most recent
actuarial
report for such Pension Plan, does not exceed the aggregate fair
market
value of the assets of such Pension Plan as of such
date.
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(viii)
|
Neither
the Borrower nor any ERISA Affiliate has incurred or reasonably
expects to
incur any liability (and no event has occurred which, with the
giving of
notice under Section 4219 of ERISA, would result in any such
liability) under Section 4201 or 4243 of ERISA with respect to any
Multiemployer Plan.
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(ix)
|
To
the extent that any Plan is funded with insurance, the Borrower
and all
ERISA Affiliates have paid when due all premiums required to
be paid. To
the extent that any Plan is funded other than with insurance,
the Borrower
and all ERISA Affiliates have made when due all contributions
required to
be paid.
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(y) Intellectual
Property.
Set
forth on Schedule 6.1(y) is a complete and accurate list of all patents,
trademarks, trade names, service marks and copyrights, and all applications
therefor and licenses thereof, of the Borrower, showing as of the date
hereof
the jurisdiction in which registered, the registration number, the date
of
registration and the expiration date. The Borrower owns or licenses all
patents,
trademarks, service marks, logos, trade names, trade secrets, know-how,
copyrights, or licenses and other rights with respect to any of the foregoing,
which are necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted. The Borrower has not infringed any
patent, trademark, service xxxx, trade name, copyright, license or other
right
owned by any other Person by the sale or use of any product, process, method,
substance, part or other material presently contemplated to be sold or
used,
where such sale or use could reasonably be expected to have a Material
Adverse
Effect and no claim or litigation is pending, or, to the best of the Borrower’s
knowledge, threatened against the Borrower that contests its right to sell
or
use any such product, process, method, substance, part or other
material.
(z) Labor
Matters.
Schedule 6.1(z) accurately sets forth all labor contracts to which the
Borrower is a party as of the Closing Date, and their dates of expiration.
There
are no existing or threatened strikes, lockouts or other disputes relating
to
any collective bargaining or similar agreement to which the Borrower is
a party
which, individually or in the aggregate, could reasonably be expected to
have a
Material Adverse Effect.
-44-
(aa) Compliance
with Environmental Laws.
(i) The Borrower is not the subject of any judicial or administrative
proceeding or investigation relating to the violation of any Environmental
Law
or asserting potential liability arising from the release or disposal by
any
Person of any Hazardous Materials, (ii) the Borrower has not filed with or
received from any Governmental Authority or other Person any notice, order,
stipulation or directive under any Environmental Law, nor is it aware of
any
pending discussions within any Governmental Authority, concerning the treatment,
storage, disposal, spill or release or threatened release of any Hazardous
Materials at, on, beneath or adjacent to Property owned or leased by it,
or the
release or threatened release at any other location of any Hazardous Material
generated, used, stored, treated, transported or released by or on behalf
of the
Borrower, (iii) the Borrower has disposed of all its waste in accordance
with all applicable laws and it has not improperly stored or disposed of
any
waste at, on, beneath or adjacent to any of its Property and none of its
Property contains any waste fill, (iv) the Borrower has no knowledge of any
contingent liability for any release of any Hazardous Materials, and there
has
been no spill or release of any Hazardous Materials at any of its Property
in
violation of Environmental Laws, (v) to the knowledge of the Borrower, all
of its Property (including, without limitation, its Equipment) is free,
and has
at all times been free, of Hazardous Materials and underground storage
tanks and
(vi) to the knowledge of the Borrower, none of its Property has ever been
used as a waste disposal site, whether registered or unregistered.
(bb) Licenses
and Permits.
The
Borrower has obtained and holds in full force and effect all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary
or
advisable for the operation of its business as presently conducted and
as
proposed to be conducted, except where the failure to possess any of the
foregoing (individually or in the aggregate) could not reasonably be expected
to
have a Material Adverse Effect.
(cc) Government
Regulation.
The
Borrower is not subject to regulation under the Energy Policy Act of 2005,
Federal Power Act, the Interstate Commerce Act or any other Requirement
of Law
that limits its ability to incur Indebtedness or consummate the transactions
contemplated by this Agreement and the other Loan Documents.
(dd) Material
Contracts.
Set
forth on Schedule 6.1(dd) is a complete and accurate list of all Material
Contracts of the Borrower, showing as of the date hereof the parties, subject
matter and term thereof. Each such contract has been duly authorized, executed
and delivered by the Borrower and each other party thereto. Except as specified
in Schedule 6.1(dd), each Material Contract of the Borrower is in full
force and effect and is binding upon and enforceable against all parties
thereto
in accordance with its terms, and there exists no default under such contract
by
any party thereto.
(ee) Business
and Properties.
No
business of the Borrower is affected by any fire, explosion, accident,
drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or
other
casualty (whether or not covered by insurance) that could reasonably be
expected
to have a Material Adverse Effect.
-45-
(ff) Business
Plan.
The
Business Plan and the Financial Statements delivered to the Lender on the
Closing Date were prepared in good faith on the basis of assumptions which
were
fair in the context of the conditions existing at the time of delivery
thereof,
and, with respect to the Business Plan, represented, at the time of delivery,
the Borrower’s best estimate of its future financial performance.
(gg) Affiliate
Transactions.
Except
as specified in Schedule 6.1(gg), the Borrower is not a party to or bound
by any agreement or arrangement (whether oral or written) to which any
Affiliate
of the Borrower is a party except (i) in the ordinary course of and
pursuant to the reasonable requirements of the business of the Borrower
and
(ii) upon fair and reasonable terms no less favorable to the Borrower than
it could obtain in a comparable arm’s-length transaction with an unaffiliated
Person.
(hh) Compliance
with Anti-Terrorism Laws.
The
Borrower is and will remain in full compliance with all laws and regulations
applicable to it including, without limitation, (i) ensuring that no Person
who owns a controlling interest in or otherwise controls the Borrower is
or
shall be (A) listed on the Specially Designated Nationals and Blocked
Person List maintained by the Office of Foreign Assets Control ("OFAC"),
Department of the Treasury, or any other similar list maintained by the
OFAC
under any authorizing statute, Executive Order or regulation or (B) a
Person designated under Section 1(b), (c) or (d) of Executive Order
No. 13224 (September 23, 2001), any related enabling legislation or
any similar Executive Order and (ii) compliance with all applicable Bank
Secrecy Act (“BSA”) laws, regulations and government guidance on BSA compliance
and on the prevention and detection of money laundering violations. The
Borrower
acknowledges that the Lender has notified it that the Lender is required,
under
the USA Xxxxxxx Xxx, 00 X.X.X. §0000 (the “Patriot Act”), to obtain, verify and
record information that identifies the Borrower and the Guarantor including,
without limitation, the name and address of the Borrower and the Guarantor
and
such other information that will allow the Lender to identify the Borrower
and
the Guarantor in accordance with the Patriot Act.
All
representations and warranties made by the Borrower in this Agreement and
in
each other Loan Document to which it is a party shall survive the execution
and
delivery hereof and thereof and the closing of the transactions contemplated
hereby and thereby. The Borrower acknowledges and confirms that the Lender
is
relying on such representations and warranties without independent inquiry
in
entering into this Agreement.
ARTICLE
VII
COVENANTS
OF THE BORROWER
SECTION
7.1 Affirmative
Covenants.
Until
termination of the Lender’s obligation to make any Loan or to cause to be issued
any Letter of Credit under this Agreement, payment and satisfaction of
all
Obligations in full, and termination, Collateralization or expiration of
all
Letters of Credit:
(a) Corporate
Existence.
The
Borrower shall, and shall cause each of its Subsidiaries to, (i) maintain
its corporate existence, (ii) maintain in full force and effect all
material licenses, bonds, franchises, leases, trademarks, qualifications
and
authorizations to do business, and all material patents, contracts and
other
rights necessary or advisable to the profitable conduct of its businesses,
and
(iii) continue in the same lines of business as presently conducted by
it.
-46-
(b) Maintenance
of Property.
The
Borrower shall, and shall cause each of its Subsidiaries to, keep all property
useful and necessary to its business in good working order and condition
(ordinary wear and tear excepted) in accordance with its past operating
practices.
(c) Affiliate
Transactions.
The
Borrower shall, and shall cause each of its Subsidiaries to, conduct
transactions with any of its Affiliates on an arm’s-length basis or other basis
no less favorable to the Borrower or such Subsidiary than would apply in
a
transaction with a non-Affiliate and which are approved by the board of
directors (or similar governing body) of the Borrower or such
Subsidiary.
(d) Taxes.
Except
as specified in Schedule 6.1(q), the Borrower shall, and shall cause each
of its Subsidiaries to, pay, when due, (i) all tax assessments, and other
governmental charges and levies imposed against it or any of its property
and
(ii) all lawful claims that, if unpaid, might by law become a Lien upon its
property; provided,
however,
that,
unless such tax assessment, charge, levy or claim has become a Lien on
any of
the property of the Borrower or such Subsidiary, it need not be paid if
it is
being contested in good faith, by appropriate proceedings diligently conducted
and an adequate reserve or other appropriate provision shall have been
established therefor as required in accordance with GAAP.
(e) Requirements
of Law.
The
Borrower shall, and shall cause each of its Subsidiaries to, comply with
all
Requirements of Law applicable to it, including, without limitation, all
applicable federal, state, local or foreign laws and regulations, including,
without limitation, those relating to environmental and employee matters
(including the collection, payment and deposit of employees’ income,
unemployment, Social Security and Medicare hospital insurance taxes) and
with
respect to pension liabilities, provided
that the
Borrower shall not be deemed in violation hereof if the Borrower’s or such
Subsidiary’s failure to comply with any of the foregoing could not reasonably be
expected to have a Material Adverse Effect.
(f) Insurance.
The
Borrower shall, and shall cause each of its Subsidiaries to, maintain public
liability insurance, business interruption insurance, third party property
damage insurance and replacement value insurance on its assets (including
the
Collateral) under such policies of insurance, with such insurance companies,
in
such amounts and covering such risks as are at all times satisfactory to
the
Lender, all of which policies covering the Collateral shall name the Lender
as
an additional insured and the lender loss payee in case of loss, and contain
other provisions as the Lender may require to protect fully the Lender’s
interest in the Collateral and any payments to be made under such
policies.
-47-
(g) Books
and Records; Inspections.
The
Borrower shall, and shall cause each of its Subsidiaries to, (i) maintain
books and records (including computer records and programs) of account
pertaining to the assets, liabilities and financial transactions of the
Borrower
and its Subsidiaries in such detail, form and scope as is consistent with
good
business practice, which shall exclude the assets, liabilities and financial
transactions of all direct and indirect shareholders,
Subsidiaries and other Affiliates of the Borrower and (ii) provide the
Lender and its agents access to the premises of the Borrower and its
Subsidiaries at any time and from time to time, during normal business
hours and
upon three Business Days prior notice, and at any time after the occurrence
and
during the continuance of a Default or Event of Default, for the purposes
of
(A) inspecting and verifying the Collateral, (B) inspecting and
copying (at the Borrower’s expense) any and all records pertaining thereto, and
(C) discussing the affairs, finances and business of the Borrower and its
Subsidiaries with any officer, employee or director thereof or with the
Auditors, all of whom are hereby authorized to disclose to the Lender all
financial statements, work papers, and other information relating to such
affairs, finances or business. The Borrower shall reimburse the Lender
for the
reasonable travel and related expenses of the Lender’s employees or, at the
Lender’s option, of such outside accountants or examiners as may be retained by
the Lender to verify or inspect Collateral, records or documents of the
Borrower
and its Subsidiaries on a regular basis or for a special inspection if
the
Lender deems the same appropriate, except that, so long as no Event of
Default
has occurred and is continuing, the Borrower shall not be required to reimburse
the Lender for more than three inspections in any calendar year. If the
Lender’s
own employees are used, the Borrower shall also pay such reasonable per
diem
allowance as the Lender may from time to time establish, or, if outside
examiners or accountants are used, the Borrower shall also pay the Lender
such
sum as the Lender may be obligated to pay as fees therefor. All such Obligations
may be charged to the Loan Account or any other account of the Borrower
with the
Lender or any of its affiliates. The Borrower hereby authorizes the Lender
to
communicate directly with the Auditors to disclose to the Lender any and
all
financial information regarding either of the Loan Parties including, without
limitation, matters relating to any audit and copies of any letters, memoranda
or other correspondence related to the business, financial condition or
other
affairs of either of the Loan Parties. In addition, the Borrower shall
permit
the Lender and its agents access to the Borrower’s premises to conduct
appraisals of its Inventory on the terms and conditions with respect to
the
inspections set forth above, and the Borrower shall be required to reimburse
the
Lender for the reasonable travel and related expenses of the Lender’s employees
or, at the Lender’s option, of such outside appraisers as may be retained by the
Lender to appraise the Borrower’s Inventory, except that, so long as no Event of
Default has occurred and is continuing, the Borrower shall not be required
to
reimburse the Lender for more than one such appraisal from the Closing
Date
through the Expiration Date. Notwithstanding anything to the contrary contained
herein, if an Event of Default has occurred and is continuing, the Borrower
shall reimburse the Lender for all reasonable travel and related expenses
of the
Lender’s employees or, at the Lender’s option, of any outside accountants or
examiners retained by the Lender, in connection with field exams and appraisals
of the Collateral, which exams and appraisals shall be done at frequencies
determined by the Lender in its sole discretion.
-48-
(h) Notification
Requirements.
The
Borrower shall timely give the Lender the following notices and other
documents:
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(i)
|
Notice
of Defaults.
Promptly, and in any event within two Business Days after becoming aware
of the occurrence of a Default or Event of Default, a certificate
of a
Responsible Officer specifying the nature thereof and the Borrower’s
proposed response thereto, each in reasonable
detail.
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|
(ii)
|
Proceedings
or Changes.
Promptly, and in any event within five Business Days after the
Borrower
becomes aware of (A) any proceeding including, without limitation,
any proceeding the subject of which is based in whole or in part
on a
commercial tort claim being instituted or threatened to be instituted
by
or against a Loan Party or any of its Subsidiaries in any federal,
state,
local or foreign court or before any commission or other regulatory
body
(federal, state, local or foreign) involving a sum, together
with the sum
involved in all other similar proceedings, in excess of $100,000
in the
aggregate, (B) any order, judgment or decree involving a sum,
together with the sum of all other orders, judgments or decrees,
in excess
of $100,000 in the aggregate being entered against a Loan Party
or any of
its Subsidiaries or any of their respective property or assets,
(C) any notice or correspondence issued to either Loan Party or
Subsidiary thereof by a Governmental Authority warning, threatening
or
advising of the commencement of any investigation involving such
Loan
Party or Subsidiary or any of its property or assets, (D) any actual
or prospective change, development or event which has had or
could
reasonably be expected to have a Material Adverse Effect, (E) the
cessation of the business relationship of the Borrower with any
customer
of the Borrower whose purchases have accounted for more than
10% in the
aggregate of the sales of the Borrower in any year since the
fiscal year
ended December 31, 2004, or the receipt by the Borrower of any notice
of an intention to terminate any such relationship, (F) the cessation
of the business relationship of the Borrower with any vendor
or supplier
of the Borrower that have accounted for more than 10% in the
aggregate (in
volume of business) for the goods and services sold to the Borrower
in any
year since the fiscal year ended December 31, 2004, or the receipt by
the Borrower of any notice of an intention to terminate any such
relationship, (G) a change in the location of any Collateral from the
locations specified in Schedule 6.1(b), (H) a proposed or actual
change of the name, identity, corporate structure or jurisdiction
of
organization of either Loan Party or Subsidiary thereof, or (I) any
Collateral is subject to voluntary recall or a recall by or in
cooperation
with the United States Consumer Products Safety Commission or
any other
Governmental Authority for any reason, a written statement describing
such
proceeding, order, judgment, decree, change, recall, development
or event
and any action being taken by such Loan Party or any of its Subsidiaries
with respect thereto.
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-49-
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(iii)
|
ERISA
Notices.
|
|
(A)
|
Promptly,
and in any event within ten Business Days after a Termination
Event has
occurred, a written statement of a Responsible Officer describing
such
Termination Event and any action that is being taken with respect
thereto
by the Borrower or any ERISA Affiliate, and any action taken
or threatened
by the Internal Revenue Service, the Department of Labor or the
PBGC;
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|
(B)
|
promptly,
and in any event within three Business Days after the filing
thereof with
the Internal Revenue Service, a copy of each funding waiver request
filed
with respect to any Plan subject to the funding requirements
of
Section 412 of the Internal Revenue Code and all communications
received by the Borrower or any ERISA Affiliate with respect
to such
request;
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|
(C)
|
promptly,
and in any event within three Business Days after receipt by
the Borrower
or any ERISA Affiliate of the PBGC’s intention to terminate a Pension Plan
or to have a trustee appointed to administer a Pension Plan,
a copy of
each such notice;
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|
(D)
|
promptly,
and in any event within three Business Days after the occurrence
thereof,
notice (including the nature of the event and, when known, any
action
taken or threatened by the Internal Revenue Service or the PBGC
with
respect thereto) of:
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|
(1)
|
any
Prohibited Transaction which could subject the Borrower or any
ERISA
Affiliate to a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Internal Revenue Code
in connection with any Plan, or any trust created
thereunder,
|
|
(2)
|
any
cessation of operations (by the Borrower or any ERISA Affiliate)
at a
facility in the circumstances described in Section 4062(e) of
ERISA,
|
-50-
|
(3)
|
a
failure by the Borrower or any ERISA Affiliate to make a payment
to a Plan
required to avoid imposition of a Lien under Section 302(f) of ERISA
or Section 412(n) of the Internal Revenue
Code,
|
|
(4)
|
the
adoption of an amendment to a Plan requiring the provision of
security to
such Plan pursuant to Section 307 of ERISA or Section 401(a)(29)
of the Internal Revenue Code, or
|
|
(5)
|
any
change in the actuarial assumptions or funding methods used for
any Plan
where the effect of such change is to increase materially or
reduce
materially the unfunded benefit liability or obligation to make
periodic
contributions;
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|
(E)
|
promptly
upon the request of the Lender, each annual report (IRS Form 5500
series) and all accompanying schedules, the most recent actuarial
reports,
the most recent financial information concerning the financial
status of
each Plan administered or maintained by the Borrower or any ERISA
Affiliate, and schedules showing the amounts contributed to each
Pension
Plan by or on behalf of the Borrower or any ERISA Affiliate in
which any
of its personnel participate or from which such personnel may
derive a
benefit, and each Schedule B (Actuarial Information) to the annual
report filed by the Borrower or any ERISA Affiliate with the
Internal
Revenue Service with respect to each such
Plan;
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|
(F)
|
promptly
upon the filing thereof, copies of any Form 5310, or any successor or
equivalent form to Form 5310, filed with the Internal Revenue Service
in connection with the termination of any Plan, and copies of
any standard
termination notice or distress termination notice filed with
the PBGC in
connection with the termination of any Pension
Plan;
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|
(G)
|
promptly,
and in any event within three Business Days after receipt thereof
by the
Borrower or any ERISA Affiliate, notice and demand for payment
of
withdrawal liability under Section 4201 of ERISA with respect to a
Multiemployer Plan;
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|
(H)
|
promptly,
and in any event within three Business Days after receipt thereof
by the
Borrower or any ERISA Affiliate, notice by the Department of
Labor of any
penalty, audit or investigation or purported violation of ERISA
with
respect to a Plan;
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-51-
|
(I)
|
promptly,
and in any event within three Business Days after receipt thereof
by the
Borrower or any ERISA Affiliate, notice by the Internal Revenue
Service or
the Treasury Department of any income tax deficiency or delinquency,
excise tax penalty, audit or investigation with respect to a
Plan;
and
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(J)
|
promptly,
and in any event within three Business Days after receipt thereof
by the
Borrower or any ERISA Affiliate, notice of any administrative
or judicial
complaint, or the entry of a judgment, award or settlement agreement,
in
either case with respect to a Plan that could reasonably be expected
to
have a Material Adverse Effect.
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(iv)
|
Material
Contracts.
Promptly, and in any event within ten Business Days after any
Material
Contract is terminated or amended in any material respect, or
any new
Material Contract is entered into, a written statement describing
such
event, with copies of amendments or new contracts, and an explanation
of
any actions being taken with respect
thereto.
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(v)
|
Environmental
Matters.
Promptly, and in any event within ten days after receipt by a
Loan Party
thereof, copies of each (A) written notice that any violation of any
Environmental Law may have been committed or is about to be committed
by a
Loan Party which violation could reasonably be expected to result
in
liability or involve remediation costs in excess of $50,000,
(B) written notice that any administrative or judicial complaint
or
order has been filed or is about to be filed against a Loan Party
alleging
violations of any Environmental Law or requiring a Loan Party
to take any
action in connection with the release of toxic or Hazardous Materials
into
the environment which violation or action could reasonably be
expected to
result in liability or involve remediation costs in excess of
$50,000,
(C) written notice from a Governmental Authority or other Person
alleging that a Loan Party may be liable or responsible for costs
associated with a response to or cleanup of a release of a Hazardous
Material into the environment or any damages caused thereby which
costs
could reasonably be expected to exceed $50,000 or (D) Environmental
Law adopted, enacted or issued after the date hereof of which
the Borrower
becomes aware which could reasonably be expected to have a Material
Adverse Effect.
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-52-
(i) Casualty
Loss.
The
Borrower shall, and shall cause each of its Subsidiaries to, (i) provide
written notice to the Lender, within ten Business Days, of any material
damage
to, the destruction of or any other material loss to any asset or property
owned
or used by the Borrower or any of its Subsidiaries other than any such
asset or
property with a net book value (individually or in the aggregate) less
than
$50,000 or any condemnation, confiscation or other taking, in whole or
in part,
or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such asset or property owned or used by the Borrower
or
any of its Subsidiaries together with a statement of the amount of the
damage,
destruction, loss or diminution in value (a “Casualty Loss”) and
(ii) diligently file and prosecute its claim for any award or payment in
connection with a Casualty Loss.
(j) Qualify
to Transact Business.
The
Borrower shall, and shall cause each of its Subsidiaries to, qualify to
transact
business as a foreign corporation, limited partnership or limited liability
company, as the case may be, in each jurisdiction where the nature or extent
of
its business or the ownership of its property requires it to be so qualified
or
authorized and where failure to qualify or be authorized could reasonably
be
expected to have a Material Adverse Effect.
(k) Financial
Reporting.
The
Borrower shall deliver to the Lender the following:
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(i)
|
Annual
Financial Statements.
As soon as available, but not later than 120 days after the fiscal
year ending December 31, 2006 and ninety days after the end of each
fiscal year thereafter, (A) the Parent’s annual audited and certified
consolidated and consolidating Financial Statements for or as
of the end
of the prior fiscal year; (B) the Borrower’s annual reviewed
consolidated and consolidating Financial Statements for or as
of the end
of the prior fiscal year; (C) a comparison in reasonable detail to
the prior year’s audited Financial Statements; (D) the Auditors’
opinion of the Parent’s Financial Statements without Qualification; and
(E) a narrative discussion of each Loan Party’s financial condition
and results of operations and the liquidity and capital resources
for such
fiscal year, prepared by the Guarantor’s chief financial officer,
provided
that, if the Financial Statements specified in clause (A) hereof are
not available or the Parent’s consolidating Financial Statements specified
in clause (A) hereof are not satisfactory to the Lender for any
reason or if the Auditors’ opinion of the Parent’s Financial Statements
contains a Qualification, then the Borrower shall have an Auditor
prepare
and deliver the Borrower’s separate audited Financial Statements for the
applicable fiscal year and each fiscal year thereafter, together
with the
other items specified in clauses (C), (D) and (E) hereof, but with
respect to the Borrower on a separate
basis.
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-53-
|
(ii)
|
Projections.
Not later than twenty days before the end of each fiscal year
of the
Borrower, the Business Plan of the Borrower certified by the
Borrower’s
chief financial officer for the one-year period commencing with
the
following fiscal year.
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|
(iii)
|
Monthly
Financial Statements.
As soon as available, but not later than twenty days after the
end of each
month, commencing with the month in which the Closing Date occurs,
(A) the Borrower’s interim Financial Statements as at the end of such
month and for the fiscal year to date, along with comparisons
of such
Financial Statements to (x) the same periods in the prior fiscal year
and (y) the projections for such periods in the Business Plan,
(B) a certification by the Borrower’s chief financial officer that
such Financial Statements have been prepared in accordance with
GAAP and
are fairly stated in all material respects (subject to normal
year-end
audit adjustments) and (C) a compliance certificate, substantially in
the form of Exhibit C (a “Compliance Certificate”), signed by the
Borrower’s chief financial officer, with an attached schedule of
calculations demonstrating compliance with the Financial Covenants
as of
the end of such month.
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|
(iv)
|
Borrowing
Base Certificate.
(A) Daily, not later than 11:00 a.m. (New York time) on each
Business Day, a borrowing base certificate, substantially in
the form of
Exhibit H detailing the Eligible Receivables and the Eligible
Inventory containing a calculation of availability and reflecting
all
sales, collections, and debit and credit adjustments, as of the
previous
Business Day, which shall be prepared by or under the supervision
of the
chief financial officer of the Borrower and certified by such
officer or
any other officer of the Borrower acceptable to the Lender (or,
if
expressly requested by the Lender on any Business Day, the Borrower’s
chief financial officer) (a “Borrowing Base Certificate”) and
(B) monthly, not later than the twentieth day of each month, a
Borrowing Base Certificate detailing the Eligible Receivables
and Eligible
Inventory (provided
that the calculation of actual ineligible Receivables and actual
ineligible Inventory will be reported on a monthly basis in such
certificate as of the last day of the preceding month), containing
a
calculation of availability and reflecting all sales, collections,
and
debit and credit adjustments, as of the last day of the preceding
month
(or as of a more recent date as the Lender may from time to time
request),
which shall be prepared by or under the supervision of the chief
financial
officer of the Borrower and certified by such
officer.
|
|
(v)
|
Agings.
Monthly, not later than the twentieth day of each month, agings
of the
Borrower’s Receivables and accounts payable, in scope and detail
satisfactory to the Lender, as of the last day of the preceding
month.
|
-54-
|
(vi)
|
Inventory.
Monthly, not later than the twentieth day of each month, a report
of the
Borrower’s Inventory, based upon a perpetual inventory, which shall
describe such Inventory by category, item (in reasonable detail),
location
and whether or not such Inventory constitutes Eligible Inventory,
as of
the last day of the preceding
month.
|
|
(vii)
|
Shareholder
and SEC Reports.
As soon as available, but not later than five days after the
same are sent
or filed, as the case may be, copies of all financial statements
and
reports that either Loan Party sends to any of its shareholders
or either
Loan Party or the Parent files with the Securities and Exchange
Commission
or any other Governmental
Authority.
|
|
(viii)
|
Other
Financial Information.
Promptly after the request by the Lender therefor, such additional
financial statements and other related data and information as
to the
business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of the Borrower
or the
Guarantor as the Lender may from time to time reasonably
request.
|
(l) Payment
of Liabilities.
The
Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge,
in the ordinary course of business, all obligations and liabilities (including,
without limitation, tax liabilities and other governmental charges), except
where the same may be contested in good faith by appropriate proceedings
and for
which adequate reserves with respect thereto have been established in accordance
with GAAP.
(m) ERISA.
The
Borrower shall, and shall cause each of its ERISA Affiliates to,
(i) maintain each Plan intended to qualify under Section 401(a) of the
Internal Revenue Code so as to satisfy the qualification requirements thereof,
(ii) contribute, or require that contributions be made, in a timely manner
(A) to each Plan in amounts sufficient (I) to satisfy the minimum
funding requirements of Section 302 of ERISA or Section 412 of the
Internal Revenue Code, if applicable, (II) to satisfy any other
Requirements of Law and (III) to satisfy the terms and conditions of each
such Plan, and (B) to each Foreign Plan in amounts sufficient to satisfy
the minimum funding requirements of any applicable law or regulation, without
any application for a waiver from any such funding requirements,
(iii) cause each Plan or Foreign Plan to comply in all material respects
with applicable law (including all applicable statutes, orders, rules and
regulations) and (iv) pay in a timely manner, in all material respects, all
required premiums to the PBGC.
-55-
As
used
in this Section 7.1(m), “Foreign Plan” means a plan that provides
retirement or health benefits and that is maintained, or otherwise contributed
to, by the Borrower for the benefit of employees outside the United
States.
(n) Environmental
Matters.
The
Borrower shall, and shall cause each of its Subsidiaries to, conduct its
business so as to comply in all material respects with all applicable
Environmental Laws including, without limitation, compliance in all material
respects with the terms and conditions of all permits and governmental
authorizations.
(o) Trademarks.
The
Borrower shall, and shall cause each of its Subsidiaries to, do and cause
to be
done all things necessary to preserve and keep in full force and effect
all of
its material registrations of trademarks, service marks and other marks,
trade
names and other trade rights.
(p) Solvency.
The
Borrower shall, and shall cause each of its Subsidiaries to, be and remain
Solvent at all times.
(q) Billing
Practices.
The
Borrower shall notify the Lender of any Receivable of the Borrower generated
pursuant to the sale of goods or the rendition of services on any basis
other
than on the terms specified in Schedule 7.1(q).
(r) Subsidiary
Dividends.
The
Borrower shall cause each of its Subsidiaries to declare and pay dividends
on
account of its capital stock or other equity interests as frequently as,
and to
the fullest extent, permitted by applicable law.
(s) Post
Closing Deliveries.
Not
later than February 21, 2007, the Borrower shall deliver to the Lender
(i) the Lockbox Agreement, duly executed by the Borrower and the Lockbox
Bank party thereto, (ii) a Control Agreement, duly executed by the Borrower
and any bank or financial institution with which the Borrower has a deposit
account other than the Borrower’s payroll account with PNC Bank and the
Operating Account and (iii) a Manual Internal Funds Transfer Agreement, in
form and substance satisfactory to the Lender, duly executed by the Borrower
and
the Lender. In addition, the Borrower shall also deliver to the Lender
the
Borrower’s reviewed Financial Statements with respect to the December 31,
2005 fiscal year, no later than ten days after such Financial Statements
are
released by the Auditors.
SECTION
7.2 Negative
Covenants.
Until
termination of the Lender’s obligation to make any Loan or to cause to be issued
any Letter of Credit under this Agreement, payment and satisfaction of
all
Obligations in full, and termination, Collateralization or expiration of
all
Letters of Credit:
(a) Indebtedness.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, at any time create, incur, assume or suffer to exist any
Indebtedness other than:
|
(i)
|
Indebtedness
under the Loan Documents;
|
-56-
|
(ii)
|
endorsement
of negotiable instruments for deposit or collection in the ordinary
course
of business; or
|
|
(iii)
|
Indebtedness
(including Capitalized Lease Obligations) incurred solely to
finance the
acquisition of fixed or capital assets in an aggregate principal
amount
not to exceed, as to the Borrower and its Subsidiaries taken
together,
$200,000 at any time outstanding.
|
(b) Contingent
Obligations.
Except
as specified in Schedule 6.1(i), the Borrower will not, directly or
indirectly, incur, assume, or suffer to exist any Contingent Obligation,
excluding indemnities given in connection with this Agreement or the other
Loan
Documents in favor of the Lender.
(c) Corporate
Changes, Etc.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, merge or consolidate with any Person or amend, alter or modify
its
Governing Documents or its legal name, mailing address, chief executive
office
or principal places of business, structure, status or existence, or liquidate
or
dissolve itself (or suffer any liquidation or dissolution) or issue any
capital
stock or other equity interests.
(d) Change
in Nature of Business.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
make any material change in the nature of its business as carried on at
the date
hereof or enter into any new line of business.
(e) Sales,
Etc. of Assets.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, in any fiscal year, sell, transfer or otherwise dispose of
any of
its assets (other than sales of Inventory in the ordinary course of business),
or grant any option or other right to purchase or otherwise acquire any
of its
assets, in each case, with an aggregate value, as to the Borrower and its
Subsidiaries taken together, in excess of $50,000.
(f) Use
of
Proceeds.
The
Borrower will not (i) use any portion of the proceeds of any Loan in
violation of Section 2.3 or for the purpose of purchasing or carrying any
“margin stock” (as defined in Regulation U of the Federal Reserve Board) in
any manner which violates the provisions of Regulation T, U or X of the
Federal Reserve Board or for any other purpose in violation of any applicable
statute or regulation, or of the terms and conditions of this Agreement
or
(ii) take, or permit any Person acting on its behalf to take, any action
which could reasonably be expected to cause this Agreement or any other
Loan
Document to violate any regulation of the Federal Reserve Board.
(g) Cancellation
of Debt.
The
Borrower will not, and will not permit any of its Subsidiaries to, cancel
any
liability or debt owed to it, except for consideration in the ordinary
course of
business.
(h) Loans
to Other Persons.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
make cash loans or advance any credit to any Affiliate or other Person,
except
that the Borrower may make a loan to its shareholder or an Affiliate after
the
first anniversary of the Closing Date so long as (i) no Default or Event of
Default has occurred and is continuing, (ii) the Lender shall have received
the most recent monthly and year to date Financial Statements of the Borrower
required to be delivered under Section 7.1(k)(iii) immediately preceding
the making of such loan and the Compliance Certificate required to be delivered
in connection therewith which shall demonstrate, among other things, that
the
Fixed Charge Coverage Ratio, calculated on a twelve-month trailing basis,
is not
less than 1.50 to 1.00 immediately prior to and after giving effect to
such loan
and shall set forth the recipient of and purpose for any such loan, and
(iii) after giving effect to the making of such loan and all amounts
required to be paid to bring current all accounts payable and all accrued
expenses of the Borrower on a pro forma basis, Excess Availability shall
at all
times be, for the period beginning sixty days before, through the period
ending
sixty days after, the making of such loan, not less than $2,000,000, it
being
understood that the Borrower shall have the right, within ten days after
the
occurrence of any deficiency in such Excess Availability after the making
of
such loan, to cure such deficiency to the Lender’s satisfaction, in its sole and
absolute discretion. Nothing contained herein shall limit the Borrower’s ability
to permit interest to accrue and be capitalized on intercompany Indebtedness
it
is owed by its Affiliates.
-57-
(i) Liens,
Etc.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, at any time create, incur, assume or suffer to exist any Lien
on or
with respect to any assets, other than:
|
(i)
|
Liens
created hereunder and by the Security
Documents;
|
|
(ii)
|
Liens
securing Indebtedness permitted by Section 7.2(a)(iii) incurred to
finance the acquisition of fixed or capital assets, provided
that (A) such Liens shall be created substantially simultaneously
with the acquisition of such assets, (B) such Liens do not at any
time encumber any assets other than the assets financed by such
Indebtedness, (C) such Liens are not modified to secure other
Indebtedness and the amount of Indebtedness secured thereby is
not
increased and (D) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed the original purchase price
of such
assets; and
|
|
(iii)
|
Permitted
Liens.
|
(j) Dividends,
Stock Redemptions, Distributions, Etc.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, pay any dividends or distributions on, purchase, redeem or
retire
any shares of any class of its capital stock or other equity interests
or any
warrants, options or rights to purchase any such capital stock or other
equity
interests, whether now or hereafter outstanding (“Interests”), make any payment
on account of or set apart assets for a sinking or other analogous fund
for, the
purchase, redemption, defeasance, retirement or other acquisition of its
Interests, or make any other distribution in respect thereof, either directly
or
indirectly, whether in cash or property or in obligations of the Borrower
or any
of its Subsidiaries, except that (i) a Subsidiary may pay dividends to the
Borrower or to another Subsidiary of the Borrower and (ii) commencing on
the first anniversary of the Closing Date, the Borrower may pay a dividend
to
its shareholder so long as (A) no Default or Event of Default has occurred
and is continuing, (B) the Lender shall have received the most recent
monthly and year to date Financial Statements of the Borrower required
to be
delivered under Section 7.1(k)(iii) immediately preceding the payment of
such dividend and the Compliance Certificate required to be delivered in
connection therewith which shall demonstrate, among other things, that
the Fixed
Charge Coverage Ratio, calculated on a twelve-month trailing basis, is
not less
than 1.50 to 1.00, immediately prior to and after giving effect to such
dividend
and set forth the recipient of and purpose for any such dividend, and
(C) after giving affect to the payment of such dividend and all amounts
required to be paid to bring current all accounts payable and all accrued
expenses of the Borrower on a pro forma basis, Excess Availability shall
at all
times be, for the period beginning sixty days before, through the period
ending
sixty days after the payment of such dividend, not less than $2,000,000,
it
being understood that the Borrower shall have the right, within ten days
after
the occurrence of any deficiency in such Excess Availability after the
payment
of such dividend, to cure such deficiency to the Lender’s satisfaction in its
sole and absolute discretion.
-58-
(k) Investments.
The
Borrower will not, and will not permit any of its Subsidiaries to, directly
or
indirectly, at any time make or hold any Investment in any Person (whether
in
cash, securities or other property of any kind) other than Investments
in Cash
Equivalents so long as the Lender has a perfected, first priority Lien
on such
Cash Equivalents.
(l) Partnerships;
Subsidiaries; Joint Ventures; Management Contracts.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
create any direct or indirect Subsidiary, enter into any joint venture
or
similar arrangement or become a partner in any general or limited partnership
or
enter into any management contract permitting third party management rights
with
respect to the business of the Borrower or any of its Subsidiaries.
(m) Fiscal
Year.
The
Borrower will not, and will not permit any of its Subsidiaries to, change
its
fiscal year from a year ending December 31.
(n) Accounting
Changes.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
make or permit any change in accounting policies or reporting practices,
except
as required by GAAP.
(o) Executive
Compensation.
The
Borrower will not, and will not permit any of its Subsidiaries to, pay
any
salary, management, director or other fee or other direct or indirect
remuneration or compensation or cash corporate overhead expense to its
Affiliates, employees of its Affiliates, officers, directors or stockholders
in
excess of the amounts specified in Schedule 7.2(o).
(p) No
Prohibited Transactions Under ERISA.
The
Borrower will not, and will not permit any of its ERISA Affiliates to,
directly
or indirectly:
|
(i)
|
Engage
in any Prohibited Transaction which could reasonably be expected
to result
in a civil penalty or excise tax described in Section 406 of ERISA or
Section 4975 of the Internal Revenue Code for which a statutory or
class exemption is not available or a private exemption has not
been
previously obtained from the Department of
Labor;
|
-59-
|
(ii)
|
permit
to exist with respect to any Pension Plan any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412
of the Internal Revenue Code), whether or not
waived;
|
|
(iii)
|
terminate
any Pension Plan where such event would result in any liability
of the
Borrower or any ERISA Affiliate under Title IV of
ERISA;
|
|
(iv)
|
fail
to make any required contribution or payment to any Multiemployer
Plan;
|
|
(v)
|
fail
to pay any required installment or any other payment required
under
Section 412 of the Internal Revenue Code on or before the due date
for such installment or other
payment;
|
|
(vi)
|
amend
a Pension Plan resulting in an increase in current liability
for the plan
year such that the Borrower or any ERISA Affiliate is required
to provide
security to such Plan under Section 307 of ERISA or
Section 401(a)(29) of the Internal Revenue
Code;
|
|
(vii)
|
withdraw
from any Multiemployer Plan where such withdrawal is reasonably
likely to
result in any liability of any such entity under Title IV of ERISA;
or
|
|
(viii)
|
take
any action that would cause the imposition of an excise tax under
Section 4978 or Section 4979A of the Internal Revenue
Code.
|
(q) Unusual
Terms of Sale.
The
Borrower will not, and will not permit any of its Subsidiaries to, sell
goods or
products or render services on extended or consignment terms or on a progress
billing or xxxx and hold basis, or on any other unusual terms.
(r) Prepayments
and Amendments of Material Contracts.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
(i) make any prepayment of any Indebtedness, other than the prepayment of
the Loans in accordance with the terms of this Agreement, or (ii) amend,
modify, cancel or terminate, or permit the amendment, modification, cancellation
or termination of, any Material Contract, except where such amendment or
modification could not reasonably be expected to have a Material Adverse
Effect.
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(s) Lease
Obligations.
The
Borrower will not, and will not permit any of its Subsidiaries to, at any
time
create, incur or assume any obligations as lessee for the rental or hire
of real
or personal property in connection with any sale and leaseback
transaction.
(t) Bank
Accounts.
The
Borrower will not, and will not permit any of its Subsidiaries to, open,
maintain or otherwise have any checking, savings or other accounts at any
bank
or other financial institution, or any other account where money is or
may be
deposited or maintained with any other Person, other than (i) payroll
accounts and (ii) accounts specified in Schedule 7.2(t).
(u) Acquisition
of Stock or Assets.
The
Borrower will not, and will not permit any of its Subsidiaries to, acquire
or
commit or agree to acquire any stock, securities or assets of any other
Person
other than Equipment and Inventory acquired in the ordinary course of
business.
(v) Securities
and Deposit Accounts.
The
Borrower will not, and will not permit any of its Subsidiaries to,
(i) establish or maintain any Securities Account or deposit account unless
the Lender shall have received a Control Agreement, duly executed by the
Borrower and the securities intermediary or depository bank parties thereto
and
in full force and effect, in respect of such Securities Account or
(ii) transfer any financial assets from any Securities Account or deposit
account; provided,
however,
that, in
the case of Securities Accounts, so long as no Event of Default has occurred
and
is continuing or would result therefrom, the Borrower and its Subsidiaries
may
(A) use such assets to the extent permitted by this Agreement, or
(B) sell or trade such assets in the ordinary course of business so long as
the proceeds of such sales or trades are deposited in a deposit account
or a
Securities Account in respect of which the Lender has received a Control
Agreement duly executed by the Borrower and the applicable depository bank
or
securities intermediary and that otherwise is in full force and
effect.
(w) Accounts
Receivable Terms.
Without
the Lender’s written consent, the Borrower will not, and will not permit any of
its Subsidiaries to, make any of its current account receivable practices
less
restrictive than the terms on the date hereof as set forth on
Schedule 7.1(q), including, without limitation, adjusting order size (in
either gross dollar amount or number of units shipped).
(x) Negative
Pledge.
The
Borrower will not, and will not permit any of its Subsidiaries to, enter
into or
suffer to exist any agreement (other than in favor of the Lender) prohibiting
or
conditioning the creation or assumption of any Lien upon any of its
assets.
ARTICLE
VIII
FINANCIAL
COVENANTS
Until
termination of the Lender’s obligations to make any Loan or to cause to be
issued any Letters of Credit under this Agreement, payment and satisfaction
of
all Obligations in full, and termination, Collateralization or expiration
of all
Letters of Credit:
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SECTION
8.1 Tangible
Net Worth.
The
Tangible Net Worth of the Borrower, as of the end of each month during
each
period set forth below, shall not be less than the amount set forth below
opposite such period:
|
Period
|
Minimum
Tangible Net Worth
|
|||
|
The
Closing Date through March 31, 2007
|
$
|
3,000,000
|
||
|
April 30,
2007 through June 30, 2007
|
$
|
3,500,000
|
||
|
July 31,
2007 and each month-end thereafter
|
$
|
4,000,000
|
||
SECTION
8.2 Fixed
Charge Coverage Ratio.
The
Fixed Charge Coverage Ratio for the last day of each month ending during
each
period set forth below, calculated on a twelve-month trailing basis as
of each
such last day, shall not be less than the ratio set forth below opposite
such
period:
|
Period
|
Minimum
Fixed Charge Coverage Ratio
|
|||
|
The
Closing Date through February 28, 2007
|
0.50
to 1.00
|
|||
|
March 1,
2007 through April 30, 2007
|
0.75
to 1.00
|
|||
|
May 1,
2007 through June 30, 2007
|
1.00
to 1.00
|
|||
|
Each
consecutive twelve-month period ending
thereafter
|
1.10
to 1.00
|
|||
SECTION
8.3 Capital
Expenditures.
The
aggregate amount of the Borrower’s and its Subsidiaries’ consolidated Capital
Expenditures made or committed to be made in any fiscal year commencing
with the
fiscal year ending December 31, 2007 shall not exceed
$250,000.
SECTION
8.4 Business
Plan.
The
Lender and the Borrower acknowledge that the foregoing financial covenants
were
established by the Lender and the Borrower on the basis of the Business
Plan
delivered to the Lender on the Closing Date, after leaving a margin in
favor of
the Borrower which the Lender and the Borrower have agreed is fair. Accordingly,
the Lender and the Borrower have agreed that any failure by the Borrower
to
comply with the terms of any Financial Covenant shall be deemed material
for
purposes of this Agreement.
ARTICLE
IX
EVENTS
OF DEFAULT
SECTION
9.1 Events
of Default.
The
occurrence of any of the following events shall constitute an “Event of
Default”:
(a) the
Borrower shall fail to pay any principal, interest, fees, expenses or other
Obligations when payable, whether at stated maturity, by acceleration,
or
otherwise; or
(b) either
Loan Party shall (i) default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Section 2.3,
2.4, 7.1(a)(i), 7.1(c), 7.1(g)(ii), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(q),
7.2
(other than 7.2(w)), 8.1, 8.2, 8.3, or 10.1 hereof, Section 6 of the
Guaranty; or (ii) default in the performance or observance of any
agreement, covenant, condition, provision or term contained in this Agreement
or
any other Loan Document (other than those referred to in Sections 9.1(a)
and (b)(i)) and such default continues for a period of ten days; or
-62-
(c) either
Loan Party shall dissolve, wind up or otherwise cease to conduct its business;
or
(d) either
Loan Party shall become the subject of an Insolvency Event; or
(e) (i) either
Loan Party shall fail to make any payment (whether of principal, interest
or
otherwise and regardless of amount) in respect of any Material Indebtedness
when
due (whether at scheduled maturity or by required prepayment, acceleration,
demand or otherwise), or (ii) any event or condition occurs that results in
any Material Indebtedness becoming due prior to its scheduled maturity
or that
enables or permits the holder or holders (or a trustee or agent on behalf
of
such holder or holders) to declare any Material Indebtedness to be due,
or to
require the prepayment, repurchase, redemption or defeasance thereof, prior
to
its scheduled maturity; or
(f) any
representation or warranty made by either Loan Party under or in connection
with
any Loan Document or amendment or waiver thereof, or in any Financial Statement,
report, document or certificate delivered in connection therewith, shall
prove
to have been incorrect in any material respect when made or deemed made;
or
(g) any
judgment or order for the payment of money which, when taken together with
all
other judgments and orders rendered against the Loan Parties taken together,
exceeds $250,000 in the aggregate shall be rendered against the Loan Parties
and
shall not be stayed, vacated, bonded or discharged within thirty days;
or
(h) (i) less
than 50.1% in the aggregate of the shares of the voting stock or other
voting
equity interests of the Borrower shall be directly or indirectly owned
or
controlled by the Guarantor, or more than 49.9% in the aggregate of such
shares
or equity interests shall become subject to any contractual, judicial or
statutory Lien other than a contractual Lien in favor of the Lender or
(ii) Xxxxxxx Xxxxx, or a successor satisfactory to the Lender, shall cease
to be the Chief Operating Officer and Chief Financial Officer of the Borrower
and such Person has not been replaced by a successor satisfactory to the
Lender
in its sole discretion within ten days; or
(i) (i) the
Borrower has failed to notify the Bank in writing within thirty days of
a change
in the majority of the members of the board of directors of the Guarantor
or the
Borrower from the Persons who were members of such board of directors on
the
Closing Date or (ii) the occurrence of any change in control or similar
event with respect to the Guarantor or the Borrower as defined or described
under any indenture or agreement in respect of Indebtedness to which the
Guarantor or the Borrower is a party and such change or event permits such
Indebtedness to be accelerated; or
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(j) any
covenant, agreement or obligation of a Loan Party contained in or evidenced
by
any of the Loan Documents shall cease to be enforceable, or shall be determined
to be unenforceable, in accordance with its terms; the Borrower or the
Guarantor
shall deny or disaffirm its obligations under any of the Loan Documents
or any
Liens granted in connection therewith or shall otherwise challenge any
of its
obligations under any of the Loan Documents; or any Liens granted on any
of the
Collateral shall be determined to be void, voidable or invalid, are subordinated
or are not given the priority contemplated by this Agreement or any other
Loan
Document; or
(k) a
Security Document shall for any reason cease to create a valid and perfected
first priority Lien on the Collateral purported to be covered thereby;
or
(l) if
the
Borrower has separate audited Financial Statements, the independent public
accountants for the Borrower shall deliver a Qualified opinion on any Financial
Statement; or
(m) more
than
10% in the aggregate of the Borrower’s vendors or suppliers (in volume of
business) shall have ceased, or have given notice that they intend to cease,
supplying goods or rendering services in substantially the same amount
to the
Borrower and the Borrower shall not have obtained replacement goods or
services
from other sources on terms at least as favorable to the Borrower within
thirty
days of such cessation or notice; or
(n) the
occurrence of any event or condition that, in the Lender’s judgment, could be
expected to have a Material Adverse Effect, provided
that, if
such event or condition is the termination or nonrenewal of a Material
Contract,
the Borrower shall have thirty days to obtain one or more additional contracts
that eliminate any such Material Adverse Effect to the Lender’s reasonable
satisfaction.
SECTION
9.2 Acceleration,
Termination and Cash Collateralization.
Upon
the occurrence and during the continuance of an Event of Default, the Lender
may
take any or all of the following actions, without prejudice to the rights
of the
Lender to enforce its claims against the Borrower:
(a) Acceleration.
To
declare all Obligations immediately due and payable (except with respect
to any
Event of Default with respect to a Loan Party specified in Section 9.1(d),
in which case all Obligations shall automatically become immediately due
and
payable) without presentment, demand, protest or any other action or obligation
of the Lender.
(b) Termination
of Commitment.
To
declare the Lender’s obligation to make Advances and to cause the issuance of
Letters of Credit hereunder immediately terminated (except with respect
to any
Event of Default with respect to a Loan Party set forth in Section 9.1(d),
in which case such obligation shall automatically terminate) and, at all
times
thereafter, any Loan made by the Lender and the issuance of any Letter
of Credit
shall be in the Lender’s sole and absolute discretion. Notwithstanding any such
termination, until all Obligations shall have been fully and indefeasibly
paid
and satisfied, the Lender shall retain all rights under guaranties and
all
security in existing and future Receivables, Inventory, General Intangibles,
Investment Property and Equipment of the Borrower and all other Collateral
held
by it hereunder and under the Security Documents, and the Borrower shall
continue to turn over all Collections to the Lender.
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(c) Cash
Collateralization.
With
respect to all Letters of Credit outstanding at the time of the acceleration
of
the Obligations under Section 9.2(a) or otherwise at any time after the
Expiration Date, the Borrower shall at such time deposit in a cash collateral
account established by or on behalf of the Lender an amount equal to 105%
of the
aggregate then undrawn and unexpired amount of such Letters of Credit.
Amounts
held in such cash collateral account shall be under the sole dominion and
control of the Lender and applied by the Lender to the payment of drafts
drawn
under such Letters of Credit, and the balance, if any, in such cash collateral
account, after all such Letters of Credit shall have expired or been fully
drawn
upon shall be applied to repay the other Obligations. After all such Letters
of
Credit shall have expired or been fully drawn upon and all Obligations
shall
have been satisfied, the balance, if any, in such cash collateral account
shall
be returned to the Borrower or to such other Person as may be lawfully
entitled
thereto.
SECTION
9.3 Other
Remedies.
(a) Upon
the
occurrence and during the continuance of an Event of Default, the Lender
shall
have all rights and remedies with respect to the Obligations and the Collateral
under applicable law and the Loan Documents, and the Lender may do any
or all of
the following:
|
(i)
|
remove
for copying all documents, instruments, files and records (including
the
copying of any computer records) relating to the Borrower’s Receivables or
use (at the expense of the Borrower) such supplies or space of
the
Borrower at the Borrower’s places of business necessary to administer,
enforce and collect such Receivables including, without limitation,
any
supporting obligations;
|
|
(ii)
|
accelerate
or extend the time of payment, compromise, issue credits, or
bring suit on
the Borrower’s Receivables (in the name of the Borrower or the Lender) and
otherwise administer and collect such
Receivables;
|
|
(iii)
|
sell,
assign and deliver the Borrower’s Receivables with or without
advertisement, at public or private sale, for cash, on credit
or
otherwise, subject to applicable law;
and
|
|
(iv)
|
foreclose
the security interests created pursuant to the Loan Documents
by any
available procedure, or take possession of any or all of the
Collateral,
without judicial process and enter any premises where any Collateral
may
be located for the purpose of taking possession of or removing
the
same.
|
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(b) The
Lender may bid or become a purchaser at any sale, free from any right of
redemption, which right is expressly waived by the Borrower. If notice
of
intended disposition of any Collateral is required by law, it is agreed
that ten
days’ notice shall constitute reasonable notification. The Borrower will
assemble the Collateral and make it available at such locations as the
Lender
may specify, whether at the premises of the Borrower or elsewhere, and
will make
available to the Lender the premises and facilities of the Borrower for
the
purpose of the Lender’s taking possession of or removing the Collateral or
putting the Collateral in saleable form. The Lender may sell the Collateral
or
any part thereof in one or more parcels at public or private sale, at any
exchange, broker’s board or at any of the Lender’s offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Lender
may deem commercially reasonable. The Lender shall not be obligated to
make any
sale of Collateral regardless of notice of sale having been given. The
Lender
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. The Borrower hereby
grants the Lender a license to enter and occupy any of the Borrower’s leased or
owned premises and facilities, without charge, to exercise any of the Lender’s
rights or remedies.
SECTION
9.4 License
for Use of Software and Other Intellectual Property.
The
Borrower hereby grants to the Lender a license or other right to use, without
charge, all computer software programs, data bases, processes, trademarks,
tradenames, copyrights, labels, trade secrets, service marks, advertising
materials and other rights, assets and materials used by the Borrower in
connection with its businesses or in connection with the
Collateral.
SECTION
9.5 No
Marshalling; Deficiencies; Remedies Cumulative.
The
Lender shall have no obligation to marshal any Collateral or to seek recourse
against or satisfaction of any of the Obligations from one source before
seeking
recourse against or satisfaction from another source. The net cash proceeds
resulting from the Lender’s exercise of any of the foregoing rights to liquidate
all or substantially all of the Collateral, including any and all Collections
(after deducting all of the Lender’s expenses related thereto), shall be applied
by the Lender to such of the Obligations and in such order as the Lender
shall
elect in its sole and absolute discretion, whether due or to become due.
The
Borrower shall remain liable to the Lender for any deficiencies, and the
Lender
in turn agrees to remit to the Borrower or its successor or assign any
surplus
resulting therefrom. All of the Lender’s remedies under the Loan Documents shall
be cumulative, may be exercised simultaneously against any Collateral and
either
Loan Party or in such order and with respect to such Collateral or such
Loan
Party as the Lender may deem desirable, and are not intended to be
exhaustive.
SECTION
9.6 Waivers.
Except
as may be otherwise specifically provided herein or in any other Loan Document,
the Borrower hereby waives any right to a judicial or other hearing with
respect
to any action or prejudgment remedy or proceeding by the Lender to take
possession, exercise control over, or dispose of any item of Collateral
in any
instance (regardless of where the same may be located) where such action
is
permitted under the terms of this Agreement or any other Loan Document
or by
applicable law or of the time, place or terms of sale in connection with
the
exercise of the Lender’s rights hereunder and also waives any bonds, security or
sureties required by any statute, rule or other law as an incident to any
taking
of possession by the Lender of any Collateral. The Borrower also waives
any
damages (direct, consequential or otherwise) occasioned by the enforcement
of
the Lender’s rights under this Agreement or any other Loan Document including
the taking of possession of any Collateral or the giving of notice to any
account debtor or the collection of any Receivable of the Borrower. The
Borrower
also consents that the Lender may enter upon any premises owned by or leased
to
it without obligations to pay rent or for use and occupancy, through self-help,
without judicial process and without having first obtained an order of
any
court. These waivers and all other waivers provided for in this Agreement
and
the other Loan Documents have been negotiated by the parties, and the Borrower
acknowledges that it has been represented by counsel of its own choice,
has
consulted such counsel with respect to its rights hereunder and has freely
and
voluntarily entered into this Agreement and the other Loan Documents as
the
result of arm’s-length negotiations.
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SECTION
9.7 Further
Rights of the Lender.
(a) Further
Assurances.
The
Borrower shall do all things and shall execute and deliver all documents
and
instruments reasonably requested by the Lender to protect or perfect any
Lien
(and the priority thereof) of the Lender on the Collateral. The Lender
is
authorized to describe the Collateral covered by any financing statement
filed
by it under the Code as “all assets” or “all personal property” of the Borrower
or by using a similar supergeneric description.
(b) Insurance;
Etc.
If the
Borrower shall fail to purchase or maintain insurance (where applicable),
or to
pay any tax, assessment, governmental charge or levy, except as the same
may be
otherwise permitted hereunder or which is being contested in good faith
by
appropriate proceedings and for which adequate reserves have been established
in
accordance with GAAP, or if any Lien prohibited hereby shall not be paid
in full
and discharged or if the Borrower shall fail to perform or comply with
any other
covenant, promise or obligation to the Lender hereunder or under any other
Loan
Document, the Lender may (but shall not be required to) perform, pay, satisfy,
discharge or bond the same for the account of the Borrower, and all amounts
so
paid by the Lender shall be treated as a Base Rate Advance hereunder and
shall
constitute part of the Obligations.
SECTION
9.8 Interest
and Letter of Credit Fees After Event of Default.
The
Borrower agrees and acknowledges that the additional interest and fees
that may
be charged under Section 4.2 (a) are an inducement to the Lender to
make Advances and to cause Letters of Credit to be issued hereunder and
that the
Lender would not consummate the transactions contemplated by this Agreement
without the inclusion of such provisions, (b) are fair and reasonable
estimates of the Lender’s costs of administering the credit facility upon an
Event of Default, and (c) are intended to estimate the Lender’s increased
risks upon an Event of Default.
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ARTICLE
X
ASSIGNMENTS
AND PARTICIPATIONS
SECTION
10.1 Assignments.
The
Borrower shall not assign this Agreement or any right or obligation hereunder
without the prior written consent of the Lender. The Lender may assign
(without
the consent of the Borrower) to one or more Persons all or a portion of
its
rights and obligations under this Agreement, the Note and the other Loan
Documents.
SECTION
10.2 Participations.
The
Lender may sell participations in or to all or a portion of its rights
and
obligations under this Agreement (including, without limitation, all or
a
portion of the Loans and the Note); provided,
however,
that in
such event the Lender’s obligations under this Agreement shall remain
unchanged.
SECTION
10.3 Disclosure.
The
Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Article X, disclose to the
assignee or participant or proposed assignee or participant any information
relating to the Loan Parties.
ARTICLE
XI
GENERAL
PROVISIONS
SECTION
11.1 Notices.
Except
as otherwise provided herein, all notices and other communications hereunder
shall be in writing and sent by certified or registered mail, return receipt
requested, by overnight delivery service, with all charges prepaid, by
hand
delivery, or by telecopier followed by a hard copy sent by regular mail,
if to
the Lender, then to CitiCapital Commercial Corporation, 000 Xxxxxxxxxx
Xxxxxx,
Xxxxxxxx, Xxx Xxxx 00000, Telecopy: (000) 000-0000, Attn.: Account Manager,
International Playthings, Inc., with a copy to CitiCapital Commercial
Corporation, 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000, Telecopy:
(000)
000-0000, Attn.: Xxxxxx X. Xxxxxxxx, Esq., and if to the Borrower, then to
International Playthings, Inc., 00X Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx
Xxxxxx
00000, Telecopy: (000) 000-0000, Attn.: Xx. Xxxxxxx Xxxxx, Chief Operating
Officer, with a copy to Xxxxxxx Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx,
Xxx
Xxxx 00000, Telecopy: (000) 000-0000, Attn.: Xxxx Xxxxxx, Esq., or, in
each
case, to such other address as the Borrower or the Lender may specify to
the
other party in the manner required hereunder. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three Business Days after being postmarked, (ii) if sent by overnight
delivery service or by hand delivery, when received at the above stated
addresses or when delivery is refused and (iii) if sent by telecopier
transmission, when such transmission is confirmed.
SECTION
11.2 Delays;
Partial Exercise of Remedies.
No
delay or omission of the Lender to exercise any right or remedy hereunder
shall
impair any such right or operate as a waiver thereof. No single or partial
exercise by the Lender of any right or remedy shall preclude any other
or
further exercise thereof, or preclude any other right or remedy.
SECTION
11.3 Right
of Setoff.
In
addition to and not in limitation of all rights of offset that the Lender
or any
of its Affiliates may have under applicable law, and whether or not the
Lender
has made any demand or the Obligations of the Borrower have matured, the
Lender
and its Affiliates shall have the right to set off and apply any and all
deposits (general or special, time or demand, provisional or final, or
any other
type) at any time held and any other Indebtedness at any time owing by
the
Lender or any of its Affiliates to or for the credit or the account of
the
Borrower or any of its Affiliates against any and all of the Obligations.
In the
event that the Lender exercises any of its rights under this Section 11.3,
the Lender shall provide notice to the Borrower of such exercise, provided
that
the failure to give such notice shall not affect the validity of the exercise
of
such rights.
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SECTION
11.4 Indemnification;
Reimbursement of Expenses of Collection.
(a) The
Borrower hereby agrees that, whether or not any of the transactions contemplated
by this Agreement or the other Loan Documents are consummated, the Borrower
will
indemnify, defend and hold harmless (on an after-tax basis) the Lender,
each
issuer of a Letter of Credit and their respective successors, assigns,
directors, officers, agents, employees, advisors, shareholders, attorneys
and
Affiliates (each, an “Indemnified Party”) from and against any and all losses,
claims, damages, liabilities, deficiencies, obligations, fines, penalties,
actions (whether threatened or existing), judgments, suits (whether threatened
or existing) or expenses (including, without limitation, reasonable fees
and
disbursements of counsel, experts, consultants and other professionals)
incurred
by any of them (collectively, “Claims”) (except, in the case of each Indemnified
Party, to the extent that any Claim is determined in a final and non-appealable
judgment by a court of competent jurisdiction to have directly resulted
from
such Indemnified Party’s gross negligence or willful misconduct) arising out of
or by reason of (i) any litigation, investigation, claim or proceeding
related to (A) this Agreement, any other Loan Document or the transactions
contemplated hereby or thereby, (B) any actual or proposed use by the
Borrower of the proceeds of the Loans, (C) the issuance of any Letter of
Credit or the acceptance or payment of any document or draft presented
to any
issuer thereof, (D) the Lender’s entering into this Agreement, the other
Loan Documents or any other agreements and documents relating hereto (other
than
consequential damages and loss of anticipated profits or earnings), including,
without limitation, amounts paid in settlement, court costs and the fees
and
disbursements of counsel incurred in connection with any such litigation,
investigation, claim or proceeding, or (E) any Loan made by the Lender, or
any failure by the Lender to make a Loan, under Section 2.2(f), it being
understood that (I) the Lender shall be fully indemnified for any Loan made
by it under Section 2.2(f) in reliance upon any check, draft, document or
other instrument presented for payment against a controlled disbursement
account
of the Borrower, without any duty whatsoever to determine whether such
presentment is authorized or proper and (II) it shall be the responsibility
of the Borrower (and not the responsibility of the Lender) to investigate
and
determine whether any check, draft, document or other instrument presented
for
payment against any such controlled disbursement account has been properly
presented and to notify the Lender in writing immediately of its discovery
of
any such improper presentment, (ii) any remedial or other action taken or
required to be taken by the Borrower in connection with compliance by the
Borrower, or any of its properties, with any federal, state or local
Environmental Laws and (iii) any pending, threatened or actual action,
claim, proceeding or suit by any shareholder or director of the Borrower
or any
actual or purported violation of the Borrower’s Governing Documents or any other
agreement or instrument to which the Borrower is a party or by which any
of its
properties is bound. In addition, the Borrower shall, upon demand, pay
to the
Lender all reasonable costs and expenses incurred by the Lender (including
the
fees and disbursements of counsel and other professionals) in connection
with
the preparation, execution, delivery, administration, modification and
amendment
of the Loan Documents, and pay to the Lender all costs and expenses (including
the fees and disbursements of counsel and other professionals) paid or
incurred
by the Lender in (A) enforcing or defending its rights under or in respect
of this Agreement, the other Loan Documents or any other document or instrument
now or hereafter executed and delivered in connection herewith,
(B) collecting the Obligations or otherwise administering this Agreement
and (C) foreclosing or otherwise realizing upon the Collateral or any part
thereof. If and to the extent that the obligations of the Borrower hereunder
are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations that is
permissible under applicable law.
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(b) The
Borrower’s obligations under Sections 4.7 and 4.8 and this
Section 11.4 shall survive any termination of this Agreement and the other
Loan Documents, the termination, expiration or Collateralization of all
Letters
of Credit and the payment in full of the Obligations, and are in addition
to,
and not in substitution of, any of the other Obligations.
SECTION
11.5 Amendments
and Waivers.
Any
provision of this Agreement or any other Loan Document may be amended or
waived
if, but only if, such amendment or waiver is in writing and signed by the
Lender
and the Loan Parties party thereto, and then any such amendment or waiver
shall
be effective only to the extent set forth therein.
SECTION
11.6 Counterparts;
Telecopied Signatures.
This
Agreement and any waiver or amendment hereto may be executed in counterparts
and
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This Agreement and each of the other Loan Documents
may be executed and delivered by telecopier or other facsimile transmission
all
with the same force and effect as if the same was a fully executed and
delivered
original manual counterpart.
SECTION
11.7 Severability.
In case
any provision in or obligation under this Agreement, any Note or any other
Loan
Document shall be invalid, illegal or unenforceable in any jurisdiction,
the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall
not in any way be affected or impaired thereby.
SECTION
11.8 Maximum
Rate.
Notwithstanding anything to the contrary contained elsewhere in this Agreement
or in any other Loan Document, the parties hereto hereby agree that all
agreements between them under this Agreement and the other Loan Documents,
whether now existing or hereafter arising and whether written or oral,
are
expressly limited so that in no contingency or event whatsoever shall the
amount
paid, or agreed to be paid, to the Lender for the use, forbearance, or
detention
of the money loaned to the Borrower and evidenced hereby or thereby or
for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the maximum non-usurious interest rate, if any, that at
any time
or from time to time may be contracted for, taken, reserved, charged or
received
on the Obligations, under the laws of the State of New York (or the laws
of any
other jurisdiction whose laws may be mandatorily applicable notwithstanding
other provisions of this Agreement and the other Loan Documents), or under
applicable federal laws which may presently or hereafter be in effect and
which
allow a higher maximum non-usurious interest rate than under the laws of
the
State of New York (or such other jurisdiction), in any case after taking
into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the “Highest Lawful Rate”). If due to any circumstance whatsoever, fulfillment
of any provision of this Agreement or any of the other Loan Documents at
the
time performance of such provision shall be due shall exceed the Highest
Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified
or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance the Lender should ever receive
anything
of value deemed interest by applicable law which would exceed the Highest
Lawful
Rate, such excessive interest shall be applied to the reduction of the
principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such
other
then outstanding Obligations, such excess shall be refunded to the Borrower.
All
sums paid or agreed to be paid to the Lender for the use, forbearance,
or
detention of the Obligations and other Indebtedness of the Borrower to
the
Lender shall, to the extent permitted by applicable law, be amortized,
prorated,
allocated and spread throughout the full term of such Indebtedness, until
payment in full thereof, so that the actual rate of interest on account
of all
such Indebtedness does not exceed the Highest Lawful Rate throughout the
entire
term of such Indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents
and
all other agreements between the parties hereto.
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SECTION
11.9 Entire
Agreement; Successors and Assigns; Interpretation.
This
Agreement and the other Loan Documents constitute the entire agreement
between
the parties, supersede any prior written and verbal agreements between
them with
respect to the subject matter hereof and thereof, and shall bind and benefit
the
parties and their respective successors and permitted assigns. This Agreement
shall be deemed to have been jointly drafted, and no provision of it shall
be
interpreted or construed for or against a party because such party purportedly
prepared or requested such provision, any other provision, or this Agreement
as
a whole.
SECTION
11.10 LIMITATION
OF LIABILITY.
THE
LENDER SHALL HAVE NO LIABILITY TO THE BORROWER (WHETHER SOUNDING IN CONTRACT,
TORT OR EQUITY OR OTHERWISE) FOR LOSSES SUFFERED BY THE BORROWER IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING
IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OR COURT ORDER BINDING ON THE LENDER THAT THE LOSSES WERE THE
RESULT OF
ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
THE
LENDER. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST THE LENDER
FOR
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES EXCEPT IN THE CASE
OF THE
LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
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SECTION
11.11 GOVERNING
LAW.
THE
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE OTHER
LOAN
DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR
ANY OF THE OTHER LOAN DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT OR
EQUITY OR
OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAW PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.
SECTION
11.12 SUBMISSION
TO JURISDICTION.
ALL
DISPUTES BETWEEN THE BORROWER AND THE LENDER BASED UPON, ARISING OUT OF,
OR IN
ANY WAY RELATING TO (A) THIS AGREEMENT; (B) ANY OTHER LOAN DOCUMENT OR
OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN THE BORROWER AND
THE
LENDER; OR (C) ANY CONDUCT, ACT OR OMISSION OF THE BORROWER, THE LENDER OR
ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER
AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR
OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN
NEW
YORK, NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
PROVIDED,
HOWEVER,
THAT THE
LENDER SHALL HAVE THE RIGHT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW,
TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN (A) ANY COURTS OF
COMPETENT JURISDICTION AND VENUE AND (B) ANY LOCATION SELECTED BY THE
LENDER TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE BORROWER AGREES
THAT
IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS
IN ANY
PROCEEDING BROUGHT BY THE LENDER. THE BORROWER WAIVES ANY OBJECTION THAT
IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE
OR BASED ON FORUM NON CONVENIENS.
SECTION
11.13 SERVICE
OF PROCESS.
THE
BORROWER HEREBY IRREVOCABLY DESIGNATES XXXXXXX XXXXX LLP, 000 XXXXXXX XXXXXX,
XXX XXXX, XXX XXXX 00000 OR ITS SUCCESSOR AS THE DESIGNEE AND AGENT OF
THE
BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER, SERVICE OF PROCESS
IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN
DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT
AT
ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO THE BORROWER, BUT THE
FAILURE
OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE
OF
SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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SECTION
11.14 JURY
TRIAL.
EACH OF
THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO (A) THIS AGREEMENT; (B) ANY
OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
BETWEEN
THE BORROWER AND THE LENDER; OR (C) ANY CONDUCT, ACT OR OMISSION OF THE
BORROWER, THE LENDER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT,
TORT
OR EQUITY OR OTHERWISE.
SECTION
11.15 Publicity.
The
Lender may (a) publish in any trade or other publication or otherwise
publicize to any third party (including its Affiliates) a tombstone, article,
press release or similar material relating to the financing transactions
contemplated by this Agreement and (b) provide to industry trade
organizations related information necessary and customary for inclusion
in
league table measurements.
-73-
IN
WITNESS WHEREOF,
each of
the parties hereto has caused this Agreement to be executed by its proper
and
duly authorized officer as of the date first set forth above.
|
INTERNATIONAL
PLAYTHINGS, INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxx | |
|
Name: Xxxxxxx
Xxxxx
Title: Chief
Operating Officer
|
||
|
CITICAPITAL
COMMERCIAL CORPORATION
|
||
| |
|
|
| By: | /s/ Miles X. Xxxxxx | |
|
Name: Miles X.
Xxxxxx
Title: Vice
President
|
||
-74-
EXHIBIT A
REVOLVING
PROMISSORY NOTE
| $13,000,000 |
Harrison,
New York
December 21, 2006 |
FOR
VALUE
RECEIVED, INTERNATIONAL PLAYTHINGS, INC., a New Jersey Corporation (the
“Borrower”), hereby unconditionally promises to pay to the order of CitiCapital
Commercial Corporation, a Delaware corporation (the “Lender”), on the Expiration
Date, at the Lender’s office at 000 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000
or at such other location as the Lender may from time to time designate
in
writing, in lawful money of the United States of America and in immediately
available funds, the principal amount equal to the lesser of (a) THIRTEEN
MILLION DOLLARS ($13,000,000) and (b) the aggregate unpaid principal amount
of the Loans made to the Borrower under Section 2.1(a) of the Loan
Agreement (as defined below).
The
Borrower further promises to pay interest in like money and funds to the
Lender
at the aforementioned address (or at such other location as the Lender
may from
time to time designate in writing) on the unpaid principal amount hereof
from
time to time outstanding from and including the date hereof until paid
in full
(both before and after judgment and both before and after the occurrence
of an
Event of Default) at the rates and on the dates determined in accordance
with,
and calculated in the manner set forth in, Sections 4.1 and 4.2 of the Loan
Agreement. Capitalized terms used but not defined herein shall have the
meanings
given them in the Loan and Security Agreement dated as of the date hereof
(as
amended, supplemented or otherwise modified from time to time, the “Loan
Agreement”) between the Borrower and the Lender.
Whenever
any payment to be made hereunder shall be stated to be due on a day that
is not
a Business Day, the payment shall be made on the next succeeding Business
Day
(except as otherwise provided in the Loan Agreement) and such extension
of time
shall be included in the computation of the amount of interest due
hereunder.
This
Note
is the Note referred to in the Loan Agreement and shall be entitled to
the
benefit of all terms and conditions of, and the security of all security
interests, liens and rights granted under or in connection with, the Loan
Agreement and the other Loan Documents, and is subject to optional and
mandatory
prepayment as provided therein. Upon the occurrence of any one or more
of the
Events of Default specified in the Loan Agreement, all amounts then remaining
unpaid on this Note may be declared to be or may automatically become
immediately due and payable as provided in the Loan Agreement.
The
Borrower acknowledges that the holder of this Note may assign, transfer
or sell
all or a portion of its rights and interests in, to and under this Note
to one
or more Persons as provided in the Loan Agreement and that such Persons
shall
thereupon become vested with all of the rights and benefits of the Lender
in
respect hereof as to all or that portion of this Note which is so assigned,
transferred or sold.
A-1
In
the
event of any conflict between the terms hereof and the terms and provisions
of
the Loan Agreement, the terms and provisions of the Loan Agreement shall
control.
The
Borrower waives presentment, demand for payment, protest and notice of
dishonor
of this Note and authorizes the holder hereof, without notice, to increase
or
decrease the rate of interest on any amount owing under this Note in accordance
with the Loan Agreement. The Borrower shall make all payments hereunder
and
under the Loan Agreement without setoff, deduction or counterclaim. No
failure
to exercise and no delay in exercising any rights hereunder on the part
of the
holder hereof shall operate as a waiver of such rights. This Note may not
be
changed or modified orally, but only by an agreement in writing, which
is signed
by the party or parties against whom enforcement of any waiver, change
or
modification is sought.
THE
VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND ANY DISPUTE ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE, WHETHER SOUNDING IN CONTRACT, TORT
OR
EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED
TO THE
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW
YORK.
A-2
THE
BORROWER AND, BY ITS ACCEPTANCE HEREOF, THE LENDER HEREBY WAIVES TO THE
FULLEST
EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS NOTE OR ANY
CONDUCT,
ACT OR OMISSION OF THE BORROWER, THE LENDER OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES,
IN EACH
CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE.
|
INTERNATIONAL
PLAYTHINGS, INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxx | |
|
Xxxxxxx
Xxxxx
Chief
Operating Officer
|
||
A-3
