LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT made and dated as of September
30, 1998 by and between
FIVE STAR GROUP, INC. (formerly known as FIVE STAR ACQUISITION
CORP.), a corporation of the State of Delaware with its
principal corporate place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ with its mailing
address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as
"BORROWER")
and
FLEET BANK, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United
States with offices at ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, in its capacity as agent for the banks who have
executed the signature page hereto (in such capacity being
hereinafter referred to as "AGENT")
and
the Banks that have executed the signature page hereto (each
being hereinafter called a "LENDER" and collectively called
"LENDERS")
WITNESSES THAT:
(1) WHEREAS, BORROWER is desirous of borrowing $25,000,000 from
the LENDERS in the form of a revolving loan (called the "Revolving Loan" in this
Agreement and more fully defined in Section 2.1 below);
(2) WHEREAS, BORROWER seeks to enter into a relationship with
AGENT and the LENDERS setting forth an understanding relating to the manner by
which BORROWER may obtain advances under such Revolving Loan from the LENDERS
and the time and the manner of the repayment of such advances;
(3) WHEREAS, AGENT and the LENDERS are willing to enter into
this Agreement but only if the conditions contained in this Agreement are
satisfied;
(4) WHEREAS, to induce AGENT and the LENDERS to enter into this
Agreement and to extend the benefits of the Revolving Loan to BORROWER, BORROWER
is willing to execute this Agreement and comply with the provisions of this
Agreement or cause them to be complied with;
NOW THEREFORE in consideration of the premises and the
covenants contained in this Agreement and for other good and valuable
consideration, BORROWER, LENDERS and AGENT do hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 INCORPORATION OF CERTAIN DEFINITIONS. The terms "AGENT",
"BORROWER", "LENDER" and "LENDERS" shall have the meanings given those terms in
the Preamble and "Whereas" Clauses of this Agreement.
1.2 INCORPORATION OF UCC DEFINITIONS. All terms defined in
Articles 1 or 9 of the Uniform Commercial Code shall have the meanings given
therein unless otherwise defined herein.
1.3 "ACCOUNTS" or "ACCOUNTS RECEIVABLE" means, in addition to
the definition of "account" as contained in the Uniform Commercial Code, all of
the accounts and contract rights of BORROWER (including its rights as an unpaid
vendor, or lienor, including stoppage in transit, replevin and reclamation),
instruments, documents, chattel paper, notes, drafts, warehouse receipts and
general intangibles, whether secured or unsecured, and whether or not
specifically assigned hereunder to AGENT for the ratable benefit of the LENDERS,
and includes a right to payment which has been earned under a contract right and
all Inventory returned or reclaimed from Account Debtors and all rights to
payment of money for Goods sold or leased or services rendered; and all Products
and Proceeds of the foregoing, whether now owned or hereafter arising or
acquired by BORROWER.
1.4 "ACCOUNT DEBTOR" means, in addition to the definition of
"account debtor" as contained in the Uniform Commercial Code, the person or
persons obligated to BORROWER on an Account, or contract right, or who is
represented by BORROWER to be so obligated.
1.5 "ADVANCES" is a collective term which means all cash
advances and extensions of monetary credit (including those reimbursable
expenses of AGENT and the LENDERS deemed to be Advances under this Agreement)
now or at any time hereafter made by AGENT and the LENDERS to BORROWER under the
Revolving Loan.
1.6 "AGENT" means FLEET BANK, NATIONAL ASSOCIATION, in its
capacity as Agent for the LENDERS hereunder, and shall include any successor
thereof as Agent, appointed as such pursuant to Section 10.10.
1.7 "AGREEMENT" is a collective term which means all of the
following:
(a) this Loan and Security Agreement; and
(b) all extensions, modifications and renewals hereof.
1.8 "ASSET PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement dated August 31, 1998 between SELLER (as seller and under the name
"FIVE STAR GROUP, INC.") and BORROWER (as buyer and under the name "FIVE STAR
ACQUISITION CORP.") relating to the sale by SELLER and the purchase by BORROWER
of SELLER's assets, a copy of such Asset Purchase Agreement being attached to
the Certification Responsive to the Loan Agreement.
1.9 "ASSIGNMENT AND ACCEPTANCE" means an agreement in the form
of Exhibit "A" attached hereto.
1.10 "BORROWING BASE CERTIFICATE" means that certain
certification in the form attached hereto as Exhibit "B" for certifications
which are required to be submitted no less frequently than weekly, setting
forth, among other things, information relating to amounts and agings of
Eligible Receivables and/or amounts and values of Eligible Inventory.
1.11 "BUSINESS DAY" shall mean a day on which AGENT is open for
business during its usual business hours and offering substantially all its
services, provided, however, that as it relates to LIBOR, "Business Day" shall
have the meaning given that term in Section 2.5(e)(1).
1.12 "CASH COLLATERAL ACCOUNT" means any one of the Cash
Collateral Accounts.
1.13 "CASH COLLATERAL ACCOUNTS" means the accounts maintained
at AGENT in the name of AGENT/BORROWER into which BORROWER deposits proceeds
from the sale or other disposition of Goods, Inventory and other Collateral.
1.14 "CERTIFICATION AS TO LIENS" means that certification given
by BORROWER setting forth the existence or non-existence of UCC liens filed
against BORROWER.
1.15 "CERTIFICATION RESPONSIVE TO THE GUARANTY" is a collective
term which means the certification of GUARANTOR as to the truth and accuracy of
certain representations and warranties set forth in the Guaranty, to which is
attached each of the following:
(a) Exhibit "A": the Certification of an assistant corporate
secretary or the corporate secretary of GUARANTOR as to a true, complete and
correct copy of the resolutions adopted by GUARANTOR's Board of Directors
authorizing the execution, delivery and performance of the Guaranty and any
other documents required thereunder or hereunder;
(b) Exhibit "B": the Certification of an assistant corporate
secretary or the corporate secretary of GUARANTOR as to the true, complete and
correct copy of the incumbency and specimen signatures of those officers of
GUARANTOR who are to execute the Guaranty and any other documents required
thereunder or hereunder;
(c) Exhibit "C": a true, complete and correct copy of
GUARANTOR's Certificate of Incorporation, as amended;
(d) Exhibit "D": a true, complete and correct copy of
GUARANTOR's By-Laws, as amended;
(e) Exhibit "E": the certificate as to the "Good Standing" of
GUARANTOR for the State of Delaware;
(f) Exhibit "F": the certificate as to the "Good Standing" of
GUARANTOR for the State of New York.
1.16 "CERTIFICATION RESPONSIVE TO THE LOAN AGREEMENT" is a
collective term which means the certification of BORROWER as to the truth and
accuracy of certain representations and warranties, to which is attached each of
the following:
(a) Exhibit "A": the Certification of BORROWER's Assistant
Corporate Secretary as to a true, correct and complete copy of the Corporate
Resolutions adopted in writing by BORROWER's board of directors authorizing the
execution and delivery of this Agreement, the borrowings hereunder, and the
execution and delivery of the other Loan Documents;
(b) Exhibit "B": the Certification of BORROWER's assistant
corporate secretary as to a true, complete and correct copy of the incumbency
and specimen signatures of those officers of BORROWER who are to execute this
Agreement and the other Loan Documents; and
(c) Exhibit "C": a true, complete and correct copy of
BORROWER's Certificate of Incorporation, as amended (including, the certificate
of amendment changing BORROWER's name from "FIVE STAR ACQUISITION CORP." to
"FIVE STAR GROUP, INC.");
(d) Exhibit "D": a true, complete and correct copy of
BORROWER's By-Laws, as amended;
(e) Exhibit "E": the certificate as to BORROWER's "Good
Standing" or authorization to do business in the State of Delaware;
(f) Exhibit "F": copies of the legal documents which BORROWER
has filed in the State of Connecticut so as to qualify BORROWER to do business
in the State of Connecticut, approval of BORROWER's application pending on the
date hereof;
(g) Exhibit "G": copies of the legal documents which BORROWER
has filed in the State of Massachusetts so as to qualify BORROWER to do business
in the State of Massachusetts, approval of BORROWER's application pending on the
date hereof;
(h) Exhibit "H": copies of the legal documents which BORROWER
has filed in the State of New Jersey so as to qualify BORROWER to do business in
the State of New Jersey, approval of BORROWER's application pending on the date
hereof
(i) Exhibit "I": copies of the legal docum ents which BORROWER
has filed in the State of New York so as to qualify BORROWER to do business in
the State of New York, approval of BORROWER's application pending on the date
hereof;
(j) Exhibit "J": copy of the Asset Purchase Agreement;
(k) Exhibit "N": copy of the ▇▇▇▇ of Sale transferring assets
sold by SELLER (under its current name "JL DISTRIBUTORS, INC.") and bought by
BORROWER (under the name "FIVE STAR GROUP, INC.) pursuant to the Asset Purchase
Agreement.
1.17 "CHATTEL PAPER" means, in addition to the definition of
"chattel paper" as contained in the Uniform Commercial Code, all writing or
writings which evidence both a money obligation and a security interest in, or a
sale or lease of, specific Equipment, Inventory or Goods. When a transaction is
evidenced by such a security agreement or a sale or a lease and by an Instrument
or series of Instruments, the group of writings taken together constitutes
Chattel Paper. Chattel Paper shall not include any "account" as that term is
defined in the Uniform Commercial Code.
1.18 "COLLATERAL" is a collective term which means all of the
following:
(a) all property (including but not limited to all Collateral
described in Article III of this Agreement), whether real, personal or mixed, or
tangible or intangible, now or at any time hereafter given, assigned or pledged
to AGENT to secure the Liabilities by BORROWER or by GUARANTOR; and
(b) all Products and Proceeds of the foregoing.
1.19 "COMMITMENT" of any LENDER means the amount set forth
opposite such LENDER's name on Schedule "A" attached hereto, as such schedule
may be amended from time to time, under the heading "Commitment", as such amount
may be reduced from time to time pursuant to the terms of this Agreement.
1.20 "CONTRACT RIGHTS" means any right of BORROWER to receive
payment or performance under a contract not yet earned by payment and/or
performance and any franchise right to operate a business.
1.21 "DEFAULT RATE" means a rate per annum equal to the lesser
of (a) 2% in excess of the applicable rate in effect or (b) the maximum rate
allowed by law, it being intended that at no time shall the rate of interest
payable on the Revolving Loan be calculated at a rate higher than the maximum
rate allowed by law.
1.22 "DELINQUENCY NOTICE" shall have the meaning given that
term in Section 10.17(a)(1).
1.23 "DELINQUENT LENDER" shall have the meaning given that term
in Section 10.17(a).
1.24 "ELECTING LENDER" shall have the meaning given that term
in Section 10.17(a).
1.25 "ELECTION NOTICE" shall have the meaning given that term
in Section 10.17(a).
1.26 "ELECTION PERIOD" shall have the meaning given that term
in Section 10.17(a).
1.27 "ELIGIBLE ASSIGNEE" means a commercial bank or other
financial institution organized under the laws of the United States of America
or any state and having a combined capital and surplus of at least Five Hundred
Million ($500,000,000) Dollars.
1.28 "ELIGIBLE INVENTORY" is a collective term which means and
includes such of BORROWER's Inventory which is and at all times shall continue
in all respects to be acceptable and satisfactory to AGENT in its discretion,
exercised in good faith and using reasonable commercial judgment, and which, not
in limitation of the foregoing, also consists of the following:
(a) that portion of BORROWER's inventory of finished goods held
for sale by BORROWER, normally and currently saleable in the ordinary course of
BORROWER's business, and which at all times pertinent hereto is of good and
merchantable quality, free from defects, as to which AGENT has a perfected first
priority lien, and which is located at the location or locations set forth in
Section 4.5 hereof, and as to which BORROWER has satisfied all terms,
conditions, warranties and representations of this Agreement and the other Loan
Documents and which is valued at the lower of (i) its cost or (ii) its market
value; but
(b) Eligible Inventory does not include any of the following:
(1) catalogs and other promotional materials of any kind;
(2) raw materials;
(3) work in process;
(4) any returned items unless returned in salable condition;
(5) any damaged, defective or recalled items;
(6) any obsolete items;
(7) any items used as demonstrators, prototypes or salesmen's
samples;
(8) any items of Inventory which have been consigned to
BORROWER or as to which any third person claims a lien;
(9) any items of Inventory which have been consigned by
BORROWER to a consignee;
(10) any items of Inventory which BORROWER maintains on a "▇▇▇▇
and hold" basis;
(11) packing and shipping materials;
(12) Inventory which in the reasonable judgment of AGENT
exercised in good faith using reasonable commercial judgment is considered to be
slow moving or otherwise not merchantable.
1.29 "ELIGIBLE RECEIVABLES" is a collective term which means
and includes such of BORROWER's Accounts Receivable which are and at all times
shall continue in all respects to be acceptable and satisfactory to AGENT in its
discretion, exercised in good faith and using reasonable commercial judgment,
and which, not in limitation of the foregoing, also consist of Accounts
Receivable which are created by BORROWER in the ordinary course of business in
an arm's length third party transaction, are genuine and in all respects are
what they purport to be. In addition to the foregoing, an Account shall be
deemed to be an Eligible Receivable only if as of the date of computation of
Eligible Receivables, such Account shall not have been outstanding for more than
ninety (90) days from the date of the invoice, provided, however, that the
following shall apply:
(a) if the Account is in respect of goods to be sold by the
Account Debtor in a new retail establishment, then, such Account shall not have
been outstanding for more than two hundred seventy (270) days from the date of
invoice, provided, that the maximum amount of Accounts beyond 90 days from the
date of the invoice which shall be considered Eligible Receivables pursuant to
this subsection (a) shall not exceed $75,000 in the aggregate at any time; and
(b) in the case of a "dated sale", if the terms of sale were
otherwise entered into by BORROWER in respect of such invoice in the ordinary
course of BORROWER's business, (1) then, as of the date of computation of
Eligible Receivables, such Account shall not have been outstanding for more than
one hundred fifty (150) days from the date of the invoice related to such "dated
sale", (2) provided, however, that if the Account relates to the sale of
"Cabot's Stain", then such Account shall not have been outstanding for more than
one hundred eighty (180) days from the date of the invoice related to such
"dated sale", (3) further, provided, that the maximum amount of Accounts which
shall be considered Eligible Receivables pursuant to this Subsection (b) shall
not exceed $4,000,000 in the aggregate at any time, and of such amount, not more
than $1,500,000 in the aggregate of such Accounts shall at any time consist of
the Accounts referred to in subsection (b)(2) of this definition.
1.30
"EQUIPMENT" means, in addition to the definition of "equipment" contained in the
Uniform Commercial Code, all of BORROWER's personal property, fixtures,
machinery and equipment, trailers, handling and delivery equipment, cranes and
hoisting equipment, office machines and furniture -- in all cases above, of
every kind, nature and description and whether affixed to realty or not
1.31 "EVENT OF DEFAULT" has the meaning set forth in Article
VIII of this Agreement.
1.32 "GAAP" means generally accepted accounting principles,
consistently applied over the period to which they relate.
1.33 "GENERAL INTANGIBLES" means, in addition to the definition
of "General Intangibles" contained in the Uniform Commercial Code, all rights of
BORROWER, including but not limited to all rights to property, choses in action
and other rights of BORROWER not otherwise specifically included elsewhere in
this Agreement, further including but not limited to all present and future
federal and state tax refunds, trademarks, trade names, service marks,
copyrights and patents, all rights under license agreements for the use of same,
warranties, insurance proceeds and condemnation awards.
1.34 "GOODS" means, in addition to the definition of "goods" as
contained in the Uniform Commercial Code, all articles of tangible personal
property capable of being sold, supplied, leased or otherwise disposed of and
shall also mean and include all of BORROWER's right, title and interest in and
to the goods and other property underlying or securing any of the Accounts
Receivable.
1.35 "GUARANTOR" means AMERICAN DRUG COMPANY, INC., a
corporation of the State of Delaware with its principal corporate place of
business at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ (New York County), New York
10019.
1.36 "GUARANTY" is a collective term which means all of the
following: (a) that certain unlimited guaranty (dated even date herewith) given
by GUARANTOR to AGENT for the ratable benefit of the LENDERS guaranteeing
payment and performance of the Liabilities; and (b) all extensions,
modifications and renewals of such certain guaranty.
1.37 "INSTRUMENT" means, in addition to the definition of
"instrument" as contained in the Uniform Commercial Code, a negotiable
instrument or a security, or any other writing which evidences a right to the
payment of money and is not itself a security agreement or lease and is of the
type which is, in the ordinary course of business, transferred by delivery with
any necessary endorsement or assignment.
1.38 "INVENTORY" means, in addition to the definition of
"inventory" as contained in the Uniform Commercial Code, all Equipment,
Inventory or Goods held by BORROWER for resale or lease or furnished or to be
furnished under contracts of service, and shall include all goods, materials and
supplies (including but not limited to incidentals, packaging materials and all
other items which contribute to the finished product or to the promotion or sale
thereof) used or usable in manufacturing, processing, packaging or shipping and
shall also include raw materials, goods and work in process and finished goods,
and all goods returned by or reclaimed from customers or Account Debtors of
BORROWER.
1.39 "LANDLORD'S CONSENTS" is a collective term which means all
of the following (copies of the following appearing as Exhibit "C" attached
hereto and made a part hereof): (a) those certain consents heretofore provided
by the fee owner or fee owners of the premises described in Section 4.5(a)
below; (b) the acknowledgments given by such fee owner or fee owners (and
included as part of their consent to BORROWER's assumption of the prior tenant's
lease obligations relating to such premises) that such consents continue for the
benefit of AGENT.
1.40 "LIABILITIES" means all of the following: (a) principal
due on the Revolving Loan and the Revolving Notes (including all Advances,
re-Advances, borrowings and re-borrowings under the Revolving Loan and the
Revolving Notes) to be paid with interest thereon as required by this Agreement;
(b) Advances, re-Advances, borrowings and re-borrowings which are and which may
be made from time to time to BORROWER under this Agreement not in compliance
with the "loan value" requirements of Article II; (c) Advances, re-Advances,
borrowings and re-borrowings which are and which may be made from time to time
to BORROWER under this Agreement over and above any monetary limitation on the
Revolving Loan and over and above any other lending limitation contained in this
Agreement, and the interest thereon; (d) all other indebtedness, liabilities and
obligations owing, arising, due and payable from BORROWER to AGENT and the
LENDERS of every kind or nature, whether absolute or contingent, due or to
become due, joint or several, liquidated or unliquidated, matured or unmatured,
primary or secondary, now existing or hereafter incurred, purchase money or
nonpurchase money, arising under this Agreement or any of the other Loan
Documents, regardless of the form or purpose of such indebtedness, liabilities
or obligations, including, without limitation, all interest, commissions,
checking account overdrafts, bank overdrafts, charges, expenses, attorneys' fees
and obligations which BORROWER may have (under contract or any applicable law)
to reimburse AGENT in connection with any hedge contract, foreign exchange
contract, Letter of Credit, indemnity or guaranty issued by AGENT to BORROWER or
for BORROWER's benefit pursuant hereto; (e) the amount due upon any notes or
other obligations given to, or received by, any LENDER on account of any of the
foregoing; and (f) the performance and fulfillment by BORROWER of all the terms,
conditions, promises, covenants and provisions contained in this Agreement and
the other Loan Documents to which BORROWER is a party, whether now existing or
hereafter arising or created
1.41 "LIBOR BASED RATE" has the meaning set forth in Section
2.5(c) below.
1.42 "LOAN DOCUMENTS" means this Agreement, the Certification
as to Liens, the Certification Responsive to the Loan Agreement, the
Certification Responsive to the Guaranty, the Guaranty, the Revolving Notes, the
Subordination Agreement, UCC-1 Financing Statements, and any agreements,
documents or instruments now or hereafter executed by BORROWER and delivered to
AGENT with respect to the transactions contemplated by this Agreement and all
extensions, modifications or renewals of any or all of the foregoing.
1.43 "MATERIALLY ADVERSE EFFECT" shall mean a materially
adverse effect on the business, condition (financial or otherwise), operations,
performance or properties of BORROWER (and/or its Subsidiaries) taken as a whole
or GUARANTOR (and/or its Subsidiaries) taken as a whole.
1.44 "MATURITY DATE" shall mean September 30, 2001.
1.45 "OUTSTANDING" means all unpaid Advances at any one time
outstanding under the Revolving Loan.
1.46 "PARTICIPANT" shall have the meaning given that term in
Section 10.20 below.
1.47 "PERMITTED LIENS" means, as of any particular time, any of
the following, so long as none of the following (except liens or security
interests held by or in favor of AGENT) constitutes a lien against BORROWER's
Accounts or Inventory:
(a) liens at any time granted by BORROWER in favor of AGENT
pursuant hereto;
(b) liens for taxes, assessments and other governmental charges
not yet subject to penalties for non-payment or the payment of which is being
contested in food faith and for which BORROWER has established cash reserves in
an amount satisfactory to AGENT;
(c) statutory liens of carriers, mechanics, materialmen,
landlords, warehouseman and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not yet overdue by more
than 90 days or which, if due and payable, are being properly contested and for
which BORROWER has established cash reserves in an amount satisfactory to AGENT;
(d) liens arising out of non-final judgments or awards against
BORROWER which are being properly contested and for which BORROWER has
established cash reserves in an amount satisfactory to AGENT;
(e) liens resulting from pledges or deposits made by BORROWER
in the ordinary course of its business in connection with workers' compensation
laws, unemployment insurance laws, social security laws, or similar legislation,
or good faith deposits or security deposits in connection with bids, tenders,
contracts (other than for the payment of borrowed money), or leases to which
BORROWER is a party, or deposits to secure public or statutory obligations of
BORROWER or deposits of cash or United States Government Bonds to secure surety,
appeal, performance or other similar bonds to which BORROWER is a party, or
deposits as security for contested taxes or import duties or for the payment of
rent;
(f) survey exceptions, encumbrances, easements or reservations
of, or rights of, others for rights of way, highways and railroad crossings,
sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning or other restrictions as to the use of real properties.
(g) liens consented to by AGENT in writing. 1.48 "PRIME BASED
RATE" shall have the meaning given that term in Section 2.5(b) below.
1.49 "PRIME RATE" means the variable rate of interest set from
time to time by AGENT as its usual, short-term base lending rate to its
commercial borrowers. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer.
From time to time AGENT makes loans to certain customers at rates of interest
below AGENT's Prime Rate.
1.50 "PROCEEDS" means, in addition to the definition of
"proceeds" given in the Uniform Commercial Code, all additions, substitutions,
replacements, and increments to the Collateral, including cash and non-cash
proceeds of all of the Collateral in whatever form, including negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements or other documents, insurance or condemnation awards and any
Collateral purchased with Proceeds.
1.51 "PRODUCTS" shall have the meaning ascribed to such term in
the Uniform Commercial Code.
1.52 "PRO RATA", "PRO RATA SHARE", "RATABLY" and
"PROPORTIONATE" and other words of like import shall, as to each LENDER, mean
and refer to the proportion which the Commitment of each such LENDER bears to
the Total Commitments.
1.53 "REGULATORY CHANGE" means as to any LENDER, any change
after the date of this Agreement in United States federal, or state, or foreign,
laws or regulations (including Regulation D and the laws or regulations that
designate any assessment rate relating to certificates of deposit or otherwise
(including the "Assessment Rate" if applicable to any Advance) or the adoption
or making after such date of any interpretations, directives or requests
applying to a class of banks, including such LENDER, of or under any United
States federal, or state, or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
1.54 "REPLACEMENT LENDER" shall have the meaning given that
term in Section 10.18(a).
1.55 "REQUIRED LENDERS" means LENDERS holding at least 66 2/3%
of the outstanding aggregate principal amount of the Revolving Loan hereunder.
1.56 "REQUIRED PAYMENT" shall have the meaning given that term
in Section 10.15.
1.57 "REVOLVING LOAN" has the meaning set forth in Section 2.1
of this Agreement.
1.58 "REVOLVING NOTE" means any one of the Revolving Notes.
1.59 "REVOLVING NOTES" means the master promissory notes
executed by BORROWER on the date hereof in favor of each LENDER so as to
evidence the indebtedness of BORROWER to such LENDER in respect of its Pro Rata
Share of any and all Advances made by such LENDER under the Revolving Loan and
all extensions, modifications or renewals of any such note, the form of each
such Revolving Note to be in the form of Exhibit "D" attached hereto and made a
part hereof.
1.60 "SELLER" means JL DISTRIBUTORS, INC. (formerly known as
FIVE STAR GROUP, INC.), a Delaware corporation whose name is to be changed to
and whose principal corporate place of business at ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ (New York County), New York 10019.
1.61 "SETTLEMENT DATE" shall mean (1) the Monday of each week,
unless such day is not a Business Day, then the next immediately following
Business Day and (2) any other Business Day chosen by AGENT so long as there
occurs at least one Settlement Date during any one calendar week.
1.62 "SUBORDINATION AGREEMENT" is a collective term which means
the agreement pursuant to which SELLER subordinates its right to repayment of
certain indebtedness owed to it by BORROWER to AGENT's right to repayment of the
Liabilities.
1.63 "SUBSIDIARY" means any corporation more than a majority
(by number of votes) of the common stock of which is at the time owned or
controlled by BORROWER or a Subsidiary of BORROWER.
1.64 "TOTAL COMMITMENTS" at any time shall mean the aggregate
of the Commitments, as then in effect, of all LENDERS, provided that the total
of all of the foregoing cannot be more than a 100% interest in this Agreement,
the Revolving Loan and the other Loan Documents at any one time.
1.65 "UNIFORM COMMERCIAL CODE" shall mean the Uniform
Commercial Code as now enacted in the State of New Jersey, as from time to time
hereafter amended.
1.66 "YEAR 2000 COMPLIANT AND READY" shall mean that BORROWER's
hardware and software systems with respect to the operation of its business and
its general business plan will: (a) handle date information involving any and
all dates before, during and/or after January 1, 2000, including accepting
input, providing output and performing date calculations in whole or in part;
(b) operate, accurately without interruption on and in respect of any and all
dates before, during and/or after January 1, 2000 and without any change in
performance; (c) respond to and process two digit year input without creating
any ambiguity as to the century; and (d) store and provide date input
information without creating any ambiguity as to the century.
1.67 "YEAR 2K PLAN" shall have the meaning ascribed to such
term in Section 4.21.
ARTICLE II
LOANS
2.1 THE REVOLVING LOAN.
(a) Upon BORROWER's request, made through AGENT pursuant to
Section 2.11, each LENDER hereby severally agrees, on the terms and subject to
the conditions of this Agreement, to make Advances and re-Advances to BORROWER
under the Revolving Loan, to be disbursed by AGENT in the manner specified in
Section 2.3, and thereafter, during the term of this Agreement in an aggregate
principal amount at any one time Outstanding up to, but not exceeding, such
LENDER's Pro Rata Share of the Revolving Loan according to the LENDERS'
respective Commitments.
(b) Such Advances and re-Advances and such borrowings and
re-borrowings constitute the "Revolving Loan" described throughout this
Agreement.
2.2 MAXIMUM PERMITTED REVOLVING LOAN BORROWINGS
(a) Subject to the provisions of Section 2.2(b) below, the
maximum which may be Outstanding under the Revolving Loan at any one time cannot
exceed the lesser of the following:
(1) $25,000,000; or
(2) the total of the "loan value" of Eligible Receivables and
Eligible Inventory.
(b) (1) Eligible Receivables shall normally have a "loan value"
of eighty (80%) percent of the unpaid amount of the Eligible Receivables,
provided, however, that AGENT in good faith and in the exercise of its
reasonable commercial judgment may on prior notice to BORROWER fix the aforesaid
"loan value" at some lesser percentage.
(2) Eligible Inventory shall normally have "loan value" of the
lesser of $12,500,000 or 50% of the value of Eligible Inventory, provided,
however, the following shall apply:
(i) during any four calendar months (whether or not
consecutive) during any one calendar year and on notice to AGENT given at least
3 Business Days prior to the start of the applicable month as to which
BORROWER's election is being made, BORROWER may elect to have Eligible Inventory
have a "loan value" of the lesser of $12,500,000 or 55% of the value of Eligible
Inventory; and
(ii) AGENT in good faith and in the exercise of its reasonable
commercial judgment may on prior notice to BORROWER fix the aforesaid "loan
value" at some lesser amount or percentage.
(c) The "loan value" of Eligible Inventory and Eligible
Receivables will be determined by AGENT using the information supplied by
BORROWER to AGENT in the Borrowing Base Certificate, together with any other
information which BORROWER is required to give AGENT pursuant to Section 6.6
below.
(d) AGENT shall not have any liabilities or responsibilities to
BORROWER on account of the failure of any LENDER to perform any such LENDER's
funding obligations under this Agreement or under any of the other Loan
Documents or other document or instrument referred to or provided for herein or
therein.
2.3 DISBURSEMENT OF REVOLVING LOAN ADVANCES
(a) BORROWER shall give AGENT notice of each borrowing
hereunder as provided in Section 2.11 hereof. AGENT, upon its receipt thereof
but only to the extent BORROWER is allowed to borrow hereunder, shall disburse
such sum to BORROWER by depositing the amount thereof in an account of BORROWER
designated by BORROWER and maintained with AGENT and charging BORROWER's
Revolving Loan account on AGENT's books. Advances can be made, however, by means
other than crediting BORROWER's checking account.
(b) So long as BORROWER is in compliance with the terms of this
Agreement, BORROWER may borrow, re-pay and re-borrow Advances under the
Revolving Loan at any time during the period from the date hereof up to the day
before the Maturity Date, at which time the entire principal balance of Advances
Outstanding under the Revolving Loan, plus accrued interest, shall be due and
owing, unless sooner due or payable as provided herein.
(c) All disbursements to BORROWER under the Revolving Loan
shall normally be made by AGENT from AGENT's offices at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or, at its option, from any of its other offices, by
crediting BORROWER's checking account and charging BORROWER's Revolving Loan
account on AGENT's books. Advances can be made, however, by means other than
crediting BORROWER's checking account.
(d) Notwithstanding anything to the contrary, the obligation of
AGENT and the LENDERS to continue making advances under the Revolving Loan shall
terminate upon the expiration of this Agreement and shall be suspended upon
written notice (except in the case of the occurrence of an Event of Default
described in Sections 8.6, 8.7 and 8.8 as to which no notice shall be required)
from AGENT to BORROWER of the occurrence and during the continuance of any of
the following events:
(1) an Event of Default hereunder; or
(2) an event which, except for the passage of time or the
giving of notice, would be such an Event of Default.
2.4 REPAYMENT OF REVOLVING LOAN ADVANCES The principal owing on
the Revolving Loan shall be repayable in full as follows:
(a) Subject to the provisions of Section 2.4(b) below, any and
all Advances shall be repayable on the Maturity Date unless the term of this
Agreement or AGENT's Revolving Loan relationship with BORROWER is sooner
accelerated or terminated or modified as provided herein.
(b) Prior to the Maturity Date and notwithstanding the
provisions of subsection (a) above, the principal owing on the Revolving Loan
shall be repayable on a continuing and continual basis as follows:
(1) BORROWER shall forthwith transfer, assign, endorse and turn
over to AGENT all Proceeds (including cash, cash equivalents, checks, notes,
instruments for the payment of money and the like) received by BORROWER from all
sales and other dispositions of its Inventory and other Collateral.
(2) Such proceeds, until so turned over to AGENT, shall not be
commingled with the other property of BORROWER, but shall be segregated, held in
trust for AGENT and shall be assigned or endorsed and delivered immediately to
AGENT in the identical form received.
(3) BORROWER shall deposit all amounts so received from
BORROWER into one or more of the Cash Collateral Accounts.
(4) (i) BORROWER authorizes AGENT to use on a daily basis all
funds on deposit in the Cash Collateral Accounts to reduce the amount of
Advances and other sums Outstanding and due on the REVOLVING LOAN with any
excess to be made available to BORROWER on request. AGENT shall make such
application (A) on the Business Day of receipt by AGENT if receipt occurs before
1:00 P.M. on any Business Day or (B) on the next Business Day after receipt by
AGENT if such receipt occurs on or after 1:00 P.M. on any Business Day.
(ii) BORROWER recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by AGENT on the date received. In
consideration of AGENT's agreement to conditionally afford BORROWER credit as of
the Business Day on which AGENT receives those items of payment, BORROWER agrees
that, in computing the charges under this Agreement, all items of payment
(except payments made by wire transfer) shall be deemed applied by AGENT on
account of the Liabilities two (2) calendar days after AGENT receives such items
of payment. AGENT is not, however, required to give BORROWER credit for the
amount of any item of payment which is unsatisfactory to AGENT in its reasonable
commercial judgment and AGENT may charge BORROWER for the amount of any item of
payment which is returned to AGENT unpaid.
(5) Notwithstanding the foregoing provisions of this Section,
all Advances Outstanding under the Revolving Loan must comply with the lending
formula set forth in Section 2.2 above. In addition, if BORROWER is not in
compliance with the lending formula set forth in Section 2.2 above, BORROWER
must bring the Revolving Loan into compliance with the lending formula set forth
in Section 2.2 above immediately upon AGENT's request to do so; and BORROWER
will be able to draw under the Revolving Loan only to the extent that such
borrowings would be in compliance with the lending formula set forth in Section
2.2 above. In the event that BORROWER fails to bring Advances Outstanding under
the Revolving Loan into compliance with the lending formula set forth in Section
2.2 above immediately upon AGENT's request to do so, such failure shall be an
Event of Default hereunder and AGENT shall have all rights which arise
therefrom.
(c) Repayment by BORROWER of Advances Outstanding under the
Revolving Loan shall not affect the ability of BORROWER to borrow and re-borrow
under this Agreement so long as BORROWER is otherwise in compliance with the
terms of this Agreement and so long as the total amount of Advances Outstanding
under the Revolving Loan does not exceed the lending formula set forth in
Section 2.2 above.
(d) Nothing in this Section 2.4 is intended to limit the rights
of AGENT and the LENDERS under Section 2.3(d).
(e) Unless BORROWER is otherwise given notice by AGENT in
accordance with this Agreement, all payments shall be made at AGENT's offices at
Fleet Corporate Administration, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
at any other location that AGENT may hereafter designate by written notice to
BORROWER given in accordance with this Agreement.
2.5 PAYMENT OF REVOLVING LOAN INTEREST
(a) (1) BORROWER shall pay to AGENT for the account of each
LENDER per annum interest on the unpaid principal amount of each Advance made by
such LENDER for the period commencing on the date of such Advance until such
Advance shall be paid in full.
(2) Subject to the other provisions of this Section 2.5,
interest shall be charged on the Advances Outstanding under the Revolving Loan
at (i) a per annum rate (the "Prime Based Rate" as more fully defined below)
based on the fluctuating Prime Rate or (ii) at BORROWER's option (the "LIBOR
Option") to be exercised in the manner set forth below, a per annum rate (the
"LIBOR Based Rate" as more fully defined below) based on LIBOR (as defined
below). In no event, however, shall interest ever be calculated at a rate higher
than the maximum rate allowed by law.
(b) (1) The Prime Based Rate (the "Prime Based Rate") shall
equal AGENT's Prime Rate, floating, plus .500 of one percent, provided, however,
that notwithstanding the foregoing, the following shall apply:
(i) if BORROWER's Tangible Net Worth (as defined in Section
6.19(b) below) is $6,500,000 or more, the Prime Based Rate shall equal AGENT's
Prime Rate, floating, plus .400 of one percent;
(ii) if BORROWER's aforementioned Tangible Net Worth is
$7,500,000 or more, the Prime Based Rate shall equal AGENT's Prime Rate,
floating, plus .225 of one percent;
(iii) if BORROWER's aforementioned Tangible Net Worth is
$8,500,000 or more, the Prime Based Rate shall equal AGENT's Prime Rate,
floating.
(iv) in all events on and after the occurrence and continuance
of an Event of Default, per annum interest shall be charged on the Advances
Outstanding under the Revolving Loan at the Default Rate.
(2) If the interest rate is determined at a Prime Based Rate,
then in the event there should be a change in the Prime Rate, the rate of
interest on the Revolving Loan shall be changed effective as of the effective
date of each such change in the Prime Rate, as established by AGENT, without
prior notice to BORROWER. Any change in the Prime Rate shall not affect or alter
any other terms or conditions of this Agreement. AGENT will use its best efforts
to provide BORROWER with notice of the amount of the Prime Rate or the interest
rate or rates being charged to BORROWER as part of the periodic statements of
account which AGENT provides to BORROWER hereunder but AGENT's failure to
provide such notice shall not result in any liability to AGENT or affect the
rights or remedies of AGENT or any LENDER hereunder or the obligations of
BORROWER hereunder.
(c) The LIBOR Based Rate (the "LIBOR Based Rate") shall be a rate per
annum equal to 225 basis points in excess of LIBOR (as defined below) with
respect to the applicable LIBOR Based Interest Period (as also defined below),
it being understood that each determination of a LIBOR Based Rate shall be made
by AGENT in its sole and absolute discretion and shall be conclusive and binding
upon BORROWER, absent manifest error. Notwithstanding the foregoing, the
following shall apply:
(1) if BORROWER's Tangible Net Worth (as defined in Section
6.19(b) below) is $6,500,000 or more, the LIBOR Based Rate shall equal 220 basis
points in excess of LIBOR (as defined below) with respect to the applicable
LIBOR Based Interest Period (as also defined below);
(2) if BORROWER's Tangible Net Worth (as defined in Section
6.19(b) below) is $7,500,000 or more, the LIBOR Based Rate shall equal 210 basis
points in excess of LIBOR (as defined below) with respect to the applicable
LIBOR Based Interest Period (as also defined below);
(3) if BORROWER's Tangible Net Worth (as defined in Section
6.19(b) below) is $8,500,000 or more, the LIBOR Based Rate shall equal 200 basis
points in excess of LIBOR (as defined below) with respect to the applicable
LIBOR Based Interest Period (as also defined below);
(4) in all events on and after the occurrence and continuance
of an Event of Default, per annum interest shall be charged on the Advances
Outstanding under the Revolving Loan at the Default Rate.
(d) (1) The determination whether BORROWER has satisfied the
Tangible Net Worth test for purposes of obtaining the interest rate reduction
allowed by this Section will be made annually by reference to the consolidated
annual financial statements required to be submitted pursuant to Section 6.6 and
by using GAAP.
(2) The determination whether BORROWER remains in compliance
with the Tangible Net Worth test for purposes of continuing the interest rate
reduction allowed by this Section will be made quarterly by reference to the
consolidated quarterly and annual financial statements required to be submitted
pursuant to Section 6.6 and by using GAAP, provided, however, that nothing in
the foregoing shall prevent AGENT from discontinuing such interest rate
reduction prior to AGENT's receipt of any of the aforementioned financial
statements in the event AGENT obtains actual knowledge that BORROWER is not in
compliance with the Tangible Net Worth test.
(e) For purposes of the determination of any LIBOR Based Rate,
the following terms shall have the following meanings:
(1) "Business Day" shall mean a day which is not a Saturday,
Sunday or day on which banks in London are required or permitted to close.
(2) (i) "LIBOR" means, as applicable to any LIBOR Based
Interest Period, the rate per annum (rounded upward, if necessary, to the
nearest 1/100 of one percent) as determined on the basis of the offered rates
for deposits in U.S. dollars, for a period of time comparable to such LIBOR
Based Interest Period which appears on the Telerate page 3750 as of 11:00 a.m.
London time on the day that is three London Business Days preceding the first
day of such LIBOR Based Interest period; provided, however, if the rate
described above does not appear on the Telerate System on any applicable
interest determination date, then LIBOR shall be the rate (rounded upwards as
described above, if necessary) for deposits in dollars for a period
substantially equal to the interest period on the Reuters Page "LIBO" (or such
other page as may replace the LIBO Page on that service for the purpose of
displaying such rates), as of 11:00 a.m. (London Time), on the day that is three
London Business Days prior to the beginning of such interest period.
(ii) If both the Telerate and Reuters system are unavailable,
then the rate for that date will be determined on the basis of the offered rates
for deposits in U.S. dollars for a period of time comparable to such LIBOR Based
Interest Period which are offered by four major banks in the London interbank
market at approximately 11:00 a.m. London time, on the day that is three London
Business Days preceding the first day of such LIBOR Based Interest Period as
selected by AGENT. The principal London office of each of the four major London
banks will be requested to provide a quotation of its U.S. dollar deposit
offered rate. If at least two such quotations are provided, the rate for that
date will be the arithmetic mean of the quotations. If fewer than two quotations
are provided as requested, the rate for that date will be determined on the
basis of the rates quoted for loans in U.S. dollars to leading European banks
for a period of time comparable to such LIBOR Based Interest Period offered by
major banks in New York City at approximately 11:00 a.m. New York City time, on
the day that is three London Business Days preceding the first day of such LIBOR
Based Interest Period. In the event that AGENT is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR
Based Interest Period cannot be determined.
(iii) In the event that the Board of Governors of the Federal
Reserve System shall impose a LIBOR Reserve Percentage with respect to LIBOR
deposits of AGENT then for any period during which such LIBOR Reserve Percentage
shall apply, LIBOR shall be equal to the amount determined above divided by an
amount equal to 1 minus the LIBOR Reserve Percentage.
(3) "LIBOR Based Interest Period" shall mean the period
commencing on the date so specified in BORROWER's notice to AGENT of any
election to exercise the LIBOR Option and ending on the date specified in such
notice, which ending date (i) shall be either 1 month, 2 months, 3 months or 6
months after the commencement of the LIBOR Based Interest Period, and(ii) shall
in no event extend beyond the termination date or any extended termination date
of the Revolving Loan. No LIBOR Based Interest Period shall commence other than
on a Business Day. If any LIBOR Based Interest Period shall end on a day which
is not a Business Day, such LIBOR Based Interest Period shall be extended to the
next succeeding Business Day.
(4) "LIBOR Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding one billion
dollars in respect of Eurocurrency liabilities (as defined in Regulation D of
the Board of Governors of the Federal Reserve System) (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on loans covered by a LIBOR Based Rate is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of AGENT to United States residents). The LIBOR Based
Rate shall be adjusted automatically on and as of the effective date of any
change in the LIBOR Reserve Percentage.
(5) "Principal Balance" means, at any time, the portion or
portions of the Advances Outstanding under the Revolving Loan as to which
BORROWER has elected to have interest determined or to be determined, as
applicable, at a LIBOR Based Rate and includes all amounts that are to be
borrowed at a LIBOR Based Rate, whether or not BORROWER actually borrows such
amounts.
(6) "Roll Over Date" shall mean the day immediately following
the last day of a LIBOR Based Interest Period.
(f) If BORROWER wishes to exercise the LIBOR Option, BORROWER
shall give AGENT notice in writing or by telex or by facsimile (receipt of which
must be confirmed electronically or telephonically) of any election to exercise
the LIBOR Option at least three (3) Business Days prior to the commencement of a
LIBOR Based Interest Period, which notice shall specify (1) the Principal
Balance with respect to which BORROWER is making such election, and (2) in
conformity with the definition of "LIBOR Based Interest Period" set forth above,
the date upon which such LIBOR Based Interest Period is to commence and (3) its
duration. AGENT shall, as soon as practical prior to or on the date of the
commencement of the LIBOR Based Interest Period, determine and quote to BORROWER
a LIBOR Based Rate with respect to the Principal Balance specified in such
notice, and notify BORROWER of the date and time by which BORROWER must accept
the quoted LIBOR Based Rate. If BORROWER rejects the quoted LIBOR Based Rate, or
if BORROWER does not inform AGENT of its acceptance of the quoted LIBOR Based
Rate by the date and time specified by AGENT, time being of the essence, the
Prime Based Rate shall apply, or continue to apply to the specified Principal
Balance. If BORROWER accepts the quoted LIBOR Based Rate by the date and time
specified by AGENT, the quoted LIBOR Based Rate shall be applicable to the
Principal Balance during the LIBOR Based Interest Period specified by BORROWER
in such notice. A quoted LIBOR Based Rate may be accepted by BORROWER either
orally or in writing, provided that any such oral acceptance shall be
immediately confirmed by BORROWER in writing or by telex or by facsimile
(receipt of which must be confirmed electronically or telephonically). The
interest rate applicable to the Principal Balance, with respect to which
BORROWER has accepted a quoted LIBOR Based Rate, shall revert from the LIBOR
Based Rate applicable thereto to the Prime Based Rate as of the Roll Over Date
applicable thereto. AGENT shall be under no duty or obligation to notify
BORROWER that the interest rate on the Principal Balance is about to revert from
a LIBOR Based Rate to the Prime Based Rate.
(g) The LIBOR Option may only be exercised by BORROWER if the
portion of the Revolving Loan to be affected by the LIBOR Option would bear
interest at the Prime Based Rate on the date of commencement of the applicable
LIBOR Based Interest Period, but for the exercise by BORROWER of the LIBOR
Option, and only if the following conditions are met:
(1) No Event of Default has occurred and is continuing.
(2) The LIBOR Based Interest Period must commence on a Business
Day.
(3) The LIBOR Based Interest Period shall in no event extend
beyond the termination date or any extended termination date of the Revolving
Loan.
(5) If any LIBOR Based Interest Period shall end on a day which
is not a Business Day, such LIBOR Based Interest Period shall be extended to the
next succeeding Business Day.
(6) The LIBOR Option must be exercised for a minimum of
$1,000,000 and integral multiples of $100,000 thereafter. (6) No more than
$12,500,000 of the total Advances Outstanding under the Revolving Loan may be
the subject of interest being determined at a LIBOR Based Rate or LIBOR Based
Rates at any one time.
(7) The exercise of the LIBOR Option will not result in more
than 3 separate LIBOR subcontracts in the collective aggregate being in
existence between BORROWER and AGENT at any one time.
(h) In the event, and on each occasion, that on or before the
date upon which a LIBOR Based Interest Period is to commence, AGENT shall have
in its sole discretion exercised in good faith using reasonable commercial
judgment made a determination (which determination shall be conclusive and
binding upon BORROWER) that a LIBOR Based Rate cannot be determined or that the
current LIBOR Based Rate will not adequately and fairly reflect the cost to
AGENT or the LENDERS of making or maintaining any Principal Balance of any such
LIBOR Based Loan, AGENT shall so notify BORROWER and the Principal Balance with
respect to which BORROWER has exercised the LIBOR Option, shall, as applicable,
bear interest or continue to bear interest at the Prime Based Rate.
(i) In all events, interest shall be payable monthly on an
accrued basis on the last day of each and every calendar month and shall be
calculated on the basis of a year consisting of 360 days and paid for actual
days elapsed.
(j) On and after the occurrence of an Event of Default
hereunder or after the Maturity Date, BORROWER's right to select pricing options
shall cease and the unpaid principal of all advances shall, unless otherwise
agreed by AGENT, bear interest at the Default Rate.
(k) All agreements between BORROWER and AGENT are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to AGENT for the use or
the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Agreement shall be governed by such new law as of
its effective date. In this regard, it is expressly agreed that it is the intent
of BORROWER and AGENT and each LENDER in the execution, delivery and acceptance
of this Agreement to contract in strict compliance with the laws of the State of
New Jersey from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of any of the Loan Documents
at the time of performance of such provision shall be due, shall involve
transcending the limit of such validity prescribed by applicable law, then the
obligation to be fulfilled shall automatically be reduced to the limits of such
validity, and if under or from circumstances whatsoever AGENT or any LENDER
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between BORROWER and AGENT.
2.6 PAYMENT OF LATE CHARGES. Any payment of interest received
more than 10 days after the payment's due date, if accepted by AGENT, will be
subject to a late charge of 5% of the total interest installment due. Nothing in
the foregoing is intended to mean that AGENT will accept any payment after the
payment's due date (after any applicable "grace" period). Nothing in the
foregoing is intended to mean that AGENT's acceptance of any payment more than
10 days after the payment's due date, other than acceptance of payment of all
sums outstanding under the Revolving Loan, is a cure of any default.
2.7 AUTHORIZATION TO CHARGE ACCOUNTS: BORROWER hereby
authorizes AGENT to charge principal and interest and any other charges due
under the Revolving Loan against a specially designated demand deposit account
of BORROWER at AGENT or, in the absence of such designation or in the event that
there are insufficient funds in such designated account, then to any demand
deposit account of BORROWER at AGENT as of each due date. In the event that
there are insufficient funds in any such account on any applicable payment due
date, then AGENT is hereby authorized to effect payment by increasing the
principal balance of the Revolving Loan as though an Advance were taken by
BORROWER against the Revolving Loan in the amount of any payment effected by
AGENT.
2.8 TERM OF THE REVOLVING LOAN AND PREPAYMENT. (a) The
Revolving Loan relationship shall continue in full force and effect until the
Maturity Date (unless the term of this Agreement or AGENT's Revolving Loan
relationship with BORROWER is sooner accelerated or terminated or modified as
provided herein). (b) Subject to the provisions of subsection (c) below,
BORROWER may terminate its Revolving Loan relationship with AGENT at any time by
giving AGENT 60 days' prior written notice. Despite BORROWER's giving such
notice, AGENT's rights under this Agreement shall remain in full force and
effect until all Liabilities are paid in full. (c) In the event that interest on
any portion or portions of the Revolving Loan is being determined at a LIBOR
Based Rate, such portion or portions may be prepaid at any time but such
prepayment must be made for the entirety of the portion for which AGENT has
entered into contracts relating to LIBOR pricing. Partial prepayments of any
such portion or portions are not allowed. In the event of any such prepayment,
the provisions of Section 2.9 shall apply. (d) Despite any modification or
termination of the Revolving Loan relationship, whether by BORROWER or by AGENT,
AGENT's rights under this Agreement shall continue to remain in full force and
effect (as modified in the case of any modification and despite any acceleration
in the case of any acceleration and despite any termination in the case of any
termination) until all Liabilities are paid in full.
2.9 YIELD MAINTENANCE AND INDEMNIFICATION RELATING TO LIBOR
BASED INTEREST:
(a) BORROWER hereby agrees to indemnify AGENT and each LENDER
against any loss or expense which AGENT or any LENDER may sustain or incur (1)
in connection with BORROWER's failure to borrow all or any portion of an Advance
or (2) in connection with the receipt or recovery by AGENT or any LENDER of all
or any portion of any Principal Balance prior to the scheduled maturity of the
applicable LIBOR Based Interest Period, whether by voluntary prepayment,
acceleration or otherwise.
(b) Without limiting the effect of the foregoing, the amount to
be paid by BORROWER to AGENT and the LENDERS in order to indemnify AGENT and the
LENDERS for any loss occasioned by any of the events described in the preceding
provisions of this Section, and as liquidated damages therefor, shall be equal
to the following amount: The current rate for United States Treasury securities
(Bills on a discounted basis shall be converted to a bond equivalent) with a
maturity closest to the maturity date of the LIBOR Based Interest Period chosen
pursuant to the LIBOR Option and as to which the prepayment is made shall be
subtracted from the "cost of funds" component of the LIBOR Based Rate in effect
at the time of the prepayment. If the result is zero or a negative number, there
shall be no yield maintenance fee. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the Principal Balance
being prepaid. The resulting amount shall be divided by 360 and multiplied by
the number of days remaining in the term of the LIBOR Based Interest Period
chosen pursuant to the LIBOR Option as to which the prepayment is made. Said
amount shall be reduced to present value calculated by using the number of days
remaining in the designated term and using the above referenced United States
Treasury security rate and the number of days remaining in the term of the LIBOR
Based Interest Period chosen pursuant to the LIBOR Option as to which the
prepayment is made. The resulting amount shall be the yield maintenance fee due
to AGENT (for the benefit of the LENDERS) upon any prepayment of any Principal
Balance. Such yield maintenance fee shall be paid, if due under the formula set
forth above, upon the receipt or recovery by AGENT or a LENDER of all or any
part of any Principal Balance prior to the maturity thereof whether by voluntary
or involuntary prepayment, acceleration or otherwise.
(c) A certificate as to any additional amounts payable pursuant
to this Section setting forth the basis and method of determining such amounts
shall be conclusive, absent manifest error, as to the determination by AGENT set
forth therein if made reasonably and in good faith. BORROWER shall pay any
amounts so certified to it by AGENT within 10 days of receipt of any such
certificate. For purposes of this Section 2.9, all references to "AGENT" shall
be deemed to include any of the LENDERS who have a Commitment in the Revolving
Loan.
(d) The indemnities provided for herein shall survive payment
in full of the principal amount of the Revolving Loan and the interest due
thereon.
2.10 EVIDENCE OF REVOLVING LOAN INDEBTEDNESS
(a) The Advances made by each LENDER shall be evidenced by a
single promissory note, or from time to time a restated and/or amended note, of
BORROWER substantially in the form attached hereto as Exhibit "D". The aforesaid
note shall be payable to the order of such LENDER in a principal amount equal to
such LENDER's Commitment as originally in effect, and shall otherwise be duly
completed. The amounts due under such note shall be payable as provided in this
Agreement.
(b) AGENT is hereby authorized by BORROWER to record on AGENT's
records all advances made by each LENDER to BORROWER under such LENDER's
aforesaid note and all interest and other amounts due thereon and all payments
made on account of principal and/or interest and/or such other amounts. The
aggregate unpaid principal and/or interest and/or other amounts entered and
shown on AGENT's records shall further evidence the principal and/or interest
and/or other amounts owing and unpaid on the Revolving Loan. Each LENDER may
from time to time render, or cause AGENT to render, a statement of the
aforementioned records. AGENT will use good efforts to render such statement
monthly. If BORROWER fails to object to any such statement within sixty (60)
days after it is received by BORROWER, such statement shall be deemed to be an
account stated and binding upon BORROWER, provided, however, that nothing in the
foregoing shall prevent AGENT or BORROWER from correcting manifest errors in
such statements. Notwithstanding the foregoing, the following shall apply:
(1) any failure by AGENT to enter on its records the date and
amount of any advance or interest or other amount due on the Revolving Loan or
LENDER's and/or AGENT's failure to render any such statement shall not, however,
limit or otherwise affect the obligations of BORROWER under this Agreement or
under any LENDER's note to repay the principal amount of the advances,
re-advances, borrowings and re-borrowings made by any LENDER to BORROWER under
the Revolving Loan, together with all interest accruing and other amounts due
thereon.
(2) AGENT's failure to enter on its records the date and amount
of any payment made by BORROWER shall not, however, limit or otherwise affect
the right of BORROWER under the Revolving Loan to demonstrate its payment of any
Advance or any interest accruing and other amounts due thereon.
(c) The foregoing notes (and any extension, modification or
renewal thereof) and the records of AGENT indicating Advances made hereunder,
accrued interest and other charges due thereon, and payments made by BORROWER on
account of such Advances, interest and charges are each referred to as a
"Revolving Note" in this Agreement and collectively referred to as the
"Revolving Notes" in this Agreement.
2.11 NOTICES RELATING TO ADVANCES.
(a) BORROWER shall give AGENT written notice of each
termination or reduction of the Total Commitment and, subject to any special
notice requirements relating to BORROWER's exercise of any LIBOR Option,
BORROWER shall give AGENT written notice of each borrowing and prepayment of
each Advance (in each case, a "Borrowing Notice"). Each such written notice
shall be irrevocable and shall be effective only if received by AGENT, subject
to any special notice requirements relating to BORROWER's exercise of any LIBOR
Option or termination or permanent reduction of the Revolving Loan, not later
than 11 a.m., New York City time, on the date that is one Business Day prior to
the date of the related termination, reduction or prepayment or on the date of
the related borrowing.
(b) Each such notice of termination or reduction shall specify
the amount thereof. Each such notice of borrowing or prepayment shall specify
the amount to be borrowed or prepaid, the date of borrowing or prepayment (which
shall be a Business Day).
(c) Notwithstanding the foregoing, as it relates to any
borrowing of an Advance, AGENT may in its discretion rely on and act on oral
requests made by BORROWER and the making of any requested Advance shall
conclusively establish BORROWER's obligation to repay such Advance in accordance
with this Agreement.
(d) Also notwithstanding the foregoing, unless payment is
otherwise timely made by BORROWER, the becoming due of any Advance or other
obligation required to be paid under this Agreement or any Loan Document shall
be deemed irrevocably to be a request by BORROWER for an Advance on the due date
of, and in the amount required to pay, such Advance or other obligation which
has become due. In addition, the presentation by BORROWER for payment by AGENT
of any check or other item of payment drawn on any demand deposit account of
BORROWER at AGENT shall be deemed irrevocably to be a request by BORROWER for an
Advance in the amount of such check or other item of payment, provided, however,
that BORROWER understands and agrees that AGENT has no obligation to honor
drafts presented against any demand deposit account having insufficient balances
even if BORROWER has the ability to borrow under the Revolving Loan.
(e) AGENT shall notify the LENDERS of the content of each such
Borrowing Notice on the next Settlement Date.
2.12 APPLICATION OF PAYMENTS
. (a) Prior to the occurrence of an Event of Default, payments
received by AGENT or any LENDER as payments due on the Revolving Loan shall be
applied against amounts owing under the Revolving Loan and this Agreement, in
the following order unless otherwise determined by AGENT in its discretion
(unless otherwise directed by the LENDERS): first to expenses of AGENT and the
LENDERS, then to principal and then to interest.
(b) On and after the occurrence of an Event of Default, AGENT
may apply all payments and other sums of money received by it from or on account
of BORROWER towards the satisfaction of those Liabilities which the LENDERS in
their sole discretion deem fit.
2.13 OVERDRAFTS.
(a) In the event that drafts are presented against any checking
account of BORROWER with AGENT and such account has insufficient balances to
honor such drafts, BORROWER authorizes AGENT in its discretion to pay such
drafts using borrowings from the Revolving Loan to the extent that BORROWER has
availability to borrow under the Revolving Loan and such borrowing does not
breach the lending formula set forth in Section 2.2 above or any other Section
of this Agreement and to effect such payment by increasing the principal balance
of the Revolving Loan as though an Advance were taken by BORROWER against the
Revolving Loan in the amount of any payment effected by AGENT.
(b) Notwithstanding the provisions of subsection (a) above,
BORROWER understands and agrees that AGENT has no obligation to honor drafts
presented against accounts having insufficient balances even if BORROWER has
availability to borrow under the Revolving Loan.
2.14 OBLIGATIONS ABSOLUTE. The obligations of BORROWER under
this Agreement shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, and such obligations shall not be affected, modified
or impaired upon the happening from time to time of any event, including without
limitation any of the following, whether or not with notice to, or consent of,
BORROWER:
(a) AGENT's or any LENDER's taking or not taking any of the
actions referred to in the Loan Documents;
(b) AGENT's or any LENDER's release (whether with or without
consideration), impairment, failure to perfect a security interest in, exchange,
surrender, substitution or modification of (i) any Collateral or (ii) any other
collateral or security given by BORROWER or (iii) any collateral or security
given by GUARANTOR or (iv) any Proceeds of the foregoing;
(c) any failure, omission or delay on the part of AGENT or any
LENDER to enforce, assert or exercise any right, power or remedy conferred on it
in the Loan Documents or any other action or acts on the part of AGENT or any
LENDER;
(d) the voluntary or involuntary liquidation, dissolution, sale
or other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors or
readjustment, or other similar proceedings which affect GUARANTOR or any of its
assets;
(e) AGENT's or any LENDER's compromise, settlement, release
(whether with or without consideration), discharge, change, modification,
amendment (whether material or otherwise) or termination of any or all of the
obligations, duties, covenants or agreements of GUARANTOR under any of the Loan
Documents;
(f) the default or failure of BORROWER or GUARANTOR fully to
perform any of the obligations set forth in the Loan Documents;
(g) AGENT's or any LENDER's inability to recover payment from
any person or entity under the Loan Documents; or
(h) the existence of any claim, setoff, defense or other rights
which BORROWER or GUARANTOR may have at any time against any person whether in
connection with this Agreement, the other Loan Documents or any unrelated
transactions.
2.15 FEES. (a) Restructure Fee: BORROWER shall pay AGENT for
the benefit of AGENT, and not for the benefit of the LENDERS, a Restructure Fee
of $10,000. The aforementioned Restructure Fee shall be considered earned and
shall be paid to AGENT on the date hereof.
(b) Revolving Loan Facility Fee: BORROWER shall pay AGENT for
the benefit of the LENDERS pro rata according to their respective Commitments a
one-time Revolving Loan facility fee in an aggregate amount equal to $40,000 for
all LENDERS. The aforementioned Revolving Loan facility fee shall be considered
earned and shall be paid on the date hereof.
(c) Unused Revolving Loan Facility Fee: In the event that
average daily usage under the Revolving Loan during any calendar month or part
thereof falls below the maximum amount which may be borrowed under the Revolving
Loan, BORROWER shall pay AGENT for the benefit of the LENDERS pro rata according
to their respective Commitments an unused Revolving Loan fee on the short fall
determined at a rate equal to 1/4 of one percent per annum. Following the end of
each calendar month, AGENT will ▇▇▇▇ BORROWER for the unused Revolving Loan
facility fee, if any, then due and BORROWER shall pay the fee within 10 days
after the receipt of such ▇▇▇▇.
2.16 ADDITIONAL COSTS; CAPITAL REQUIREMENTS
(a) In the event that any existing or future law or regulation,
guideline or interpretation thereof, by any court or administrative or
governmental authority charged with the administration thereof, or compliance by
any LENDER with any request or directive (whether or not having the force of
law) of any such authority shall impose, modify or deem applicable or result in
the application of, any capital maintenance, capital ratio or similar
requirement against loan commitments or other obligations entered into by any
LENDER hereunder, and the result of any event referred to above is to impose
upon any LENDER or increase any capital requirement applicable as a result of
the making or maintenance of such LENDER's Commitment or the obligation of such
LENDER hereunder with respect to such Commitment or otherwise (which imposition
of capital requirements may be determined by each LENDER's reasonable allocation
of the aggregate of such capital increases or impositions), then, upon demand
made by such LENDER as promptly as practicable after it obtains knowledge that
such law, regulation, guideline, interpretation, request or directive exists and
determines to make such demand, BORROWER shall immediately pay to such LENDER
from time to time as specified by such LENDER additional commitment fees which
shall be sufficient to compensate such LENDER for such imposition of or increase
in capital requirements together with interest on each such amount from the date
demanded until payment in full thereof at the Default Rate. A certificate
setting forth in reasonable detail the amount necessary to compensate such
LENDER as a result of an imposition of or increase in capital requirements
submitted by such LENDER to BORROWER shall be conclusive, absent manifest error,
as to the amount thereof. For purposes of this Section, all references to any
"LENDER" shall be deemed to include any participant in such LENDER's Commitment,
provided, however, that the foregoing shall not require BORROWER to pay more
under this Section because of the existence of such participants than BORROWER
would pay to LENDER if there were no participants.
(b) In the event that any Regulatory Change shall: (i) change
the basis of taxation of any amounts payable to any LENDER under this Agreement
or the Notes in respect of any Advances (other than taxes imposed on the overall
net income of such LENDER for any such Advances by the United States of America
or the jurisdiction in which such LENDER has its principal office); or (ii)
impose or modify any reserve, Federal Deposit Insurance Corporation premium or
assessment, special deposit or similar requirements relating to any extensions
of credit or other assets of, or any deposits with or other liabilities of, such
LENDER; or (iii) impose any other conditions affecting this Agreement in respect
of Advances or any such extensions of credit, assets, deposits or liabilities;
and the result of any event referred to in clause (i), (ii) or (iii) above shall
be to increase such LENDER's costs of making or maintaining any Advances
including, without limitation, its Commitment, or to reduce any amount
receivable by such LENDER hereunder in respect of its Commitment (such increases
in costs and reductions in amounts receivable are hereinafter referred to as
"Additional Costs"), then, in each case, upon demand made by such LENDER as
promptly as practicable after it obtains knowledge that such a Regulatory Change
exists and determines to make such demand (a copy of which demand shall be
delivered to AGENT), BORROWER shall pay to such LENDER from time to time as
specified by such LENDER, additional commitment fees or other amounts which
shall be sufficient to compensate such LENDER for such increased cost or
reduction in amounts receivable by such LENDER from the date of such change,
together with interest on each such amount from the date demanded until payment
in full thereof at the Prime Based Rate and, if not paid within 30 days after
demand, then with interest at the Default Rate. All references to any "LENDER"
shall be deemed to include any participant in such LENDER's Commitment,
provided, however, that the foregoing shall not require BORROWER to pay more
under this Section because of the existence of such participants than BORROWER
would pay to LENDER if there were no participants.
(c) Determinations by any LENDER for purposes of this Section
of the effect of any Regulatory Change on its costs of making or maintaining
Advances or on amounts receivable by it in respect of Advances, and of the
additional amounts required to compensate such LENDER in respect of any
Additional Costs, shall be set forth in writing in reasonable detail and shall
be conclusive, absent manifest error.
(d) In the event that any LENDER demands compensation under
this Section 2.16, then without limiting or reducing the obligations of BORROWER
hereunder, such LENDER shall take reasonable steps to mitigate the circumstances
resulting in such demand, provided, however, that such LENDER shall not be
required to take such steps if, in its opinion, such steps (1) would be
inconsistent with such LENDER's internal policies, (2) would or might have an
adverse effect upon the LENDER's business, operations, or financial condition or
(3) would result in any cost, liability or exposure to such LENDER.
ARTICLE III
COLLATERAL
3.1 CROSS COLLATERALIZATION. BORROWER agrees that payment and
performance of all Liabilities shall be secured by each and all of the
following: (a) all Collateral hereinafter set forth in this Article III, (b) all
Collateral now or hereafter given by BORROWER (i) to AGENT for the ratable
benefit of the LENDERS or (ii) to any of the LENDERS and (c) all Proceeds of the
foregoing.
3.2 ACCOUNTS RECEIVABLE. To secure payment and performance of
all Liabilities, BORROWER hereby creates in favor of AGENT for the ratable
benefit of the LENDERS and hereby grants to AGENT for the ratable benefit of the
LENDERS a first security interest in all of BORROWER's Accounts, as defined
herein, presently owned by BORROWER or hereafter existing, created or acquired
by it.
3.3 CHATTEL PAPER. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Chattel Paper, as defined herein,
whether presently owned by BORROWER or hereafter acquired by it, including but
not limited to all such Chattel Paper, and now or hereafter left in the
possession of AGENT or any of the LENDERS for any purpose.
3.4 CONTRACT RIGHTS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Contract Rights, as defined
herein, presently owned by BORROWER or hereafter acquired by it.
3.5 DEPOSIT ACCOUNTS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby assigns to AGENT for the ratable benefit of the
LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS a
first security interest in each and all of the following:
(a) the balance of every demand or deposit account (including,
without limitation, each Cash Collateral Account), now or hereafter existing, of
BORROWER with AGENT or any of the LENDERS or any bank affiliated with AGENT or
any of the LENDERS (or any successor-in-interest to any of the foregoing) or in
transit to any of them; and
(b) all money, instruments, securities, documents, credits,
claims, and other property of BORROWER, now or hereafter or for any purpose
(including safe-keeping or pledge or security for any of the Liabilities) in the
possession, custody, safekeeping or control of AGENT or any of the LENDERS or
any bank affiliated with AGENT or any of the LENDERS (or any
successor-in-interest to any of the foregoing) or in transit to any of them; and
(c) any sum now or hereafter owed by AGENT or any of the
LENDERS to BORROWER whether due or not; and (d) all additions, substitutions,
replacements, and increments to the foregoing property, as well as proceeds of
all of the foregoing property in whatever form, including cash, negotiable
instruments and other instruments for the payment of money.
3.6 EQUIPMENT. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Equipment, as defined herein, of
BORROWER, whether presently owned by BORROWER or hereafter acquired by it, and
wherever located.
3.7 GENERAL INTANGIBLES. To secure payment and performance of
all Liabilities, BORROWER hereby creates in favor of AGENT for the ratable
benefit of the LENDERS and hereby grants to AGENT for the ratable benefit of the
LENDERS a first security interest in all of BORROWER's General Intangibles, as
defined herein, presently owned by BORROWER or hereafter acquired by it.
3.8 GOODS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Goods, as defined herein,
presently owned by BORROWER or hereafter acquired by it.
3.9 INSTRUMENTS. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Instruments as defined herein, of
BORROWER, whether presently owned by BORROWER or hereafter acquired by it,
including but not limited to all such Instruments now or hereafter left in the
possession of AGENT or any of the LENDERS for any purpose, including but not
limited for the purpose of collection.
3.10 INVENTORY. To secure payment and performance of all
Liabilities, BORROWER hereby creates in favor of AGENT for the ratable benefit
of the LENDERS and hereby grants to AGENT for the ratable benefit of the LENDERS
a first security interest in all of BORROWER's Inventory, as defined herein, of
BORROWER, whether presently owned by BORROWER or hereafter acquired by it, and
wherever located.
3.11 LEDGERS AND RECORDS. To secure the payment and performance
of all Liabilities, BORROWER hereby creates in favor of AGENT for the ratable
benefit of the LENDERS and hereby grants to AGENT for the ratable benefit of the
LENDERS a first security interest in all of BORROWER's ledger sheets, files,
records and documents relating to the Collateral which shall, until delivered to
or removed by AGENT, be kept by BORROWER in trust for AGENT and without cost to
AGENT in appropriate containers in safe places.
3.12 PRODUCTS AND PROCEEDS. To secure payment and performance
of all Liabilities, BORROWER hereby creates in favor of AGENT for the ratable
benefit of the LENDERS and hereby grants to AGENT for the ratable benefit of the
LENDERS a security interest in Products and Proceeds.
ARTICLE IV
REPRESENTATIONS
In order to induce AGENT and the LENDERS to enter into this
Agreement and to perform their respective obligations hereunder, BORROWER makes
the following representations to AGENT and to each of the LENDERS, each and all
of which shall survive the execution and delivery of this Agreement for the
duration of the term, or the extended or renewed term or terms of, this
Agreement:
4.1 (a) BORROWER is a corporation of the State of Delaware with
its principal place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
(b) (1) BORROWER's correct legal name is "FIVE STAR GROUP,
INC." (2) Immediately prior to the date hereof, BORROWER was known as "FIVE STAR
ACQUISITION CORP."
(c) (1) On the date hereof, BORROWER uses no trade names except
the trade name "Decorating Group" in the State of New York. (2) BORROWER will
not use any trade name without first giving AGENT prior notice thereof.
(d) (1) On the date hereof, BORROWER owns no patents, trade
names (except as set forth above) or trade marks. (2) BORROWER will advise AGENT
of any patents, trade names or trade marks which it acquires and, if requested
by AGENT, will provide AGENT with a security interest therein.
(e) BORROWER is engaged in the business of the wholesale
distribution of home decorating, hardware and finishing products and business
directly related thereto.
(f) The stock of BORROWER is wholly owned by GUARANTOR.
(g) BORROWER has no Subsidiaries. 4.2 BORROWER is in good
standing under the laws of the State of Delaware, the state of its
incorporation.
4.3 BORROWER is qualified to do business and is in good
standing in the States of Connecticut, New Jersey, Massachusetts and New York
and in each jurisdiction where the nature of its business requires it to be so
qualified except where the failure to so qualify would not have a Materially
Adverse Effect on the business, properties or financial condition of BORROWER.
4.4 BORROWER has the corporate power to execute, deliver and
carry out this Agreement and its Board of Directors has duly authorized and
approved the terms described herein and the taking of any and all action
contemplated herein.
4.5 (a) On the date hereof, the Collateral given by BORROWER is
located at the following addresses: (1) 903 ▇▇▇▇▇▇ Road East Hanover Morris
County, New Jersey 07936
Record Owner: Hanover Public Warehousing, L.L.C.
Address of
Record Owner: c/o Vornado Realty Trust
Park ▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President, Real Estate
(2) ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Record Owner: ▇▇▇▇▇▇ Company
Address of
Record Owner: ▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) In addition and on the date hereof, BORROWER maintains
offices, but no Collateral, at the following locations:
(1) ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇ (New York County), New York 10019
Record Owner: Solow Company
Address of
Record Owner: ▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(2) ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇▇▇), ▇▇▇ ▇▇▇▇
Record Owner: R.G.E., Inc.
Address of
Record Owner: ▇.▇. ▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
4.6 BORROWER has full power and authority to execute, deliver
and perform this Agreement, each Revolving Note and all of the other Loan
Documents to which it is party and to perform and observe the terms and
provisions hereof and thereof.
4.7 This Agreement is a legal, valid and binding agreement of
BORROWER enforceable against BORROWER in accordance with its terms and each
Revolving Note and all of the other Loan Documents to which it is a party are
similarly valid, binding and enforceable against BORROWER in accordance with
their respective terms except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, relating to or affecting the enforcement of creditors'
rights generally and except that the remedy of specific performance and other
equitable remedies are subject to judicial discretion.
4.8 No consent or approval of any trustee or holder of any
indebtedness or obligation of BORROWER is necessary in connection with the
execution and delivery of this Agreement or any Revolving Note or any of the
other Loan Documents to which it is a party or any transaction contemplated
hereby or thereby, with the exception of any consents or approvals which may
have been obtained and certified copies of which have been delivered to AGENT.
4.9 No consent, permission, authorization, order or license of
any governmental authority is necessary in connection with the execution and
delivery of this Agreement or any Revolving Note or any of the other Loan
Documents to which it is a party or any transaction contemplated hereby or
thereby, except as any such consent, permission, authorization, order or license
has been obtained and certified copies of which have been delivered to AGENT or
except where the failure to obtain any such consent, permission, authorization,
order or license would not create a Materially Adverse Effect on the business,
properties or financial condition of BORROWER.
4.10 There is no provision of any indenture or material
agreement, written or oral, to which to the best of BORROWER's knowledge,
BORROWER is a party or under which it is obligated which would be contravened in
any material respect by the execution and delivery of this Agreement or any
Revolving Note or any of the other Loan Documents to which it is a party or by
the performance of any material provision, condition, covenant or other term
hereof or thereof except where such contravention would not have a Materially
Adverse Effect on the business, properties or financial condition of BORROWER.
4.11 To the best of BORROWER's knowledge, there is no statute,
rule or regulation, or any judgment, decree or order of any court or agency
binding on BORROWER which would be contravened in any Materially Adverse Effect
by the execution and delivery of this Agreement or any Revolving Note or any of
the other Loan Documents to which it is a party or by the performance of any
material provision, condition, covenant or other term hereof or thereof except
where such contravention would not have a Materially Adverse Effect on the
business, properties or financial condition of BORROWER.
4.12 On the date of this Agreement, BORROWER has good and
marketable title to all of its properties and assets, real, personal and mixed,
as reflected on the most recent balance sheet of BORROWER, and none of said
properties or assets is subject to any mortgage, pledge, lien, security
interest, encumbrance, charge or title retention or other security agreement or
arrangement of any character whatsoever except for Permitted Liens and except as
set forth on the Certification as to Liens and except where the existence of
such lien would not otherwise violate Section 8.4 or Section 8.5 hereof and
would also not have a Materially Adverse Effect on the business, properties or
financial condition of BORROWER.
4.13 (a) BORROWER has timely filed all returns and information
and other reports required of it under all Federal, State, local and foreign tax
laws to which it is subject, except where failure to file would not have a
Materially Adverse Effect on the business, properties or financial condition of
BORROWER;
(b) all such returns and reports are true, correct and
complete in all material respects;
(c) there are not now in effect any extensions of time in which
to assess additional taxes against BORROWER;
(d) BORROWER has paid or made adequate provision for the full
payment of all fees, taxes, interest and penalties which have been incurred or
are due and payable by it or which have been asserted or proposed to be asserted
against it, except for those taxes being contested in good faith and by
appropriate proceedings diligently pursued and for which BORROWER has
established cash reserves to the satisfaction of AGENT;
(e) the liability for taxes shown on the most current financial
statements of BORROWER submitted to AGENT is sufficient for the payment of all
material Federal, State, local and foreign taxes attributable or with respect to
all periods, or portions thereof, prior to the date of such financial statements
remaining unpaid as of such date and any interest thereon to such date; and
(f) except as disclosed in the Asset Purchase Agreement
relating to the New Jersey and Connecticut sales and use tax audits, BORROWER is
not now being audited by any tax authority nor are there pending any unresolved
issues arising from prior audits, except as set forth in the most current
financial statements of BORROWER submitted to AGENT.
4.14 No material action or proceeding is now pending or, to the
knowledge of BORROWER is threatened, against BORROWER at law, in equity or
otherwise, before any court, board, commission, agency or instrumentality of any
federal, state or local government or of any agency or subdivision thereof, or
before any arbitrator or panel of arbitrators, other than claims covered by
insurance that could reasonably be expected to have a Materially Adverse Effect
on the business, properties or financial condition of BORROWER. A summary of
existing litigation appears on Schedule 4.14.
4.15 (a) There are no collective bargaining agreements or other
labor contracts covering BORROWER other than the Agreement between Five Star
Group, Inc. and Local No. 11 affiliated with International Brotherhood of
Teamsters effective December 14, 1997 through December 13, 2000.
(b) Except as set forth in subsection (a) above, no such
collective bargaining agreement or other labor contract will expire during the
term of this Agreement.
(c) To the best of BORROWER's knowledge, no union or other
labor organization is seeking to organize, or to be recognized as bargaining
representative for, a bargaining unit of employees of BORROWER.
(d) To the best of BORROWER's knowledge, there is no pending
or, threatened strike, work stoppage, material unfair labor practice claim or
charge, arbitration or other material labor dispute against or affecting
BORROWER or its employees which would have a Materially Adverse Effect on the
business, properties or financial condition of the BORROWER.
(e) There has not been, during the five year period prior to
the date hereof, a strike, work stoppage, material unfair labor practice claim
or charge, arbitration or other material labor dispute against or affecting
BORROWER or any of its employees.
(f) There are no actions, suits, charges, demands, claims,
counterclaims or proceedings pending or, to the best of BORROWER's knowledge,
threatened against BORROWER, by or on behalf of, or with, its employees, other
than employee grievances arising in the ordinary course of business that are
not, in the aggregate, material.
4.16 No event has occurred and is continuing which would
constitute an Event of Default as defined in Article VIII or which, upon a lapse
of time and notice, if applicable, would become such an Event of Default and no
borrowing by BORROWER under this Agreement constitutes an event of default under
any agreement to which BORROWER is a party.
4.17 All financial statements of BORROWER and all written
information and other written data furnished by BORROWER to AGENT are complete
and correct in all material respects, and such financial statements have been
prepared in accordance with GAAP and fairly represent the financial condition of
BORROWER as of such date subject to year-end audit adjustments in the case of
interim financial statements. Since such date there has been no material adverse
change in BORROWER's financial condition sufficient to impair its ability to
repay all of the Liabilities except for those taxes being contested in good
faith and by appropriate proceedings diligently pursued and for which BORROWER
has established reserves to the satisfaction of AGENT. BORROWER does not have
any material contingent obligations, liabilities for taxes or other outstanding
financial obligations which are material in the aggregate, except as disclosed
in such statements, information and data.
4.18 (a) Neither BORROWER nor any employee benefit plan
maintained by BORROWER is in violation of any of the provisions of the Employee
Retirement Income Security Act of 1974, 29 U.S.C. '1001 et seq., as from time to
time amended ("ERISA") or any regulations issued thereunder by the United States
Treasury Department, the Department of Labor and the Pension Benefit Guaranty
Corporation, and no prohibited transaction (within the meaning of Title I of
ERISA or the Internal Revenue Code of 1986, as amended (the "Code")) has
occurred and is continuing with respect to any such plan, in each instance where
such violation or prohibited transaction or any liabilities resulting directly
or indirectly therefrom individually or in the aggregate could reasonably be
expected to have a Materially Adverse Effect on the business, results of
operations, prospects, financial condition or any material asset of BORROWER or
on the ability of BORROWER to execute this Agreement or consummate any of the
transactions contemplated hereby. For purposes of this Agreement, the term
"employee benefit plan" means any plan of a type described in Section 3(3) of
ERISA in respect of which BORROWER is an "employer" as defined in Section 3(5)
of ERISA (herein called the "Benefit Plans" or individually the "Benefit Plan").
(b) With respect to each such Benefit Plan and any trusts
created thereunder:
(1) all reports, forms and other information required to be
filed with any government agency or to be distributed or made available to any
Benefit Plan participant or beneficiary of any Benefit Plan have been filed,
distributed or made available;
(2) all Benefit Plans have been amended to the extent currently
required by the applicable provisions of ERISA and the Code;
(3) BORROWER has made all contributions required to be made
with respect to each Benefit Plan;
(4) with respect to each group health plan maintained by
BORROWER, the requirements of Sections 601 through 608 of ERISA have been
complied with;
(5) no Benefit Plan and no trust thereunder has been
terminated;
(6) there has been no "reportable event", as defined in Section
4043 of ERISA, or any "accumulated funding deficiency";
(7) BORROWER has not incurred any liability to the Pension
Benefit Guaranty Corporation.
(c) Neither BORROWER nor any officer, director or other
employee of BORROWER, nor any "party in interest" or "disqualified person", as
such terms are defined in Section 3 of ERISA and Section 4975 of the Code, has,
with respect to any Benefit Plan, engaged in or been a party to any "prohibited
transaction", as such term is defined in Section 4975 of the Code or Section 406
of ERISA, in connection with which BORROWER or any officer, director or other
employee of BORROWER, or any Benefit Plan, could reasonably be expected to,
directly or indirectly, be subject to either a penalty, assessed pursuant to
Section 502(i) of ERISA, or a tax imposed by Section 4975 of the Code.
4.19 BORROWER is not engaged nor will it engage, principally or
as one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of the Revolving Loan will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of such Board of Governors.
4.20 BORROWER is indebted to SELLER in the principal amount of
$5,000,000.
4.21 Year 2000 Compliance. BORROWER has developed and has
delivered to AGENT a questionnaire prepared by AGENT (the "Y2K Plan") for
insuring that the software and hardware systems of BORROWER which impact or
affect in any way the business operations of BORROWER will be Year 2000
Compliant and Ready. BORROWER have met the Y2K Plan milestones such that all
hardware and software systems will be Year 2000 Compliant and Ready in
accordance with the Y2K Plan.
ARTICLE V
CONDITIONS OF LENDING
The obligation of AGENT and the LENDERS to lend hereunder is
subject to the following conditions precedent:
5.1 On the date hereof, all legal matters incident to this
Agreement shall be reasonably satisfactory to counsel for AGENT.
5.2 On the date hereof, BORROWER shall be in compliance with
all the terms and provisions set forth herein and no Event of Default specified
in Article VIII hereof, nor any event which upon notice or lapse of time or both
would constitute such an Event of Default, shall have occurred and be
continuing.
5.3 On the date hereof, AGENT shall have received executed
originals of:
(a) this Agreement;
(b) the Revolving Notes;
(c) UCC-1 Financing Statements and, if necessary to discharge
any non-Permitted Liens against BORROWER or SELLER, UCC-3 Financing Statements
(Terminations);
(d) the Certification as to Liens;
(e) the Certification Responsive to the Loan Agreement;
(f) the Guaranty;
(g) the Certification Responsive to the Guaranty;
(h) evidence of insurance coverage on the Inventory, and
Equipment in amounts and on terms reasonably satisfactory to AGENT, together
with endorsements showing AGENT as co-insured or loss payee, as its interests
may appear wherever appropriate, together with endorsements showing AGENT to
have at least 30 days' notice prior to insurance cancellation or non-renewal;
(i) legal opinion of counsel for BORROWER and for GUARANTOR;
(j) the Subordination Agreement with copy of subordinated note
attached; and
(k) the Landlord's Consents.
ARTICLE VI
POSITIVE COVENANTS
BORROWER covenants and agrees that, until the full and final
payment of the Liabilities, unless AGENT waives compliance in writing:
6.1 (a) BORROWER will repay the Revolving Loan, in accordance
with the terms of the Revolving Notes and this Agreement.
(b) Unless otherwise provided herein, BORROWER will repay
AGENT's customary service charges associated with any accounts maintained at
AGENT.
(c) BORROWER will repay all other Liabilities in accordance
with the terms thereof and any note and/or notes and/or records of AGENT
evidencing the same.
6.2 BORROWER will maintain, preserve and keep its properties
and assets or cause the same to be maintained, preserved and kept, in good
repair, working order and condition excepting reasonable wear and tear; make or
cause to be made all necessary and proper repairs, replacements and renewals
thereto as shall from time to time be necessary; and make or cause to be made
all necessary and proper substitutions, additions, modifications and
improvements as may be necessary to preserve (a) the value of its properties and
assets, (b) their usefulness to BORROWER and (c) their fitness for their
intended purposes, provided that nothing in this Section 6.2 shall prevent
BORROWER from discontinuing the operation and maintenance of any of its
properties and disposing of same if in the judgment of BORROWER such is
desirable in the conduct of its business and such discontinuance and disposition
do not in the aggregate have a Materially Adverse Effect on BORROWER.
6.3 (a) BORROWER will pay as they become due, all taxes (or
will provide adequate reserves therefor), assessments, levies and other
governmental charges, by whatever name called, that may at any time be lawfully
assessed or levied against or with respect to BORROWER, the Collateral or any
other property acquired by BORROWER in substitution for, as a renewal or
replacement of, or modification, improvement or addition to the Collateral
(including, but not by way of limitation, any tax, assessment or other
governmental charge which, if not paid, will become a lien or charge upon the
Collateral) and will also pay all utilities and other charges incurred in the
operation, maintenance, use and upkeep of the Collateral or any part thereof.
(b) If any lien shall be claimed which in AGENT's opinion might
possibly create a valid obligation having priority over the rights granted to it
herein, AGENT may, on prior notice to BORROWER, pay such taxes, assessments,
charges or claims, and the amount thereof, together with interest at the Default
Rate, shall be added to the Liabilities hereby secured.
6.4 BORROWER will (a) preserve and maintain its corporate
existence, (b) maintain all of its rights, privileges and franchises necessary
or desirable in the normal conduct of its business except if no Materially
Adverse Effect results from the loss of any such rights, privileges and
franchises and (c) conduct its business in an orderly and regular manner.
6.5 At any time or from time to time when in the reasonable opinion of
AGENT or its counsel it shall be necessary or desirable, BORROWER will execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered any
supplement hereto or other mortgage, document, instrument, agreement, UCC-1
Financing Statement, UCC-3 Financing Statement, invoice, ▇▇▇▇ of lading,
shipping document and receipt or other writing as may reasonably be required for
perfecting the liens and security interests granted to AGENT hereunder,
correcting any inadequate or incorrect description of the Collateral or carrying
out the intention of or facilitating the performance of any term, covenant or
condition of this Agreement. In the event BORROWER fails to abide by this
Section within 10 days from AGENT's request, AGENT may execute all of the above
instruments on behalf of BORROWER.
6.6 Reporting Requirements. (a) BORROWER shall maintain books and records
in such detail, form and scope as being currently maintained by BORROWER.
(b) In addition, BORROWER shall supply to AGENT on forms supplied by AGENT
or otherwise reasonably acceptable to AGENT, the information set forth in the
subsections below, it being understood that in the event that BORROWER does not
supply or cause to be delivered to AGENT the information set forth below within
10 calendar days after BORROWER receives notice from AGENT that such information
is past due, interest on the Revolving Loan will be calculated at the Default
Rate during the time that BORROWER is not in compliance, it being further
understood that AGENT's acceptance of payment at the Default Rate does not
otherwise prevent AGENT from otherwise declaring an Event of Default as a result
thereof:
(1) At Least Weekly Collateral Reporting: Not in limitation of the
foregoing or of the right of AGENT to request other information in the exercise
of its reasonable commercial judgment, BORROWER shall submit at the time of each
request for an advance under the Revolving Loan but in no event less frequently
than weekly the information contained in the Borrowing Base Certificate, such
certificate to be submitted no later than Wednesday after the end of the
immediately preceding week and such information to include each of the following
to the extent not specifically provided for in the Borrowing Base Certificate:
(i) all deposit tickets (including collections in the form of cash or
checks);
(ii) immediately upon their occurrences, reports and records of merchandise
returns or disputes, discounts, advertising allowances, contraoffsets or any
other offsets, volume discounts, rebate arrangements, sales of samples, "▇▇▇▇
and hold" transactions, and any other factor which would dilute the value or
reduce the amount of any Account Receivable.
(2) Monthly Collateral Reporting: Also not in limitation of the foregoing
or of the right of AGENT to reasonably request other information in the exercise
of its reasonable commercial judgment, BORROWER shall submit on a monthly basis
the following information, to be submitted no later than 15 days after the end
of each calendar month:
(i) detailed invoice date Accounts Receivable aging, which detail
individual Account Debtors' names, addresses, amounts owed and days outstanding;
(ii) aging schedules of accounts payable;
(iii) Accounts Receivable/Loan Reconciliation, in the form attached hereto
as Exhibit "E"; and
(iv) Collateral Update Certificate, in the form attached hereto as Exhibit
"F", including monthly Inventory reports showing the amount of Inventory in
stock and the location and cost thereof.
(c) Quarterly Financial Statements: Also not in limitation of the foregoing
or of the right of AGENT to reasonably request other information in the exercise
of its reasonable commercial judgment, BORROWER shall, so long as any of the
Liabilities remains outstanding (unless AGENT otherwise consents in writing),
deliver to AGENT as soon as available and in any event within 50 days after the
end of each fiscal quarter of BORROWER, each of the following:
(1) financial statements prepared internally by management substantially in
the same form (except for notes to the financial statements) as required for
GUARANTOR's consolidated annual financial statements with BORROWER and NPD
Trading (USA), Inc. (GUARANTOR's other subsidiary) and showing on a consolidated
basis the assets and liabilities of GUARANTOR, BORROWER and the aforementioned
NPD Trading (USA), Inc., at the end of said fiscal quarter and the results of
their consolidated operations during said fiscal quarter, prepared in accordance
with GAAP, all in reasonable detail and in each case duly certified in the form
attached hereto as Exhibit "G" by the principal financial officer of BORROWER as
having been prepared in accordance with GAAP and being correct and complete in
all material respects subject only to year end adjustments, it being understood
that, to the extent that GUARANTOR's quarterly report on Form 10-Q contains any
of the foregoing items, AGENT will accept GUARANTOR's report on Form 10-Q in
lieu of such items;
(2) a certificate of said officer in the form attached hereto as Exhibit
"G" (i) stating that such officer does not have any knowledge that an Event of
Default (or an event which, with notice or the lapse of time or both, would
constitute an Event of Default) exists or, if an Event of Default (or such other
event) does exist, a statement as to the nature thereof and the actions which
BORROWER proposes to take with respect thereto, and (ii) showing calculations in
reasonable detail of BORROWER's compliance at and as of the end of each such
fiscal quarter, with each financial ratio and requirement of Article VI and
Article VII of this Agreement.
(d) Annual Financial Statements: Not in limitation of the foregoing or of
the right of AGENT to reasonably request other information in the exercise of
its reasonable commercial judgment, BORROWER shall, so long as any of the
Liabilities remains outstanding (unless AGENT otherwise consents in writing),
deliver to AGENT as soon as available and in any event within 95 days after the
end of each fiscal year of BORROWER, each of the following:
(1) an annual audit report for such year for GUARANTOR, including (i) on a
consolidated basis for BORROWER and the aforementioned NPD Trading (USA), Inc.,
their balance sheet and statements of operations, their cash flows and changes
in stockholders' equity for such fiscal year, setting forth in comparative form
the corresponding figures for the preceding fiscal year, prepared in accordance
with GAAP and all in reasonable detail and in each case duly certified by
independent certified public accountants of recognized standing acceptable to
AGENT, and (ii) on a consolidating basis for GUARANTOR, BORROWER and the
aforementioned NPD Trading (USA), Inc., their balance sheet and statement of
operations, all in reasonable detail and duly certified in the form attached
hereto as Exhibit "G" by the principal financial officer of BORROWER as having
been prepared in accordance with GAAP and being correct and complete in all
material respects, it being understood that, to the extent that GUARANTOR's
annual report on Form 10-K contains any of the foregoing items, AGENT will
accept GUARANTOR's report on Form 10-K in lieu of such items;
(2) a copy of the management letter, if any, issued by such accounting firm
to BORROWER; and
(3) a certificate of said accounting firm stating that, in the course of
auditing and reporting on the financial statements of BORROWER for such fiscal
year, they obtained no knowledge that BORROWER failed to comply with the terms,
covenants, provisions or conditions of Article VI or Article VII hereof insofar
as such Articles relate to accounting matters or, if such accountants shall have
obtained knowledge of such failure, they shall disclose the failure in such
statement; and
(4) a certificate of the chief financial officer of BORROWER in the form
attached hereto as Exhibit "H" (i) stating that such officer does not have any
knowledge that an Event of Default (or an event which, with notice or the lapse
of time or both, would constitute an Event of Default) exists, or, if an Event
of Default (or such other event) does exist, a statement of the nature thereof
and the actions which BORROWER proposes to take with respect thereto and (ii)
showing calculations in reasonable detail of BORROWER's compliance at and as of
the end of each such fiscal year with each financial ratio and requirement of
Article VI and Article VII of this Agreement.
(e) Annual Tax Returns: BORROWER hereby covenants to furnish to AGENT, no
later than September 20 of each year, a true copy of the tax return of BORROWER
as filed with the Internal Revenue Service.
(f) Annual Projections: Not in limitation of the foregoing or of the right
of AGENT to request other information, each BORROWER shall, so long as any of
the Liabilities remains outstanding (unless AGENT otherwise consents in
writing), deliver to AGENT as soon as available and in any event within 30 days
prior to the end of each of its fiscal years, annual projections for the
immediately upcoming fiscal year, prepared on an annual basis, and including
balance sheet, profit and loss and cash flow and in form acceptable to AGENT.
(g) Notice of Default: As soon as possible and in any event within three
Business Days after it becomes aware of the occurrence of each Event of Default
(or each event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default), the written statement of the chief financial
officer of BORROWER setting forth details of such Event of Default (or such
other event) and the action which BORROWER proposes to take with respect
thereto.
(h) Notice of Adverse Condition: As soon as possible, the written statement
of the chief financial officer of BORROWER setting forth details of any action,
event or condition of any nature of which BORROWER is aware, which may
reasonably be expected to have a Materially Adverse Effect upon the business,
assets or financial condition of BORROWER or the value of the Collateral or the
liens and security interests granted to AGENT herein and the action which
BORROWER proposes to take with respect thereto.
(i) Notice of Litigation: BORROWER will notify AGENT in writing within a
reasonable time (which shall in no event exceed ten business days after
BORROWER's knowledge) of the commencement or threat of any litigation against
BORROWER which, if determined adversely to it, would result in its dissolution
or liquidation, prevent or materially impair it from conducting its business
substantially as now conducted, prevent or materially impair BORROWER from
repaying the Revolving Loan and the other Liabilities or prevent or materially
impair BORROWER from otherwise faithfully performing its obligations under this
Agreement or result in a material adverse change in BORROWER's business or
financial condition or affairs or creditworthiness. Without intending to limit
the generality of the foregoing, any litigation which seeks monetary damages
(whether compensatory or punitive) from BORROWER in an aggregate amount in
excess of $150,000.00 which is not covered by insurance shall be deemed to
constitute litigation of a character which must be reported to AGENT.
(j) Other Information: BORROWER will promptly after a written request
therefor provide AGENT with: (1) such other information regarding the Collateral
(including, without limitation, Accounts Receivable and Inventory) or the
Proceeds thereof and the business, affairs and condition of BORROWER (including,
without limitation, projections) as AGENT may reasonably request from time to
time, and (2) such other financial data or information evidencing compliance
with the requirements of this Agreement, the Revolving Notes and the other Loan
Documents, as AGENT may reasonably request from time to time.
6.7 BORROWER will at all times comply with, or cause to be complied with,
all laws, statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over it and its business except for
non-compliance that would not have singly or in the aggregate have a Materially
Adverse Effect on BORROWER.
6.8 (a) BORROWER shall maintain insurance coverage as follows: (1) Casualty
Insurance: At BORROWER's expense, an original policy or policies of insurance
issued by financially sound and reputable insurer or insurers satisfactory to
AGENT (in the exercise of its reasonable commercial judgment) insuring
BORROWER's machinery, equipment, fixtures and personal property against such
perils and on such terms and in such amounts as is customarily maintained by
similar businesses. Without limiting the generality of the foregoing, said
insurance shall in no event be less than that amount necessary to prevent
BORROWER and AGENT from being deemed co-insurers under applicable law (and in no
event less than the replacement value of the property insured) and shall insure
against the hazards of fire, extended coverage, vandalism, malicious mischief
and sprinkler leakage and shall name AGENT as mortgagee and loss payee, as its
interests may appear. Such policy shall contain a 30 day notice of cancellation
and non-renewal provision.
(2) Liability Insurance: At BORROWER's expense, an original policy or
policies of liability insurance issued by financially sound and reputable
insurer or insurers satisfactory to AGENT (in the exercise of its reasonable
commercial judgment) and in amounts not less than $1,000,000/$3,000,000. Such
policy shall name AGENT as an additional insured, as its interests may appear,
and shall contain a 30 day notice of cancellation and non-renewal provision.
(b) Certificates evidencing the coverage afforded under BORROWER's policies
of insurance and, if requested, copies of all policies are to be delivered to
AGENT.
(c) If BORROWER fails to take the action called for herein, AGENT may, in
its discretion upon 10 days prior notice to BORROWER or such shorter period as
may be necessary to prevent a gap in insurance protection and coverage, obtain
insurance covering AGENT's interest in the Collateral and the amount of the
premium for said insurance, together with per annum interest at the Default
Rate, shall be added to the Liabilities and the repayment thereof shall be
secured by the Collateral.
(d) All rights to insurance proceeds are hereby assigned to AGENT to the
extent of the unpaid Liabilities.
(e) Unless otherwise agreed in writing, AGENT shall have the sole right, in
its own name or in BORROWER's name, to file claims under any insurance policies,
to receive and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.
(f) BORROWER shall have no claim against insurance proceeds
until all of the Liabilities are paid in full. AGENT shall not be responsible
for any failure to collect any insurance proceeds, regardless of the cause of
such failure. Nothing herein shall in any way affect AGENT's lien against the
Collateral or the liability of any person responsible for the payment of the
balance of the Liabilities.
(g) In the event the Collateral or any part thereof shall be damaged or
destroyed, AGENT, at its election, may (1) apply the insurance proceeds or any
part thereof to the payment of the Liabilities, whether the indebtedness be
matured or not, (2) use the same or any part thereof to fulfill any of the
covenants contained herein or in the other Loan Documents as AGENT may
determine, (3) use the same or any part thereof to replace or restore the
Collateral to the extent satisfactory to AGENT, or (4) release the same to
BORROWER.
(h) BORROWER agrees that in the event that the Collateral or any part
thereof shall be damaged or partially or totally destroyed there shall be no
abatement or reduction in the amounts payable hereunder and BORROWER shall
continue to be obligated to make such payments.
(i) Any monies released by AGENT to BORROWER or paid or applied on the cost
of replacement or restoration shall in no event be deemed a payment on any of
the Liabilities.
(j) Anything to the contrary herein contained notwithstanding, any proceeds
paid over to AGENT and not used for replacement or restoration shall be applied
to pay accrued interest and any other sums then due and owing to AGENT and the
LENDERS, and any excess shall be paid over to BORROWER.
6.9 (a) BORROWER will safeguard, protect and hold all the Collateral for
AGENT's account and make no disposition thereof except in the regular course of
business as hereinafter provided in this Section.
(b) Until AGENT shall have given written notice to BORROWER that an Event
of Default has occurred and is continuing, any Collateral which may from time to
time remain in possession or control of BORROWER or any third party may be sold
and shipped to customers in the ordinary course of business, on open account and
on terms not exceeding the terms currently extended. AGENT shall have the right
to withdraw this permission at any time by written notice to BORROWER after an
Event of Default has occurred and is continuing, in which event no further
disposition shall be made of the Collateral without AGENT's written approval.
(c) Upon the sale, lease, transfer, exchange, or other disposition of the
Collateral, the security interests and liens created and provided for herein
shall without break in continuity and without further formality or act continue
in and attach to the instruments for the payment of money, Accounts Receivable,
Contract Rights, documents of title, shipping documents, Chattel Paper and all
other cash and non-cash proceeds of such sale, lease, transfer, exchange or
disposition, including Collateral returned or rejected by customers or
repossessed by AGENT. As to any such sale, lease, transfer, exchange or
disposition, AGENT shall have all of the rights of an unpaid seller, including
stoppage in transit, replevin and reclamation.
(d) The rights given BORROWER in subsection (b) above are expressly
conditioned on the requirement that all proceeds of all sales, leases,
transfers, exchanges or other dispositions of any Collateral (including, without
limitation, proceeds in the form of acceptances, cash, cash equivalents, checks,
drafts, money orders, notes, instruments for the payment of money and other
evidences of payment and the like) must be forthwith transferred, assigned,
endorsed and turned over to AGENT and, until so turned over, shall not be
commingled with BORROWER's other property, but shall be segregated, held in
trust for AGENT as AGENT's exclusive property and shall be assigned or endorsed
and delivered immediately to AGENT in the identical form received.
6.10 For purposes of implementing this Agreement and also for purposes of
paying and satisfying the Liabilities, BORROWER hereby designates AGENT or
AGENT's representative as its attorney-in-fact with power to endorse its name
upon any acceptances, cash equivalents, checks, drafts, money orders, notes,
instruments for the payment of money and other evidences of payment or
Collateral that may come into AGENT's possession. BORROWER also designates AGENT
or AGENT's representative as its attorney-in-fact to sign BORROWER's name on any
invoice or ▇▇▇▇ of lading relating to any of the Accounts Receivable, drafts
against Account Debtors, and assignments and verifications of Accounts
Receivable to any Account Debtor and to do all other acts and things necessary
to carry out this Agreement. All acts of said attorney or designee are hereby
ratified and approved. This power is coupled with an interest and is irrevocable
while any of the Liabilities remains unpaid. As it relates for to action taken
by AGENT or AGENT's representative while acting as the aforesaid
attorney-in-fact, neither AGENT nor AGENT's representative shall itself, nor
shall its respective directors, managers, officers, employees or agents, be
liable or responsible, directly or indirectly, to the other for any action
taken, or omitted to be taken by it in good faith, or for the consequences of
any oversight or error of judgment on its part occurring in good faith, unless
the taking of, or omitting to take, such action, or such oversight or error in
judgment by such party or its directors, managers, officers, employees or
agents, constitutes gross negligence or willful misconduct.
6.11 (a) AGENT shall have the right at BORROWER's expense but no more
frequently than quarterly (unless an Event of Default has occurred and is
continuing) to obtain verifications from Account Debtors relating to the amount
and validity of any Account Receivable.
(b) (1) Unless an Event of Default has occurred, BORROWER's aforementioned
expense shall be limited to $1,500 per month, payable monthly in advance with
the initial payment payable on the date hereof and on the first day of each and
every calendar month beginning November 1, 1998, so as to reimburse AGENT for
all expenses incurred by AGENT pursuant to the exercise of its rights under this
Section. If an Event of Default has occurred, there shall be no limit on AGENT's
right to reimbursement. (2) The aforementioned reimbursement shall be paid to
AGENT as compensation to AGENT and not for the Pro Rata benefit of the LENDERS
(c) By its execution of this Agreement, BORROWER authorizes AGENT to
directly charge any of its expenses associated with the above against a
specially designated demand deposit account of BORROWER at AGENT or, in the
absence of such designation or in the event that there are insufficient funds in
such designated account, then to any demand deposit account of BORROWER at AGENT
as of each due date. In the event that there are insufficient funds in any such
account on any applicable payment due date, then AGENT is hereby authorized to
effect payment by charge against the Revolving Loan by increasing the principal
balance of the Revolving Loan as though an Advance were taken by BORROWER
against the Revolving Loan in the amount of any payment effected by AGENT.
(d) Any verifications prepared or conducted by BORROWER or its accountants
shall be supplied to AGENT.
6.12 (a) AGENT shall have full access during normal business hours to, and
the right, through its officers, agents, attorneys or accountants and at
BORROWER's expense to: examine, check, inspect and make abstracts and copies
from BORROWER's books, accounts, orders, records, audits, correspondence, and
all other papers; confirm and verify all Accounts Receivable and the other
Collateral; enter upon BORROWER's premises during business hours and from time
to time, for the purpose of examining BORROWER's records concerning the
Collateral and for inspecting the Collateral and any and all records. So long as
no Event of Default has occurred and is continuing, AGENT's access shall be upon
reasonable request and upon prior notice to BORROWER, provided, however, that
nothing in the foregoing shall operate to limit or diminish AGENT's right to
examine BORROWER's records concerning the Collateral and for inspecting the
Collateral and any and all records relating thereto.
(b) BORROWER will reimburse AGENT for all of its examination fees incurred
by AGENT pursuant to the exercise of its rights under this Section.
(c) (1) Unless an Event of Default has occurred, the reimbursement set
forth in Section 6.12(b) above shall be paid at the rate of $833.34 per month,
payable on the date hereof and on the first day of each and every calendar month
beginning October 1, 1998, with a maximum of $10,000 being paid in any one
calendar year. If an Event of Default has occurred, there shall be no limit on
AGENT's right to reimbursement.
(2) The aforementioned reimbursement shall be paid to AGENT as compensation
to AGENT and not for the Pro Rata benefit of the LENDERS.
(d) By its execution of this Agreement, BORROWER authorizes AGENT to
directly charge any of its expenses associated with the above against a
specially designated demand deposit account of BORROWER at AGENT or, in the
absence of such designation or in the event that there are insufficient funds in
such designated account, then to any demand deposit account of BORROWER at AGENT
as of each due date. In the event that there are insufficient funds in any such
account on any applicable payment due date, then AGENT is hereby authorized to
effect payment by charge against the Revolving Loan by increasing the principal
balance of the Revolving Loan as though an Advance were taken by BORROWER
against the Revolving Loan in the amount of any payment effected by AGENT.
6.13 (a) (1) In order to compensate AGENT for its expenses in monitoring,
reviewing and analyzing BORROWER's records, financial statements and Collateral,
BORROWER will pay AGENT a Collateral Management Fee of $2,000 a month, payable
on the date hereof and on the first day of each and every calendar month
beginning October 1, 1998.
(2) The aforementioned Collateral Management Fee shall be paid
to AGENT as compensation to AGENT and not for the Pro Rata benefit of the
LENDERS.
(b) By its execution of this Agreement, BORROWER authorizes AGENT to
directly charge any of its expenses associated with the above against a
specially designated demand deposit account of BORROWER at AGENT or, in the
absence of such designation or in the event that there are insufficient funds in
such designated account, then to any demand deposit account of BORROWER at AGENT
as of each due date. In the event that there are insufficient funds in any such
account on any applicable payment due date, then AGENT is hereby authorized to
effect payment by charge against the Revolving Loan by increasing the principal
balance of the Revolving Loan as though an Advance were taken by BORROWER
against the Revolving Loan in the amount of any payment effected by AGENT.
6.14 BORROWER shall authorize and direct all accountants and auditors
employed by it at any time during the term of this Agreement to exhibit and
deliver to AGENT copies of any of its financial statements, trial balances or
other accounting records of any sort in their possession, and to disclose to
AGENT any information they may have concerning its financial status and business
operations.
6.15 Except as may otherwise be specifically provided as to a particular
Eligible Receivable, warrants that as to each such Eligible Receivable:
(a) each such Account is a valid Account;
(b) no such Account is an Account with respect to which the Account Debtor
is an officer, director, employee, or agent of BORROWER or is an entity related
to or having common owners with BORROWER;
(c) no such Account is an Account arising from progress ▇▇▇▇▇▇▇▇, invoices
for deposits, and rebills of amounts previously credited to the extent of
credits issued more than 15 days prior to such rebill;
(d) such Account represents a bona fide performed transaction and AGENT
maintains a fully perfected first lien therein;
(e) the delivery of the merchandise or the rendition of services giving
rise to the Account has been completed;
(f) no return, rejection or repossession has occurred;
(g) to the best of BORROWER's knowledge, the merchandise or services giving
rise to the Account have been finally accepted by the Account Debtor without
dispute, offset, contra-offset, defense or counter claim and the Account Debtor
has agreed to make payment in accordance with the specified terms of the
invoice, except for discounts, credits and allowances allowed by BORROWER in the
ordinary course of its business and disclosed by BORROWER to AGENT in writing;
(h) to the best of BORROWER's knowledge, the amount shown on BORROWER's
books and on any invoice or statement delivered to AGENT is owing to BORROWER;
(i) no partial payment has been made unless such partial payment is
disclosed by BORROWER to AGENT on BORROWER's records submitted to AGENT;
(j) such Account continues to be in full conformity with the
representations and warranties made by BORROWER to AGENT with respect thereto,
except for non-conformances which would not have a Materially Adverse Effect on
the business, properties or financial condition of BORROWER and which are
disclosed to AGENT in writing;
(k) no such Account is an Account with respect to which BORROWER is or may
become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to BORROWER, to the extent of BORROWER's existing or potential
liability to such Account Debtor;
(l) to the best of BORROWER's knowledge, no such Account is an Account with
respect to which the Account Debtor has disputed any liability or the Account
Debtor has made any claim with respect to any other Account due to BORROWER, or
the Account is otherwise subject to any right of setoff, deduction, breach of
warranty or other defense, dispute or counterclaim by the Account Debtor;
(m) no such Account is an Account as to which any agreement has been made
under which any deductions or discount may be claimed except regular discounts
in the usual course of business which have been disclosed on the face of the
invoice;
(n) the age of the Account conforms to the standards for eligibility set
forth in the definition of Eligible Receivables;
(o) to the best of BORROWER's knowledge, such Account is fully collectible
when due other than that portion of any Account representing late fees, service
charges or interest, as to which portion BORROWER has made disclosure to AGENT;
(p) no such Account is based on a "▇▇▇▇ and hold" transaction and/or arises
from promotional transactions or salesmen samples;
(q) no such Account is a guaranteed or consignment lease or sale;
(r) such Account arises from a lease or sale to an Account Debtor whose
principal place of business or whose place of incorporation is located within
the United States or Puerto Rico;
(s) no such Account arises from a lease or sale to a federal, state, local
or foreign governmental authority unless such governmental authority is the
United States of America or any department, agency or instrumentality of the
Untied States, unless BORROWER complied with the Assignment of Claims Act of
1940, as amended (31 U.S.C. Section 203 et seq.);
(t) no such Account arises from an intra-company lease or sale or from a
sale or lease to any affiliated entity; and
(u) no such Account is payable in a currency other than the currency of the
United States.
6.16 If any of the Accounts Receivable includes a charge for any tax
payable to any governmental tax authority, AGENT is hereby authorized in AGENT's
reasonable discretion, to pay the amount thereof to the proper taxing authority
for BORROWER's account and to charge the amount of such tax against a specially
designated demand deposit account of BORROWER at AGENT or, in the absence of
such designation or in the event that there are insufficient funds in such
designated account, then to any demand deposit account of BORROWER at AGENT as
of each due date. In the event that there are insufficient funds in any such
account on any applicable payment due date, then AGENT is hereby authorized to
effect payment by charge against the Revolving Loan by increasing the principal
balance of the Revolving Loan as though an Advance were taken by BORROWER
against the Revolving Loan in the amount of any payment effected by AGENT.
BORROWER shall notify AGENT if any Accounts Receivable include any tax due to
any such taxing authority, and in the absence of notice to AGENT, AGENT shall
have the right to retain the full proceeds of such Accounts Receivable, and
shall not be liable for any taxes that may be due from BORROWER by reason of the
sale and delivery creating such Accounts Receivable.
6.17 Subordination Agreement. BORROWER will obtain the Subordination
Agreement required by this Agreement so as to postpone the payment of the
principal amount of the "Claims" specified in the Subordination Agreement until
such time as the Liabilities are paid in full. 6.18 Landlord's Consent(s).
BORROWER will obtain the Landlord's Consent(s) required by this Agreement.
6.19 Minimum Tangible Net Worth.
(a) (1) On the date hereof and through December 30, 1998, BORROWER shall
have Tangible Net Worth of at least $5,200,000.
(2) During the period from December 31, 1998 to December 30, 1999, BORROWER
shall maintain its Tangible Net Worth at a minimum of $5,450,000.
(3) During the period from December 31, 1999 to December 30, 2000, BORROWER
shall maintain its Tangible Net Worth at a minimum of $6,000,000.
(4) During the period commencing December 31, 2000 and continuing at all
times thereafter, BORROWER shall maintain its Tangible Net Worth at a minimum of
$6,500,000.
(b) For purposes of this covenant, "Tangible Net Worth" shall be determined
by the following formula:
the sum on a consolidated basis of the par value of the
capital stock of GUARANTOR, BORROWER and NPD Trading (USA),
Inc. +/-surplus/deficit + debt whose payment is subordinated
to the prior payment of the Liabilities
less
the sum on a consolidated basis of treasury stock of
GUARANTOR, BORROWER and NPD Trading (USA), Inc. +
unamortized debt discount and expense + book value of good
will (excluding, however, any negative good will) + book
value of trademarks + book value of tradenames + book value
of patents + deferred charges + intangible assets + all
indebtedness due from BORROWER's officers or shareholders,
provided, however, that the effect of negative goodwill on
the income statement and balance sheet of GUARANTOR,
BORROWER and NPD Trading (USA), Inc. shall be excluded
(c) Compliance with this Section will be tested annually and quarterly by
reference to GUARANTOR's annual and quarterly financial statements required to
be submitted pursuant to Section 6.6 above and by using GAAP.
6.20 Total Debt to Tangible Net Worth.
(a) (1) During the period from the date hereof to December 31, 1998,
BORROWER shall maintain the ratio of its Total Debt to its Tangible Net Worth at
no more than 6.0 to 1.0.
(2) During the period from January 1, 1999 to December 31, 1999, BORROWER
shall maintain the ratio of its Total Debt to its Tangible Net Worth at no more
than 5.0 to 1.0.
(3) During the period commencing January 1, 2000 and at all times
thereafter, BORROWER shall maintain the ratio of its Total Debt to its Tangible
Net Worth at no more than 4.0 to 1.0.
(b) For purposes of this covenant, "Total Debt" shall include all debt owed
by BORROWER, including all debt owed by BORROWER to AGENT and the LENDERS but
excluding any debt whose payment has been subordinated to the prior payment of
the Liabilities. For purposes of this covenant, Tangible Net Worth shall have
the meaning given that term in Section 6.19(b) above.
(c) Compliance with this Section will be tested annually by reference to
GUARANTOR's annual consolidated financial statements required to be submitted
pursuant to Section 6.6 above and by using GAAP.
6.21 Year 2000 Compatibility. BORROWER will deliver to AGENT (a)
simultaneously with the delivery of its annual and quarterly financial
statements required to be submitted pursuant to this Agreement, a statement of
the chief financial officer of BORROWER to the effect that nothing has come to
such officer's attention to cause such officer to believe that the Y2K Plan
milestones have not been met in a manner such that the hardware and software
systems of BORROWER will not be Year 2000 Compliant and Ready in accordance with
the Y2K Plan; (b) within five Business Days after BORROWER becomes aware of any
deviations from the Y2K Plan which would cause compliance with the Plan to be
delayed or not achieved, a statement of the chief financial officer of BORROWER,
setting forth the details thereof and the action which BORROWER is taking or
proposes to take with respect thereto; and (c) promptly upon the receipt
thereof, a copy of any third party assessments of the Y2K Plan of BORROWER,
together with any recommendations made by such third party with respect to Year
2000 compliance.
6.22 BORROWER will, from time to time upon the reasonable request of AGENT
(such request to be deemed reasonable if, so long as no Event of Default has
occurred and is continuing, made no more than twice a year), report to AGENT all
rent payments made by BORROWER to the owner or owners of the locations set forth
in Section 4.5 above, it being understood that BORROWER's failure to provide
AGENT with proof of any such rent payment within 15 days of AGENT's request
therefor will be sufficient evidence that an Event of Default has occurred
hereunder. During any period of time that BORROWER fails to provide AGENT with
proof of its rent payment as aforesaid and not in limitation of any other right
of AGENT hereunder, AGENT may reserve from BORROWER's availability to borrow
under the Revolving Loan the amount of rental which became due and owing from
the date of the last proof submission by BORROWER.
ARTICLE VII
NEGATIVE COVENANTS
BORROWER covenants and agrees, that until the full and final payment of the
Liabilities, unless AGENT waives compliance in writing:
7.1 Change in Location: BORROWER will not (a) change the location of its
chief executive office or where its books and records are maintained or (b)
change the names currently used by it for billing or other business purposes or
(c) change or add to the location or locations of any Collateral as set forth in
Section 4.5 above unless in each case above (i) BORROWER shall have given AGENT
30 days written notice of such change and (ii) AGENT shall have received such
instruments or documents as AGENT may reasonably request so that such change
will not impair or negatively affect the security interests granted to AGENT
hereunder.
7.2 Changes in Business: Except as permitted by Section 6.2 hereof,
BORROWER will not (a) make any material change in its business or in the nature
of its operation, or (b) liquidate or dissolve itself (or suffer any liquidation
or dissolution) or (c) convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, assets or business except sales of Inventory or
other Collateral in the ordinary course of business and for a fair consideration
or (d) dispose of any shares of stock or any indebtedness, whether now owned or
hereafter acquired or (e) discount, sell, pledge, hypothecate or otherwise
dispose of Accounts Receivable.
7.3 Dissolution, Mergers, Acquisitions, Formation of Subsidiaries: BORROWER
will (a) not dissolve or otherwise dispose of all or a substantial part of its
assets, (b) not consolidate with or merge into another corporation or entity
permit one or more other corporations or entities to consolidate with or merge
into it (whether or not BORROWER or any Subsidiary is the surviving entity)
except that GUARANTOR may merge with and into BORROWER so long as BORROWER is
the survivor, (c) not acquire all or substantially all of the assets or any of
the capital stock of any corporation or other entity and (d) not form or create
or acquire any Subsidiary.
7.4 Liens: Except for Permitted Liens or as disclosed in the Certification
as to Liens, BORROWER will not suffer to exist any lien, encumbrance, mortgage
or security interest on property on which a lien has been given to AGENT
pursuant to this Agreement or any of the other Loan Documents.
7.5 Indebtedness: BORROWER will not create, incur, permit to exist or have
outstanding any indebtedness, except:
(a) indebtedness of BORROWER to AGENT and the LENDERS under this Agreement
and the Revolving Notes;
(b) accrued taxes, assessments and governmental charges not yet due and
payable, non-interest bearing accounts payable and accrued liabilities, and
non-interest bearing deferred liabilities other than for borrowed money (e.g.,
deferred compensation and deferred taxes), in each case incurred and continuing
in the ordinary course of business;
(c) indebtedness secured by any purchase money security interests to the
extent this Agreement may expressly allow any such purchase money security
interest and Capitalized Lease Obligations (as defined below in this Article),
in each case incurred only if, after giving effect thereto, the limit on Capital
Expenditures set forth in this Article would not be breached;
(d) debt under the Subordination Agreement.
7.6 Guaranties:
(a) BORROWER will not assume, endorse, be or become liable for, or
guarantee, the obligations of any person or entity, except by the endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
(b) For the purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or otherwise, to purchase,
repurchase or otherwise acquire indebtedness of any other person or entity, or
to purchase, sell or lease, as lessee or lessor, property or services, in any
such case primarily for the purpose of enabling another person to make payment
of any indebtedness, or to make any payment (whether as an advance, capital
contribution, purchase of an equity interest or otherwise) to assure a minimum
equity, asset base, working capital or other balance sheet or financial
condition, in connection with the indebtedness of another person or entity, or
to supply funds to or in any manner invest in another person or entity in
connection with the indebtedness of such person or entity.
7.7 ERISA:
(a) BORROWER will not permit the occurrence of any Termination Event under
ERISA, or the occurrence of a termination or partial termination of a Defined
Contribution Plan which would result in a liability to BORROWER or any
Subsidiary in excess of $150,000.
(b) BORROWER will not engage, or permit BORROWER or any Subsidiary to
engage, in any prohibited transaction under Section 406 of ERISA or Section 4975
of the Internal Revenue Code, for which a civil penalty pursuant to Section
502(i) of ERISA or a tax pursuant to Section 4975 of the Internal Revenue Code
is imposed in excess of $150,000.
(c) BORROWER will not engage or permit BORROWER or any Subsidiary to
engage, in any breach of fiduciary duty under Part 4 of Title I of ERISA; or
(d) BORROWER will not permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability to
BORROWER or any Subsidiary individually or together with all similar liabilities
and increases, is material to BORROWER or any Subsidiary; or
(e) BORROWER will not fail, or permit BORROWER or any Subsidiary to fail,
to establish, maintain and operate each Employee Benefit Plan in compliance in
all material respects with the provisions of ERISA, the Internal Revenue Code
and all other applicable laws and the regulations and interpretations thereof.
7.8 Compromise of Claims: BORROWER will not compromise, settle or adjust
any claims which are part of or which affect the Collateral except in the
ordinary course of business.
7.9 Bank Accounts: BORROWER will not establish any deposit or other bank
account with any financial institution unless such account is approved in
writing by AGENT.
7.10 Subordinated Debt:
(a) BORROWER will not amend or change, or consent to any amendment or
change, with respect to, the Subordination Agreement or any other document
evidencing or securing the debt subordinated thereby.
(b) BORROWER will not directly or indirectly, make any principal payment or
distribution of or on account of any debt subordinated by the Subordinated Debt
except to the extent expressly allowed therein.
7.11 Loans and Investments: BORROWER will not make loans or advances or
make or suffer to exist, any investment in any person or entity, including,
without limitation, any loans to or investments in any shareholder, director,
officer or employee of GUARANTOR, BORROWER and NPD Trading (USA), Inc., provided
however, that notwithstanding the foregoing, BORROWER may loans or contributions
to GUARANTOR and/or NPD Trading (USA), Inc., in an amount not to exceed $250,000
in any one calendar year and BORROWER may make investments in:
(a) obligations issued or guaranteed by the United States of America;
(b) certificates of deposit, bankers acceptances and other "money market
instruments" issued by any bank or trust company organized under the laws of the
United States of America or any State thereof and having capital and surplus in
an aggregate amount of not less than $100,000,000;
(c) open market commercial paper bearing the highest credit rating issued
by Standard & Poor's Corporation or by another nationally recognized credit
rating agency;
(d) repurchase agreements entered into with any bank or trust company
organized under the laws of the United States of America or any State thereof
and having capital and surplus in an aggregate amount of not less than
$100,000,000 relating to United States of America government obligations; and
(e) shares of "money market funds", each having net assets of not less than
$100,000,000; in each case maturing or being due or payable in full not more
than 365 days after BORROWER's acquisition thereof.
7.12 Fiscal Year: BORROWER will not change its fiscal year without the
prior written consent of AGENT, which consent shall not be unreasonably
withheld.
7.13 Amendment of Corporate Documents: BORROWER will not modify, amend,
supplement or terminate, or agree to modify, amend, supplement or terminate, its
certificate of incorporation or by-laws except for amendments that would not
adversely affect any Liabilities, any Collateral, any rights or remedies of
AGENT or the LENDERS hereunder or the ability of BORROWER to perform its
obligations, or conduct its business as previously conducted.
7.14 No Year-to-Date Net Loss in Excess of $300,000:
(a) BORROWER will not suffer a year-to-date Net Loss of $300,000 or more in
any fiscal year.
(b) AGENT will determine compliance with this Section on a quarterly basis
using the consolidated financial information required to be submitted by
BORROWER under this Agreement and by using GAAP.
7.15 Losses in Any Two Consecutive Fiscal Quarters: (a) BORROWER will not
suffer a Net Loss for any two consecutive fiscal quarters.
(b) AGENT will determine compliance with this Section on a quarterly basis
using the consolidated financial information required to be submitted by
BORROWER under this Agreement and by using GAAP.
7.16 Margin Securities: BORROWER will not own, purchase or acquire (or
enter into any contract to purchase or acquire) any "margin security" as defined
by any regulation of the Board of Governors as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, AGENT is to have received an opinion of counsel
satisfactory to AGENT to the effect that such purchase or acquisition will not
cause this Agreement to violate Regulations G or U or any other regulation of
the Board of Governors then in effect.
7.17 Capital Expenditures: (a) BORROWER will not incur Capital Expenditures
in an amount exceeding $500,000 in any fiscal year.
(b) For purposes of this covenant, the following terms shall have the
following meanings:
(1) "Capital Expenditures" - aggregate expenditures made or liabilities
incurred for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise and the
principal portion of payments with respect to Capitalized Lease Obligations.
(2) "Capital Lease" - any lease of property which would be capitalized on
the lessee's balance sheet or for which the amount of the asset or liability
thereunder, if so capitalized, should be disclosed in a note to such balance
sheet.
(3) "Capitalized Lease Obligation" - any indebtedness represented by
obligations under a Capital Lease, and the amount of such indebtedness shall be
the capitalized amount of such obligations.
ARTICLE VIII
EVENTS OF DEFAULT
Regardless of the terms of any of the other Loan Documents, the occurrence
of any of the following events shall be deemed an event of default (an "Event of
Default") hereunder:
8.1 (a) BORROWER shall fail to pay on its due date any interest or
principal or premium due on the Revolving Loan or any Revolving Note;
(b) BORROWER shall fail to pay within 10 days of its due date any other
payment due under this Agreement;
8.2 BORROWER shall fail to perform or observe any covenant of
BORROWER contained in Section 6.6, Section 6.19 or Section 6.20 or Article VII
of this Agreement;
8.3 (a) any representation or warranty herein or in any of the
other Loan Documents or in connection with any transaction contemplated hereby
or thereby shall prove to have been false or misleading in any material respect
when made;
(b) to the extent that any aforementioned representation is made to the
best of the information, knowledge or belief of BORROWER but the underlying
representation is nonetheless false or misleading in any material respect, an
Event of Default will be deemed to have occurred hereunder if BORROWER fails to
make correct the underlying representation 30 Business Days after notice from
AGENT to do so;
8.4 (a) AGENT shall fail to have a legal, valid and binding first lien on
the Accounts Receivable and Inventory;
(b) Except for Permitted Liens and except as may be set forth on the
Certification as to Liens, AGENT shall fail to have a legal, valid and binding
first lien on any of the other Collateral;
8.5 (a) any consensual lien or encumbrance or any security interest,
perfected or otherwise, other than the security interests specifically provided
for or permitted hereunder, shall be created in the Collateral;
(b) any non-consensual lien, including but not limited to any judgment
against BORROWER or GUARANTOR, becomes an encumbrance against BORROWER's
Accounts or Inventory and BORROWER does not remove or discharge such lien within
10 days after notice from AGENT to do so;
(c) any non-consensual lien, including but not limited to any judgment
against BORROWER or GUARANTOR in any amount in excess of $50,000 becomes an
encumbrance against any of the other Collateral and BORROWER does not remove or
discharge such lien within 30 days after notice from AGENT to do so;
8.6 BORROWER or GUARANTOR shall admit in writing an inability to pay debts
as they come due or shall file any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors;
8.7 an involuntary petition shall be filed under any bankruptcy or
insolvency statute against BORROWER or GUARANTOR and such petition is not
discharged or stayed within 60 days from the date of the filing of the petition;
8.8 a receiver or trustee shall be appointed to take possession of the
properties of BORROWER or GUARANTOR;
8.9 BORROWER or GUARANTOR ceases all or substantially all of its
operations;
8.10 any default shall occur under any other loan agreement involving
either the borrowing of money or the advance of credit to which BORROWER or
GUARANTOR may be a party as borrower or guarantor and such default results in
the acceleration of the money owing under such other loan agreement;
8.11 BORROWER or GUARANTOR shall breach, violate or default under, any
term, condition, provision, representation or warranty contained in this
Agreement not specifically referred to in this Article VIII and such breach,
default or violation is not cured within the earlier of (a) the time period
given by this Agreement for cure or (b) in the absence of this Agreement's
giving any such time period for cure, 30 Business Days after notice from BANK to
do so;
8.12 any breach, default or violation shall occur under any of the terms,
conditions, representations, warranties or covenants contained in any of the
other Loan Documents and such breach, default or violation is not cured within
the earlier of (a) the time period given by any such other Loan Document for
cure or (b) in the absence of any such other Loan Document's giving any such
time period for cure, 30 Business Days after notice from BANK to do so;
8.13 any of the Loan Documents (or any provision thereof) is claimed by
BORROWER or by GUARANTOR to be invalid or unenforceable;
8.14 BORROWER or GUARANTOR shall fail to obtain and deliver to AGENT any
mortgage, financing statement, subordination agreement or any other
documentation required to be signed or obtained as part of this Agreement or
shall have failed to take any action requested by AGENT to perfect or protect
the security interests provided for herein and such failure is not cured within
the earlier of (a) the time period given by this Agreement for cure or (b) in
the absence of this Agreement's giving any such time period for cure, 30
Business Days after notice from BANK to do so;
8.15 BORROWER obtains any loan secured by Accounts Receivable or Inventory
from any source other than AGENT;
8.16 if the ratio of Eligible Receivables and Eligible Inventory to the
outstanding principal of the Revolving Loan does not comply with the
requirements of Article II and BORROWER fails to bring such ratio into
compliance with the requirements of Article II immediately after notice is given
that BORROWER is required to do so;
8.17 BORROWER shall fail to timely remit payment to any of the landlords of
any of the properties described in Section 4.5 of this Agreement where BORROWER
maintains Collateral or any default shall occur under any lease at such
location;
8.18 any other event occurs or condition exists which, in the opinion of
AGENT, constitutes a Materially Adverse Effect in the business condition or
financial status of BORROWER or which, in the opinion of AGENT, impairs the
ability of BORROWER to discharge its obligations hereunder or which causes AGENT
to deem itself insecure;
8.19 any other event occurs or condition exists which, in the opinion of
AGENT, constitutes a Materially Adverse Effect in the business condition or
financial status of GUARANTOR or which, in the opinion of AGENT, impairs the
ability of GUARANTOR to discharge its obligations under the Guaranty or which
causes AGENT to deem itself insecure.
ARTICLE IX
REMEDIES
9.1 Upon the occurrence and continuance of an Event of Default, AGENT may
and, at the direction of the Required Lenders, AGENT shall do any or all of the
following at the same time or at different times:
(a) AGENT may, by written notice to BORROWER, declare the entire principal
amount of the Revolving Loan, or the unpaid balance thereof, together with all
accrued interest and all other lawful and proper charges thereon, immediately
due and payable whereupon all such sums shall become immediately due and payable
with interest thereafter at the Default Rate, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
BORROWER.
(b) AGENT may, by written notice to BORROWER, declare all other
Liabilities, together with all accrued interest and all other lawful and proper
charges thereon, to be forthwith due and payable with interest thereafter at the
Default Rate, whereupon all such sums shall become immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by BORROWER.
(c) AGENT may proceed with or without judicial process to take possession
of all or any part of the Collateral not already in the possession of AGENT.
BORROWER agrees that upon receipt of notice of AGENT's intention to take
possession of all or any part of said Collateral, BORROWER will do everything
reasonably necessary to make same available to AGENT.
(d) AGENT may assign, transfer and deliver at any time or from time to
time, in accordance with the Uniform Commercial Code, the whole or any portion
of any Collateral which is subject to the Uniform Commercial Code or any rights
or interests therein; and without limiting the scope of AGENT's rights
thereunder, sell such Collateral at a public or private sale, or in any other
manner, at such price or prices as AGENT may deem best, and either for cash or
credit, or for future delivery, at the option of AGENT, in bulk or in parcels
and with or without having such Collateral at the sale or other disposition.
AGENT shall have the right to be the purchaser at any public sale. Any
notification of a sale or other disposition of the Collateral or of any other
action by AGENT required to be given by AGENT to BORROWER will be sufficient if
given not less than ten (10) days prior to the day on which such sale or other
disposition will be made and in the manner set forth in Section 11.1; such
notification shall be deemed reasonable notice. In the event of a sale of such
Collateral, or any other disposition thereof, AGENT shall apply all proceeds
first to all costs and expenses of disposition, including attorneys' fees, and
then to the Liabilities of BORROWER to AGENT.
(e) AGENT may immediately, and without notice or other action, set-off and
apply against the Liabilities (1) any and all deposits and all other items
described in Section 3.5 hereof and/or (2) any sum owed by AGENT or any LENDER
in any capacity to BORROWER whether due or not. ANY AND ALL RIGHTS TO REQUIRE
AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE REVOLVING LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO THE FOREGOING, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED. AGENT may do the foregoing even though some or all of the Liabilities
may be unmatured and regardless of the adequacy of any other Collateral securing
the Liabilities. AGENT shall be deemed to have exercised such right of set-off
and to have made a charge against any such sum immediately upon the occurrence
of such Event of Default, even though the actual book entries may be made at
some time subsequent thereto.
(f) AGENT may send notice of assignment and/or notice of AGENT's security
interest to any and all Account Debtors or any third party holding or otherwise
concerned with any of the Collateral, and thereafter, AGENT shall have the sole
right to collect the Accounts Receivable and/or take possession of the
Collateral. Any and all of AGENT's reasonable collection expenses, including but
not limited to stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection agencies or attorneys
utilized, shall be added to the Liabilities and charged against a specially
designated demand deposit account of BORROWER at AGENT or, in the absence of
such designation or in the event that there are insufficient funds in such
designated account, then to any demand deposit account of BORROWER at AGENT as
of each due date.
(g) AGENT may without notice to or consent from BORROWER, ▇▇▇ upon or
otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise, upon any terms, any of the Accounts Receivable or any
securities, instruments or insurance applicable thereto and/or release the
Account Debtor thereon. AGENT is authorized and empowered to accept the return
of the Goods represented by any of the Accounts Receivable, without notice to or
consent by BORROWER all without discharging or in any way affecting BORROWER's
liability hereunder. AGENT does not, by anything herein or in any assignment or
otherwise, assume any obligations of BORROWER under any Account, contract or
agreement assigned to AGENT, and AGENT shall not be responsible in any way for
the performance by BORROWER of any of the terms and conditions thereof.
(h) AGENT may notify the Post Office authorities to change the address for
delivery of mail addressed to BORROWER to such address as AGENT may designate.
(i) AGENT may add to the Liabilities AGENT's reasonable expenses to obtain
or enforce payment of any Liabilities hereunder and the enforcement or
liquidation of any debt hereunder shall include reasonable attorneys' fees, plus
other legal expenses incurred by AGENT.
9.2 AGENT is hereby further granted a license or other right to use,
without charge at all times on and after the occurrence and continuance of an
Event of Default, BORROWER's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and BORROWER's rights under all licenses
and franchise agreements are to inure to AGENT's benefit.
9.3 (a) Upon the occurrence and continuance of an Event of Default, each
LENDER may, with the consent of the Required Lenders, declare all Liabilities
owed to any such LENDER, together with all accrued interest and all other lawful
and proper charges thereon, to be forthwith due and payable, whereupon all such
sums shall become immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
BORROWER.
(b) Upon the occurrence and continuance of an Event of Default, each LENDER
may, with the consent of the Required Lenders, immediately and without notice or
other action, set-off and apply against the Liabilities (1) any and all deposits
and all other items described in Section 3.5 hereof and/or (2) any sum owed by
any such LENDER in any capacity to BORROWER whether due or not. ANY AND ALL
RIGHTS TO REQUIRE any LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE REVOLVING LOAN, PRIOR TO EXERCISING ITS
RIGHT OF SETOFF WITH RESPECT TO THE FOREGOING, ARE HEREBY KNOWINGLY, VOLUNTARILY
AND IRREVOCABLY WAIVED. Each LENDER may do the foregoing even though some or all
of the Liabilities may be unmatured and regardless of the adequacy of any other
Collateral securing the Liabilities. Each LENDER shall be deemed to have
exercised such right of set-off and to have made a charge against any such sum
immediately upon the occurrence of such Event of Default, even though the actual
book entries may be made at some time subsequent thereto.
9.4 BORROWER shall remain liable for any deficiency resulting from a sale,
lease, foreclosure or other disposal of the Collateral and shall pay any such
deficiency forthwith on demand, together with per annum interest at the Default
Rate.
9.5 The rights of AGENT and each LENDER under this Article are in addition
to all other remedies, statutory and otherwise, which are available to it at law
or in equity or otherwise and whether or not under the terms of any of the other
Loan Documents.
ARTICLE X
AGENT; RELATIONS AMONG LENDERS
10.1 APPOINTMENT OF AGENT. Each LENDER hereby irrevocably appoints and
authorizes AGENT to act as its exclusive agent and the administrator of its
rights hereunder and under any of the other Loan Documents or other documents or
instruments referred to or provided for herein or therein with such powers as
are specifically delegated to AGENT by the terms of this Agreement and any of
the other Loan Documents, together with such other powers as are reasonably
incidental thereto.
10.2 POWERS OF AGENT; CONSENT AND WAIVER
(a) Subject to the provisions of subsections (d) below, AGENT shall have
the power to do each and all of the following:
(1) except for the original of any Revolving Note the possession of which
is to be maintained by each LENDER, (i) hold in AGENT's possession all of the
other Loan Documents or other documents or instruments referred to or provided
for herein or therein and (ii) maintain separate records and accounts with
respect to the Revolving Loan, reflecting the interests of LENDERS in the
Revolving Loan;
(2) service and control the administration of the Revolving Loan
(including, without limitation, the disbursement of Revolving Loan monies);
(3) manage and perform the terms of the Loan Documents; provided, however,
that as it relates to the disbursement of Revolving Loan monies, AGENT shall be
under no obligation to disburse such monies until after receipt of such monies
from LENDERS. In the absence of receipt of each LENDER's Pro Rata Share of such
Revolving Loan monies, AGENT may, but is not obligated to, make an Advance to
BORROWER attributable to the non-paying LENDER's Pro Rata Share of the total
Advance requested under the Revolving Loan;
(4) retain possession of the Loan Documents for itself and as agent for the
LENDERS to the extent of their Pro Rata Share;
(5) afford each LENDER the right, at its own expense and through employees,
agents or counsel, to examine the original Loan Documents, or original
counterparts thereof, and other documents and information relating to the
transactions contemplated thereby contained in AGENT's files during normal
business hours at the office of AGENT noted in this Agreement, or at such other
place as may be designated from time to time, upon a LENDER's delivery of
reasonable prior notice to AGENT;
(6) at the requesting LENDER's expense, furnish copies of any documents
reasonably requested by the requesting LENDER;
(7) upon the request of a LENDER, allow the requesting LENDER, at
requesting LENDER's expense, to join in the exercise of AGENT's right pursuant
to the Loan Documents to inspect and examine the books of BORROWER and other
related parties, upon the requesting LENDER's delivery of reasonable prior
notice to AGENT;
(8) without charge or fee to the LENDERS, issue statements for and
collect all collections under the Revolving Loan as trustee for the LENDERS and
retain records of all amounts as the same are received in connection with or
arising out of the Revolving Loan, whether as principal, interest or otherwise,
and including (without limiting the generality hereof) each of the following:
(i) proceeds of or recoveries under insurance and/or title policies; (ii)
amounts payable by third parties; (iii) amounts payable by reason of total or
partial condemnation or taking by governmental authority; (iv) amounts realized
as the result of enforcement under this Agreement or of Collateral; and (v)
amounts received as proceeds of one or more foreclosure sales;
(9) hold each LENDER's Pro Rata Share of the above amounts in trust for and
(but only to the extent that AGENT has received good funds of such amounts) pay
to the LENDERS Ratably any amounts described above on the applicable Settlement
Date.
(b) AGENT shall perform its obligations under this Agreement and the other
Loan Documents in good faith according to the same standard of care as that
customarily exercised by AGENT in administering its own loans similar to the
Revolving Loan.
(c) Subject to the provisions of subsection (d) below, AGENT: (1) shall
have no duties or responsibilities except those expressly set forth in this
Agreement (together with such other powers as are reasonably incidental thereto)
and any of the other Loan Documents or other documents or instruments referred
to or provided for herein or therein or required by law; and (2) shall not by
reason of this Agreement be a fiduciary or trustee for any LENDER, except to the
extent that AGENT acts as an agent with respect to the receipt or payment of
funds.
(d) (1) Except as otherwise expressly provided in this Agreement, any
consent or approval required or permitted by this Agreement may be given, and
any term of this Agreement or of any of the other Loan Documents may be amended,
and the performance or observance by BORROWER or any guarantor of any terms of
this Agreement or the other Loan Documents or the continuance of any Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of
AGENT.
(2) Notwithstanding the foregoing, approval of all LENDERS shall be
required for any amendment, modification or waiver of this Agreement that:
(i) reduces or forgives any principal of any unpaid Advance or any interest
thereon (including all interest and costs associated with an Event of Default or
non-payment by a Delinquent Lender as defined below) or any fees due any LENDER
hereunder, or permits any prepayment not otherwise permitted hereunder; or
(ii) changes the unpaid principal amount of, or the rate of interest on,
any Advance; or
(iii) changes the date fixed for any payment of principal of or interest on
any Advance (including, without limitation, any extension of the Maturity Date)
or any fees payable hereunder; or
(iv) changes the amount of any LENDER's Pro Rata Share of the Total
Commitments (other than pursuant to an assignment permitted under Section 10.19
hereof) or increases the amount of the Total Commitments; or
(v) amends any of the financial covenants contained in Articles VI and VII
of this Agreement; or
(vi) releases or reduces the liability of any guarantor or other obligor
(if any) other than as may be expressly permitted under this Agreement; or
(vii) amends or modifies any other covenants of this Agreement and or any
other provision herein or in any of the other Loan Documents unless such
covenant or provision expressly allows approval by only the REQUIRED LENDERS; or
(viii) amends any of the provisions governing funding contained in Article
II and Article X hereof; or
(ix) changes the rights, duties or obligations of AGENT specified in this
Article X (provided that no amendment or modification to AGENT's rights, duties
or obligations or to the fees payable to AGENT under this Agreement may be made
without the prior written consent of AGENT); or
(x) changes the definition of REQUIRED LENDERS or alters provisions calling
for approval of the REQUIRED LENDERS; or
(xi) releases any Collateral (except as expressly permitted by this
Agreement), or agrees to the release or modification of any rights or powers
with respect to the Collateral, or agrees to or accepts any other collateral in
substitution for the Collateral (except, in all of the foregoing cases, upon
satisfaction of conditions as set forth in this Agreement).
(3) No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of AGENT or the LENDERS or any LENDER in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial to such
right or any other rights of AGENT or the LENDERS. No notice to or demand upon
BORROWER shall entitle BORROWER to other or further notice or demand in similar
or other circumstances.
10.3 DELEGATION OR TRANSFER OF AGENCY FUNCTION (a) Without the consent of
BORROWER or any LENDER, AGENT may at any time or from time to time transfer its
functions as AGENT hereunder to any of its offices wherever located in the
United States, provided that AGENT shall promptly notify BORROWER and LENDERS
thereof.
(b) AGENT may employ agents and attorneys-in-fact and shall not be
responsible, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.
10.4 IMMUNITIES OF AGENT; EXCULPATION
(a) AGENT shall not be responsible to LENDERS:
(1) for any recitals, statements, representations or warranties made by
BORROWER or any officer, partner or official of BORROWER or any other person
contained in this Agreement or any of the other Loan Documents, or in any
certificate or other documents or instruments referred to or provided for in, or
received by any of them under, this Agreement or any of the other Loan Documents
or other documents or instruments referred to or provided for herein or therein;
or
(2) for the value, legality, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any of the other Loan
Documents or any other document or instrument referred to or provided for herein
or therein; or
(3) for the perfection or priority of any lien or pledge securing
the obligations hereunder or thereunder; or
(4) for any failure by BORROW ER to perform any of its obligations
hereunder or thereunder.
(b) Neither AGENT nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to be taken by it
or them hereunder or under any of the other Loan Documents or other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its or their own gross negligence or willful
misconduct.
10.5 RELIANCE BY AGENT. AGENT shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram, telecopier or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper person
or persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by AGENT. AGENT may deem and treat each
LENDER as the holder of the Pro Rata Share of the Revolving Loan made by it for
all purposes hereof and shall not be required to deal with any person who has
acquired a participation interest in the Revolving Loan from a LENDER. As to any
matters not expressly provided for by this Agreement or any of the other Loan
Documents or other documents or instruments referred to or provided for herein
or therein, AGENT shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
REQUIRED LENDERS, and such instructions of the REQUIRED LENDERS and any action
taken or failure to act pursuant thereto shall be binding on all of the LENDERS
and any other holder of all or any portion of the Revolving Loan or
participation therein.
10.6 DEFAULTS. AGENT shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default unless AGENT has actual knowledge of the same
or has received notice from a LENDER or BORROWER referring to this Loan
Agreement, describing such Event of Default and stating that such notice is
"notice of default". In the event that AGENT obtains such actual knowledge or
receives such a notice, AGENT shall give prompt notice thereof to each of the
LENDERS. AGENT shall take such action with respect to such Event of Default as
shall be reasonably directed by the REQUIRED LENDERS. Unless and until AGENT
shall have received such direction, AGENT may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to any such
Event of Default as it shall deem advisable in the best interest of the LENDERS,
provided, however, that AGENT shall not accelerate the indebtedness under this
Agreement without the prior written consent of the REQUIRED LENDERS.
10.7 NON-RELIANCE ON AGENT AND OTHER LENDERS.
(a) Each LENDER agrees that it has, independently and without reliance on
AGENT or any other LENDER, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of BORROWER and its
Subsidiaries and the decision to enter into this Agreement and that it will,
independently and without reliance upon AGENT or any other LENDER, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Loan Documents or other documents or
instruments referred to or provided for herein or therein. AGENT shall not be
required to keep itself informed as to the performance or observance by BORROWER
of this Agreement or any of the other Loan Documents or any other documents or
instruments referred to or provided for herein or therein or to inspect the
Collateral (including, without limitation, any tangible property) or books of
BORROWER. Except for notices, reports and other documents and information
expressly required to be furnished to LENDERS by AGENT hereunder, AGENT shall
not have any duty or responsibility to provide the LENDERS with any credit or
other information concerning the affairs, financial condition or business of
BORROWER or any of its Subsidiaries or any guarantor of the Liabilities
hereunder (or any affiliate of them) which may come into the possession of AGENT
or any of its affiliates.
(b) AGENT shall not be required to file this Agreement, any of the other
Loan Documents or any other documents or instruments referred to herein or
therein, for record or give notice of this Agreement, any of the other Loan
Documents or any other documents or instruments referred to herein or therein,
to anyone.
10.8 SHARING OF COSTS BY LENDERS; INDEMNIFICATION OF AGENT.
(a) Each LENDER agrees to pay its Pro Rata Share, based on the amount of
its respective Outstanding Advances due under its Revolving Note, of any
expenses incurred (and not paid or reimbursed by BORROWER after demand for
payment is made by AGENT) by or on behalf of LENDERS in connection with any
Event of Default, including, without limitation, costs of enforcement of the
Loan Documents and any advances to pay taxes or insurance premiums or otherwise
to preserve its lien against the Collateral or to preserve or protect the
Collateral. In the event a LENDER fails to pay its Pro Rata Share of expenses as
aforesaid, and all or a portion of such unpaid amount is paid by AGENT, then the
defaulting LENDER shall reimburse AGENT for the portion of such unpaid amount
paid by it, together with interest thereon at the Prime Based Rate from the date
of payment by AGENT.
(b) In addition, each LENDER agrees to reimburse and indemnify AGENT (to
the extent it is not paid by on or behalf of BORROWER, after demand for payment
is made by AGENT) for such LENDER's Pro Rata Share, based upon the amount of its
respective Outstanding Advances due under its Revolving Note, of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against AGENT in any way relating to or
arising out of this Agreement, any of the other Loan Documents or any other
documents contemplated by or referred to herein or the transactions contemplated
hereby or thereby (including, without limitation, any costs and expenses which
BORROWER is obligated to pay under this Agreement), or as a result of the
enforcement of any of the terms of this Agreement, the other Loan Documents, or
of any such other documents or instruments contemplated by or referred to herein
or therein; provided that no LENDER shall be liable for (1) any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified, (2) any loss of principal or interest with respect to
AGENT's Pro Rata Share of the Revolving Loan (except, in the case of a
particular LENDER, any loss suffered by AGENT in connection with a swap or other
interest rate hedging arrangement entered into between AGENT and BORROWER for
the benefit of or for the account of such LENDER).
10.9 RIGHTS OF AGENT AS LENDER. With respect to AGENT's individual
Commitment and its Pro Rata Share of the Revolving Loan, AGENT in its capacity
as a LENDER hereunder shall have the same rights and powers hereunder as any
other LENDER and may exercise the same as though it were not acting as AGENT,
and the term "LENDER" or "LENDERS" shall, unless the context otherwise
indicates, include AGENT in its capacity as a LENDER. AGENT and its affiliates
may (without having to account therefor to any LENDER) accept deposits from,
lend money to (on a secured or unsecured basis), and generally engage in any
kind of banking, trust or other business with BORROWER or any of its
Subsidiaries or any guarantor of the Liabilities hereunder (and any affiliates
of them) as if it were not acting as AGENT and AGENT may accept fees and other
consideration from BORROWER or its Subsidiaries, for services in connection with
this Agreement or any of the other Loan Documents or otherwise without having to
account for the same to the LENDERS.
10.10 RESIGNATION OR REMOVAL OF AGENT; SUCCESSOR AGENT.
(a) Subject to the appointment and acceptance of a successor AGENT as
provided below, AGENT may resign at any time by giving not less than 30 days'
prior written notice thereof to the LENDERS and BORROWER and AGENT may be
removed at any time with cause by a unanimous vote of the LENDERS other than
AGENT, provided that BORROWER shall be promptly notified thereof. Upon any such
resignation or removal, the REQUIRED LENDERS shall have the right to appoint a
successor AGENT which shall be a LENDER or another bank or financial institution
reasonably acceptable to BORROWER and having a combined capital and surplus of
at least $500,000,000, provided, however, that if an Event of Default shall have
occurred and is continuing, any such other bank or financial institution need
not be acceptable to BORROWER. If no successor AGENT shall have been so
appointed by the REQUIRED LENDERS and shall have accepted such appointment
within thirty days after the REQUIRED LENDERS' removal of the retiring AGENT,
then the retiring AGENT may, after consultation with BORROWER and within ten
days thereafter, on behalf of and on notice to the LENDERS, appoint a successor
AGENT, which shall be one of the LENDERS.
(b) The REQUIRED LENDERS or the retiring AGENT, as the case may be, shall
upon the appointment of a successor AGENT promptly so notify BORROWER.
(c) Upon the acceptance of any appointment as AGENT hereunder by a
successor AGENT, such successor AGENT shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring AGENT,
and the retiring AGENT shall be discharged from its duties and obligations
hereunder.
(d) After any retiring AGENT's removal hereunder as AGENT, the provisions
of this Article X shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as AGENT.
10.11 ACTIONS OF AGENT; FAILURE OF AGENT TO ACT.
(a) Subject to the provisions of Section 10.6, AGENT will, upon the
occurrence of an Event of Default, act in accordance with the decisions of the
REQUIRED LENDERS.
(b) Except for action expressly required of AGENT hereunder, AGENT shall in
all cases be fully justified in failing or refusing to act hereunder unless it
shall have received further assurances (which may include cash collateral) of
the indemnifica-tion obligations of LENDERS under Section 10.8(b) hereof in
respect of any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
(c) AGENT shall not have any liabilities or responsibilities to BORROWER on
account of the failure of any LENDER to perform its obligations hereunder or to
any LENDER on account of the failure of BORROWER or the other LENDER to perform
its obligations hereunder or under any of the other Loan Documents or other
document or instrument referred to or provided for herein or therein.
(d) Notwithstanding any other provision of this Agreement to the contrary,
AGENT shall not itself, nor shall its directors, managers, officers, employees
or agents, be liable or responsible, directly or indirectly, to the LENDERS for
any action taken, or omitted to be taken by it in good faith, or for the
consequences of any oversight or error of judgment on its or their part
occurring in good faith, unless the taking of, or omitting to take, such action
on the part of AGENT, or such oversight or error in judgment on the part of
AGENT or its directors, managers, officers, employees or agents, constitutes
willful misconduct or gross negligence. In the absence of such willful
misconduct or gross negligence by or on behalf of AGENT, but subject to the
provisions of subsection(e) below, the LENDERS hereby ratably indemnify AGENT
(to the extent not reimbursed by BORROWER) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses which may be imposed on, incurred by or against AGENT in any way
relating to or arising out of this Agreement or the Loan Documents or any action
taken or omitted to be taken by AGENT under or pursuant to this Agreement or the
Loan Documents, excluding the normal cost to AGENT in connection with the
administration of the Revolving Loan.
(e) No LENDER makes any representation of any kind to any other present or
future party to this Agreement as it relates to the perfection or priority of
any security interest in the Collateral and no LENDER will have any rights
against any present or future party to this Agreement or the agents of any
LENDER for any cause of action arising out of the lack of perfection or the
priority of any lien on the Collateral.
10.12 AMENDMENTS CONCERNING AGENCY FUNCTION. Notwith-standing anything to
the contrary contained in this Agreement, AGENT shall not be bound by any
waiver, amendment, supplement or modification of this Agreement or any of the
other Loan Documents or other documents or instruments referred to or provided
herein or therein which affects its duties, rights, and/or function hereunder or
thereunder unless it shall have given its prior written consent thereto.
10.13 PROCEDURES FOR LENDERS FUNDING ADVANCES.
(a) AGENT shall give written notice to each LENDER of each request for an
Advance under the Revolving Loan, by telephone, facsimile transmission, hand
delivery or overnight courier. Each such notice shall summarize the request for
an Advance under the Revolving Loan and shall specify (1) the date of the
requested Advance, (2) the aggregate amount of the requested Advance, (3) the
applicable LENDER's Pro Rata Share of the requested Advance, and (4) the
applicable interest rate selected by BORROWER with respect to such Advance, or
any portion thereof, and, in the case of the LIBOR Option, the applicable LIBOR
Based Interest Period, selected, or deemed selected, by BORROWER. Each LENDER
shall, before 11:00 a.m. (New York time) on the date set forth in any such
request for an Advance, make available to AGENT, at an account to be designated
by AGENT, in same day funds, each LENDER's Ratable portion of the requested
Advance. After AGENT's receipt of such funds and upon AGENT's determination that
the applicable conditions to make the requested Advance have been fulfilled,
AGENT shall make such funds available to BORROWER as provided for in this
Agreement. Promptly after receipt by AGENT of written request from any LENDER,
AGENT shall deliver to the requesting LENDER a copy of BORROWER's request for an
Advance, provided, however, that AGENT's providing proof of its funding of such
Advance shall presumptively and without more evidence that BORROWER made request
for such Advance in the aggregate amount of the funded Advance and that such
Advance was timely made. Also promptly after receipt by AGENT of written request
from any LENDER, AGENT shall deliver to the requesting LENDER the accompanying
certifications and such other instruments, documents, certifications and
approvals delivered by or on behalf of BORROWER to AGENT in support of the
requested Advance.
(b) (1) The Outstanding amount of the Advances may fluctuate through
AGENT's disbursement of funds to, and receipt of funds from, BORROWER. Payments
shall be made by AGENT to the LENDERS or by the LENDERS to AGENT by wire
transfer or otherwise, but in any event in immediately available funds.
(2) The obligation of AGENT and the LENDERS to make settlement on the
Settlement Date as set forth above shall exist and continue notwithstanding (i)
the amount of any Advance may not comply with any minimum amount for borrowings
that may be required hereunder, (ii) whether any conditions specified in Article
II are then satisfied, (iii) whether an Event of Default (or events which but
for the passage of time or the giving of notice would be such an Event of
Default) exists on the Settlement Date, (iv) the date of such Advance, (v) any
reduction in the Total Commitments after any such Advances were made, (vi) any
set-off, counterclaim, recoupment, defense or other right which such LENDER may
have against AGENT, BORROWER, or any other person for any reason whatsoever;
(vii) any adverse change in the condition (financial or otherwise) of BORROWER
or any of its Subsidiaries; (viii) the acceleration or maturity of any Advances
or the termination of the Commitments after the making of any Advance; (ix) any
breach of this Agreement by any party to this Agreement, AGENT, or any LENDER;
or (x) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(3) In the event that any settlement cannot for any reason take place on
the Settlement Date set by AGENT (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect to
BORROWER), then each LENDER shall forthwith purchase, without recourse or
warranty (as of the Settlement Date which would otherwise have occurred, but
adjusted for any payments received from BORROWER on or after such date and prior
to such purchase) from AGENT such participation in the Outstanding Advances as
shall be necessary to cause all of the LENDERS to share in such Advances ratably
based upon their respective Pro Rata Share of the Total Commitments, provided
that all interest payable on any such Pro Rata Share shall be for the account of
AGENT until the date on which the respective participation is purchased and, to
the extent attributable to the purchased participation, shall be payable to the
participant from and after such date.
(4) If any portion of any amount paid (or deemed to be paid) to AGENT
should be recovered from AGENT by or on behalf of BORROWER in bankruptcy, by
assignment for the benefit of creditors or otherwise, the loss of the amount so
recovered shall be ratably shared among all LENDERS as shall be necessary to
cause all of the LENDERS to share in such Advances ratably based upon their
respective Pro Rata Share of the Total Commitments.
10.14 NATURE OF OBLIGATIONS OF LENDERS. The obligations of the LENDERS
hereunder are several and not joint. Failure of any LENDER to fulfill that
LENDER's obligations hereunder shall not result in any other LENDER becoming
obligated to advance more than its Pro Rata Share of an Advance, nor shall such
failure release or diminish the obligations of any other Lender to fund its Pro
Rata Share of an Advance.
10.15 NON-RECEIPT OF FUNDS BY AGENT. Unless AGENT shall have received
notice from a LENDER or BORROWER (either one as appropriate being the "Payor")
prior to the date on which such LENDER is to make payment hereunder to AGENT of
Revolving Loan proceeds or BORROWER is to make payment to AGENT, as the case may
be (either such payment being a "Required Payment"), which notice shall be
effective upon receipt, that the Payor will not make the Required Payment in
full to AGENT, AGENT may assume that the Required Payment has been made in full
to AGENT on such date, and AGENT in its sole discretion may, but shall not be
obligated to, in reliance upon such assumption, make the amount thereof
available to the intended recipient on such date. If and to the extent the Payor
shall not have in fact so made the Required Payment in full to AGENT, the
recipient of such payment shall repay to AGENT forthwith on demand such amount
made available to it together with interest thereon, for each day from the date
such amount was so made available by AGENT until the date AGENT recovers such
amount, at the Default Rate.
10.16 SHARING OF PAYMENTS AMONG LENDERS.
(a) (1) The calculation of each LENDER's Pro Rata Share of interest on any
Advance shall (i) commence on the date of its funding of its Pro Rata Share of
an Advance under the Revolving Loan on the Settlement Date and (ii) end on the
date that the LENDER receives funds in payment of its Pro Rata portion of such
Advance; provided, however, that as it relates to AGENT, AGENT shall only be
liable for the payment of interest actually received by it from BORROWER and
also for interest due during the period of time between the date of AGENT's
aforesaid receipt of such interest and the time AGENT makes settlement as
required by this Agreement.
(2) Nothing in the foregoing shall be deemed to relieve any LENDER from any
obligation imposed upon it under this Agreement to make its pro rata share of
Loans.
(b) If a LENDER shall obtain payment of any principal of its Revolving Note
or interest thereon, or shall receive any Collateral or proceeds thereof with
respect to any Revolving Note or any interest to which it is entitled, whether
voluntarily or involuntarily, and whether through the exercise of any right of
setoff, banker's lien, counterclaim, or by any other means (including direct
payment), and such payment results in such LENDER receiving a greater payment
than it would have been entitled to had such payment been paid directly to AGENT
for disbursement to LENDERS, then such LENDER shall promptly purchase for cash
from the other LENDERS participations in the Revolving Loan in such amounts, and
make such other adjustments from time to time as shall be equitable, to the end
that all LENDERS shall share Ratably the benefit of such payment. To such end,
LENDERS shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. BORROWER agrees that any LENDER so purchasing a participation in
the Revolving Loan may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation. Nothing
contained herein shall require any LENDER to exercise any such right or shall
affect the right of any LENDER to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness of BORROWER.
10.17 EFFECT OF A LENDER'S FAILURE TO MAKE AN ADVANCE
(a) Failure to Fund: In the event any LENDER fails for any reason to fund
the portion it is required to fund of any Advance of Revolving Loan proceeds by
3:00 p.m. on the second Business Day after the date established by AGENT as the
date such Advance is to be made, such LENDER shall be a "Delinquent Lender" for
all purposes hereunder until and unless such delinquency is cured in accordance
with the terms and by the time permitted under subsection (b) below, and the
following provisions shall apply:
(1) AGENT shall notify (such notice being referred to as the "Delinquency
Notice") each LENDER and BORROWER of any LENDER's failure to fund. Each LENDER
who is not a Delinquent Lender shall have the right, but in no event or under
any circumstance the obligation, to fund such Delinquent Lender's portion of
such Advance, provided that, within twenty (20) days of the date of the
Delinquency Notice (the "Election Period"), such non-Delinquent Lender (the
"Electing Lender") irrevocably commits by notice in writing (an "Election
Notice") to AGENT, the other LENDERS and BORROWER to fund the Delinquent
Lender's portion of the Advance that is the subject of the delinquency and to
assume the Delinquent Lender's obligations with respect to the advancing of the
entire undisbursed portion of the Delinquent Lender's individual Commitment
(such entire undisbursed portion of the Delinquent Lender's individual
Commitment, including its portion of the Advance that is the subject of the
delinquency, the "Delinquency Amount"). If AGENT receives more than one Election
Notice within the Election Period, then all LENDERS who are not Delinquent
Lenders and who have so elected (collectively, the "Electing Lenders") shall be
deemed to have committed Ratably to fund shares of the Delinquency Amount based
upon the amounts of their respective individual Commitments. If there are one or
more Electing Lenders and the Delinquent Lender fails to cure during the
Election Period as provided in subsection (b) below, then upon the expiration of
the Election Period, each Electing Lender's individual Commitment shall be
automatically increased by the Delinquency amount (if there is only one Electing
Lender) or such Electing Lender's Pro Rata Share, determined as aforesaid, of
the Delinquency Amount (if there are two or more Electing Lenders), and the
Delinquent Lender's individual Commitment shall automatically be reduced by the
Delinquency Amount. AGENT shall thereupon notify BORROWER and each LENDER of (i)
the adjusted amounts of the individual Commitments and (ii) if the Advance that
was the subject of the delinquency was not made pursuant to Section 10.15 hereof
or was refunded by BORROWER pursuant to subsection (a)(5) of this Section, the
rescheduled date of such Advance (which shall be no sooner than three Business
Days after such notice). In the event AGENT shall have funded, pursuant to
Section 10.15 hereof, the entire Advance that was the subject of the delinquency
(including the Delinquent Lender's portion), and BORROWER shall not have
refunded such advance pursuant to subsection (a)(5) of this Section, the
Electing Lender(s) shall remit to AGENT the Delinquent Lender's portion of the
Advance, or their Pro Rata Share thereof, as the case may be, within three
Business Days of the notice provided for in the immediately preceding sentence,
and AGENT shall reimburse itself from such funds for making the Delinquent
Lender's portion of the Advance. Notwithstanding anything to the contrary
contained herein, if AGENT advances its own funds in respect of a Delinquent
Lender's portion of an Advance, AGENT shall be entitled to the interest at the
applicable Default Rate on the portion of the principal amount represented
thereby, from the date AGENT makes such Advance until the date it is reimbursed
therefor.
(2) In connection with the adjustment of the amounts of the individual
Commitments of the Delinquent Lender and Electing Lender(s) upon the expiration
of the Election Period as aforesaid, BORROWER covenants that it shall, promptly
following the request of the Electing Lender(s), execute and deliver to each
Electing Lender and the Delinquent Lender replacement Revolving Notes
substantially in the form of the Revolving Note or Revolving Notes being
replaced and stating:
"This Note is a replacement Revolving Note as contemplated by Section
10.17 of the Loan Agreement; it replaces and is in lieu of that
certain Revolving Note made by Maker dated [Closing Date] to the order
of [Delinquent Lender] in the principal sum of [Delinquent Lender's]
original individual Revolving Loan Commitment]."
Such replacement Revolving Notes shall be in amounts equal to such LENDERS'
respective individual Commitments, as adjusted. All such replacement Revolving
Notes shall constitute "Revolving Notes" for purposes of this Agreement and the
Loan Documents or other documents or instruments referred to or provided for
herein or therein. The execution and delivery of replacement Revolving Notes as
required above shall be a condition precedent to any further advances of
Revolving Loan proceeds.
(3) In the event that no LENDER elects to commit to fund the Delinquency
Amount within the Election Period as provided in subsection (a) of this Section,
AGENT shall, upon the expiration of the Election Period, so notify BORROWER and
each LENDER and the provisions of Section 10.18 hereof shall apply.
(4) Subject to a Delinquent Lender's right to cure as provided in
subsection (b) below, but notwithstanding anything else to the contrary
contained in this Agreement, if any LENDER fails (i) to make available to AGENT
its Pro Rata Share of any Advance under the Revolving Loan or (ii) to purchase
its Pro Rata Share of any other obligation arising under the Total Commitments
or (iii) to comply with the provisions in this Agreement with respect to making
dispositions and arrangements with the other LENDERS, where such LENDER's share
of any payment received, whether by setoff or otherwise, is in excess of its Pro
Rata Share of such payments due and payable to all of the LENDERS, in each case
as, when and to the full extent required by the provisions of this Agreement, or
(iv) to adjust promptly the amount of such LENDER's Outstanding Advances and its
Pro Rata Share of the other obligations (if any) arising under the Total
Commitments, then such LENDER shall be deemed a Delinquent Lender until such
time as such delinquency is satisfied. In addition, the Delinquent Lender's
interest in, and any and all amounts due to a Delinquent Lender under, the Loan
Documents or other documents or instruments referred to or provided for herein
or therein (including, without limitation, all principal, interest, fees and
expenses) shall be subordinate in lien priority and to the repayment of all
amounts (including, without limitation, interest) then or thereafter due or to
become due to the non-Delinquent Lenders under the Loan Documents or other
documents or instruments referred to or provided for herein or therein
(including future Advances). In furtherance of the foregoing, the Delinquent
Lender shall be deemed to have assigned any and all payments due to it from
BORROWER, whether on account of Outstanding Advances, interest, fees or
otherwise, to the remaining non-Delinquent Lenders for application to, and
reduction of, their respective Pro Rata Shares of all Outstanding Advances and
the Delinquent Lender hereby authorizes AGENT to distribute all payments from or
on behalf of BORROWER to the non-Delinquent Lenders in proportion to their
re-adjusted respective Pro Rata Shares of all Outstanding Advances. Also, the
Delinquent Lender shall have no right to participate in any discussions among
and/or decisions by the LENDERS hereunder and/or under the other Loan Documents
or other documents or instruments referred to or provided for herein or therein
and the Delinquent Lender shall be bound by any amendment to, or waiver of, any
provision of, or any action taken or omitted to be taken by AGENT and/or the
non-Delinquent Lenders under, any of the Loan Documents or other documents or
instruments referred to or provided for herein or therein which is made
subsequent to the Delinquent Lender's becoming a Delinquent Lender.
(5) If, pursuant to the operation of Section 10.15 hereof, an Advance of
Revolving Loan proceeds is made without AGENT's receipt of a Delinquent Lender's
portion thereof, BORROWER shall, upon demand of AGENT, refund the entire such
advance to AGENT. BORROWER's failure to do so within ten (10) days of such
demand shall, notwithstanding anything to the contrary contained in any of the
Loan Documents, constitute an Event of Default under this Agreement and the
other Loan Documents. Upon its receipt of such funds from BORROWER, AGENT shall
promptly remit to each non-Delinquent Lender its appropriate share thereof.
(b) Cure by Delinquent Lender.
(1) A Delinquent Lender may cure a delinquency arising out of its failure
to fund its required portion of any Advance if, within the Election Period, it
remits to AGENT its required portion of such Advance (together with interest
thereon at the Default Rate from the date such Advance was to have been made if
such Advance was made by AGENT and not refunded by BORROWER pursuant to
subsection (a)(5) of this Section above), in which event AGENT shall so notify
BORROWER and the LENDERS who are not Delinquent Lenders: (i) of its receipt of
such funds; and (ii)(A) if the Advance that was the subject of the delinquency
shall not have been made (or shall have been refunded by BORROWER pursuant to
subsection (a)(5) of this Section above), of the rescheduled date of the Advance
(which shall be no sooner than 3 Business Days after such notice) or (B) if
AGENT shall have funded the entire Advance that was the subject of the
delinquency (including the Delinquent Lender's portion) and BORROWER shall not
have refunded such advance pursuant to subsection (a)(5) of this Section above,
of its intention to reimburse itself from funds received from the Delinquent
Lender (which reimbursement is hereby authorized) for funding the Delinquent
Lender's required portion of the Advance. In the event any Delinquent Lender
cures a delinquency prior to the expiration of the Election Period (or
thereafter with the consent of all of the non-Delinquent Lenders), such
Delinquent Lender nonetheless shall be bound by any amendment to or waiver of
any provision of, or any action taken or omitted to be taken by AGENT and/or the
non-Delinquent Lenders under, any of the Loan Documents or other documents or
instruments referred to or provided for herein or therein which is made
subsequent to that LENDER's becoming a Delinquent Lender and prior to its curing
the delinquency as provided in this subsection, provided that such amendment or
waiver of action was taken in accordance with the provisions of this Agreement.
A Delinquent Lender shall have absolutely no right to cure any delinquency after
the expiration of the Election Period unless all LENDERS in their sole
discretion elect to permit such cure.
(2) If not previously satisfied directly by the Delinquent Lender, a
Delinquent Lender shall also be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
Outstanding Advances and of the non-Delinquent Lenders (as set forth in
subsection (a)(4) above), the LENDERS' respective Pro Rata Shares of all
Outstanding Advances have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency, provided, however, that (i) any cure under this subsection (2)
shall not reinstate the Delinquent Lender's right to participate in any
discussions among and/or decisions by the LENDERS hereunder and/or under the
other Loan Documents or other documents or instruments referred to or provided
for herein or therein and (ii) the Delinquent Lender shall be bound by any
amendment to, or waiver of, any provision of, or any action taken or omitted to
be taken by AGENT and/or the non-Delinquent Lenders under, any of the Loan
Documents or other documents or instruments referred to or provided for herein
or therein which may be made subsequent to a satisfaction of any deficiency
pursuant to this subsection (2).
(c) Delinquent LENDER Not Excused. Nothing contained in the foregoing
subsections (a) and (b) above shall release, or in any way limit, a Delinquent
Lender's obligations as a LENDER hereunder and/or under any of the other of the
Loan Documents or other documents or instruments referred to or provided for
herein or therein. Further, a Delinquent Lender shall indemnify and hold
harmless AGENT and each of the non-Delinquent Lenders from any claim, loss, or
costs incurred by AGENT and/or the non-Delinquent Lenders as a result of a
Delinquent Lender's failure to comply with the requirements of this Agreement,
including, without limitation, any and all additional losses, damages, costs and
expenses (including, without limitation, attorneys' fees) incurred by AGENT and
any LENDER as a result of and/or in connection with (1) a non-Delinquent
Lender's acting as an Electing Lender, (2) any enforcement action brought by
AGENT against a Delinquent Lender, and (3) any action brought against AGENT
and/or LENDERS. The indemnification provided above shall survive any termination
of this Agreement.
(d) Notices Regarding Delinquent Lender. Notices by AGENT or LENDERS
pursuant to subsections (a) and (b) above may be by telephone (to be promptly
confirmed in writing).
10.18 REPLACEMENT LENDER
(a) In the event a LENDER becomes a Delinquent Lender and no other LENDER
elects to make Advances to meet the Pro Rata Share of Advances that were to have
been made by the Delinquent Lender, BORROWER shall have the right, at any time
provided there exists no Event of Default or event which, but for the passage of
time or the giving of notice, would be such an Event of Default, to cause
another financial institution reasonably acceptable to the REQUIRED LENDERS to
assume the Delinquent Lender's obligations with respect to the Delinquency
Amount on the then-existing terms and conditions of the Loan Documents (such
replacement institution, a "Replacement Lender"). Such assumption shall be
pursuant to a written instrument reasonably satisfactory to the REQUIRED
LENDERS. Upon such assumption, the Replacement Lender shall become a "LENDER"
for all purposes hereunder, with all Individual Loan Commitment in an amount
equal to the Delinquency Amount, and the Delinquent Lender's individual
Commitment shall automatically be reduced by the Delinquency Amount. In
connection with the foregoing, BORROWER shall execute and deliver to the
Replacement Lender and the Delinquent Lender a replacement Revolving Note
substantially in the form of the Revolving Note held by the Delinquent Lender
and stating:
"This Note is a replacement Revolving Note as contemplated by
Section 10.18 of the Loan Agreement; it replaces and is in
lieu of that certain note made by Maker dated [Closing Date]
to the order of [Delinquent Lender] in the principal sum of
[Delinquent Lender's original individual Revolving Loan
Commitment]."
Such replacement Revolving Note shall be in amounts equal to, in the case of the
Replacement Lender's Revolving Note, the Delinquency Amount and, in the case of
the Delinquent Lender's Revolving Note, its individual Commitment, as reduced as
aforesaid. Such replacement Revolving Notes shall constitute a "Revolving Note"
for purposes of this Agreement and the other Loan Documents.
(b) LENDERS shall reasonably cooperate with BORROWER's attempts to obtain a
Replacement Lender, but they shall not be obligated to modify the Loan Documents
in connection therewith, other than such modifications as may be required to
reflect the admission of the Replacement Lender as a LENDER.
10.19 ASSIGNMENTS BY LENDERS.
(a) (1) Each LENDER may assign to one or more banks or other entities all
or a portion of its rights and obligations under this Agreement upon consent of
BORROWER (so long as no Event of Default has occurred and is continuing) and
AGENT, which consent shall not be unreasonably withheld (including, without
limitation, all or a portion of its Commitment, the Advances owing to it, and
the Revolving Note or Revolving Notes held by it); provided, however, that the
following shall apply:
(i) no such consent shall be required in the case of any assignment to the
Federal Reserve Bank;
(ii) each such assignment shall be of a constant, and not a varying,
percentage of all of the assigning LENDER's rights and obligations under this
Agreement;
(iii) the amount of the Commitment of the assigning LENDER being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
Five Million ($5,000,000) Dollars, must be in an integral multiple of One
Million ($1,000,000) Dollars thereafter, and the assigning LENDER must retain at
least Five Million ($5,000,000) Dollars of its Commitment provided, however,
that any LENDER may assign any portion of its Commitment to another LENDER,
provided the assigning LENDER retains at least Five Million ($5,000,000) Dollars
of its Commitment) and provided further, however, that in the event that any
LENDER is the holder of a Commitment in an amount less than $5,000,000, such
LENDER's assignment must be for the entirety of its Commitment; and
(iv) each such assignment shall be to an Eligible Assignee.
(2) Upon such execution, delivery, acceptance and recording (if
applicable), from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least fifteen Business Days after
the execution thereof, the following shall apply:
(i) the assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a LENDER
hereunder, and
(ii) the LENDER assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning LENDER's rights and obligations under this
Agreement, such LENDER shall cease to be a party hereto).
(3) By executing and delivering an Assignment and Acceptance, the LENDER
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows:
(i) other than as provided in such Assignment and Acceptance, such
assigning LENDER makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto;
(ii) such assigning LENDER makes no representation or warranty and assumes
no responsibility with respect to the financial condition of BORROWER or the
performance or observance by BORROWER of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of such financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon AGENT,
such assigning LENDER or any other LENDER and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement;
(v) such assignee confirms that it is an Eligible Assignee;
(vi) such assignee appoints and authorizes AGENT to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to AGENT by the terms hereof, together with such powers as are
reasonably incidental thereto; an
(vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a LENDER.
(4) Upon its receipt of an Assignment and Acceptance executed by an
assigning LENDER and an assignee representing that it is an Eligible Assignee,
together with any Revolving Note subject to such assignment, AGENT shall (i)
accept such Assignment and Acceptance, and (ii) give prompt notice thereof to
BORROWER.
(5) Within five Business Days after its receipt of such notice, BORROWER,
at its own expense, shall execute and deliver to AGENT in exchange for the
surrendered Revolving Note a new Revolving Note to the order of such Eligible
Assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning LENDER has retained a Commitment
hereunder, a new Revolving Note to the order of the assigning LENDER in an
amount equal to the Commitment retained by it hereunder. Such new Revolving Note
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Revolving Note, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit "A" hereto.
(b) Any LENDER may, in connection with any assignment or proposed
assignment pursuant to this Section, disclose to the assignee or proposed
assignee, any information relating to BORROWER furnished to LENDER by or on
behalf of BORROWER; provided that, prior to any such disclosure, the assignee or
proposed assignee shall agree to preserve the confidentiality of any
confidential information relating to BORROWER received by it from such LENDER to
the same extent as AGENT and the LENDERS.
10.20 PARTICIPATIONS.
(a) BORROWER, AGENT and LENDERS agrees that any LENDER may (without the
consent of any other party hereto) sell participations to one or more banks or
other entities (each a "Participant") in a portion of its rights and obligations
under this Agreement (including, without limitation, a portion of its
Commitment, the Advances owing to it, and the Revolving Note held by it);
provided, however, that the following shall apply:
(1) such LENDER's obligations under this Agreement (including, without
limitation, its Commitment hereunder) shall remain unchanged,
(2) such LENDER shall remain solely responsible to the other parties hereto
for the performance of such obligations,
(3) such LENDER shall retain a controlling interest over its Participants
in its Commitment,
(4) such LENDER shall remain the holder of any such Revolving Note for all
purposes of this Agreement, and BORROWER, AGENT and the other LENDER shall
continue to deal solely and directly with such LENDER in connection with such
LENDER's rights and obligations under this Agreement, and
(5) no Participant (other than an affiliate of a LENDER which is a party
hereto) shall be entitled under the relevant participation agreement or any
associated agreement to require such LENDER to take or omit to take any action
hereunder, except, to the extent that any Participant has any interest directly
affected thereby, action that extends the final maturity of any Advance, reduces
the rate or extends the time of payment of interest on any Advance, extends the
time for payment, or reduces any payment or fee payable to such LENDER
hereunder.
(b) As part of such sale of participations, the selling LENDER may without
the consent of any party hereto ▇▇▇▇▇ ▇▇▇▇ passu interests in the Advances, this
Agreement, the Revolving Note applicable to such LENDER, and the other Loan
Documents to any such person, firm or corporation. So long as the selling LENDER
remains a LENDER under this Agreement, such person, firm or corporation shall
through its participation with LENDER share on a derivative basis and on a pari
passu basis all the powers and rights given to LENDER in respect thereof but
neither AGENT nor any other party hereto shall be required to deal in any way
with any such participant. AGENT and other parties to this Agreement will
continue to deal in all respects with the selling LENDER as though no sale of a
participation had been made by such selling LENDER.
(c) Any LENDER may, in connection with any participation or proposed
participation pursuant to this Section, disclose to the participant or proposed
participant, any information relating to BORROWER furnished to LENDER by or on
behalf of BORROWER; provided that, prior to any such disclosure, the participant
or proposed participant shall agree to preserve the confidentiality of any
confidential information relating to BORROWER received by it from such LENDER to
the same extent as AGENT and the LENDERS.
10.21 BENEFITS RESTRICTED. Except as expressly provided in this Article X,
neither BORROWER nor any of its Subsidiaries shall have any rights as a third
party beneficiary of any of the provisions hereof. In performing its functions
and duties under this Agreement, AGENT shall act solely as agent for LENDERS and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with BORROWER or any of its Subsidiaries.
10.22 WITHHOLDING TAXES. Each LENDER represents that it is entitled to
receive any payments to be made to it hereunder without the withholding of any
tax and will furnish to AGENT such forms, certifications, statements and other
documents as AGENT may reasonably request from time to time: (a) to evidence
such LENDER's exemption from the withholding of any tax imposed by any
jurisdiction, or (b) to enable AGENT to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any LENDER is not created or organized under the laws of the United States or
any state thereof, such LENDER will furnish to AGENT Form 4224 or Form 1001 of
the Internal Revenue Service, or such other forms, certifications, statements or
documents, duly executed and completed by such LENDER as evidence of such
LENDER's exemption from the withholding of United States tax with respect
thereto. AGENT shall not be obligated to make any payments hereunder to such
LENDER in respect of the Revolving Loan until such LENDER shall have furnished
to AGENT the requested form, certification, statement or document.
10.23 DELIVERY OF REVOLVING LOAN DOCUMENTS. (a) AGENT represents that it
has delivered true and complete copies of all Loan Documents which have been
executed in connection with the Revolving Loan. A list of said Loan Documents
are identified on the Closing Statement delivered to each LENDER on the date
hereof. (b) Each LENDER acknowledges receipt and approval of copies of all said
documents.
10.24 DEEMED CONSENT OR APPROVAL. With respect to any requested amendment,
waiver, consent or other action which requires the approval of the REQUIRED
LENDERS or all of the LENDERS, as the case may be, in accordance with the terms
of this Agreement, or if AGENT is required hereunder to seek, or desires to
seek, the approval of the REQUIRED LENDERS or all of the LENDERS, as the case
may be, prior to undertaking a particular action or course of conduct, AGENT in
each such case shall provide each LENDER with written notice of any such request
for amendment, waiver or consent or any other requested or proposed action or
course of conduct, accompanied by such detailed background information and
explanations as may be reasonably necessary to determine whether to approve or
disapprove such amendment, waiver, consent or other action or course of conduct.
AGENT may (but shall not be required to) include in any such notice, printed in
capital letters or boldface type, a legend substantially to the following
effect:
"THIS COMMUNICATION REQUIRES IMMEDIATE RESPONSE. FAILURE TO RESPOND
WITHIN TEN (10) CALENDAR DAYS FROM THE RECEIPT OF THIS COMMUNICATION
SHALL CONSTITUTE A DEEMED APPROVAL BY THE ADDRESSEE OF THE ACTION
REQUESTED BY BORROWER OR THE COURSE OF CONDUCT PROPOSED BY AGENT AND
RECITED ABOVE."
and if the foregoing legend is included by AGENT in its communication, a LENDER
shall be deemed to have approved or consented to such action or course of
conduct for all purposes hereunder if such LENDER fails to object to such action
or course of conduct by written notice to AGENT within ten (10) calendar days of
such LENDER's receipt of such notice.
10.25 COMPENSATION OF AGENT.
(a) It is understood that AGENT will receive for its benefit and not for
the benefit of the LENDERS each of the following:
(1) the Restructure Fee set forth in Section 2.15(a) above;
(2) the Verification Fees payable under Section 6.11 above;
(3) the field examination fees payable under Section 6.12 above;
(4) the Collateral Management Fees payable under Section 6.13 above; an
(5) any increased interest payable by virtue of the two collection days
described in Section 2.4(b)(4)(ii) above
(b) In addition, AGENT shall receive the compensation set forth in the
letter or other understanding relating to AGENT's fees delivered or communicated
to the LENDERS prior to the date hereof.
ARTICLE XI
MISCELLANEOUS
11.1 (a) Any communications between the parties hereto or notices
provided herein to be given may be given by mailing the same, certified mail,
return receipt requested, postage prepaid or by confirmed facsimile transmission
or hand delivery or by an overnight delivery service, as follows:
(1) to AGENT at:
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Head, Asset Based Lending Department;
(2) to BORROWER at the address first
above given for BORROWER in this
Agreement;
(3) to any LENDER at the address given for any
such LENDER in this Agreement;
(4) to such other addresses as any party
may in writing hereafter indicate by
notice given in conformity with this
Section.
(b) Notices sent by certified mail shall be deemed received when accepted.
Notices sent by confirmed facsimile transmission or hand delivery shall be
deemed received when delivered to the address and/or person designated in this
Section. Notices sent by overnight delivery service shall be deemed received
upon delivery.
11.2 In the event that BORROWER shall default in the performance of any of
the provisions of this Agreement or in the event that BORROWER shall fail to pay
any tax, assessment, government charge or levy, except as the same are being
contested in good faith by appropriate proceedings, or shall fail to discharge
any lien, encumbrance or security interest prohibited hereby, or shall fail to
comply with any other obligation of BORROWER to AGENT or any LENDER hereunder,
AGENT may, but shall not be required to, pay, satisfy, discharge or bond the
same for the account of BORROWER and all moneys so paid out shall be an
obligation of BORROWER hereunder, repayable on demand, together with per annum
interest at the Default Rate.
11.3 Any LENDER may at any time pledge all or any portion of its rights
under the Loan Documents including its Revolving Note to any of the twelve (12)
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or enforcement thereof shall release any such
LENDER from its obligations under any of the Loan Documents.
11.4 All payments shall be in lawful money of the United States in
immediately available funds unless otherwise provided in this Agreement.
11.5 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that
BORROWER shall not assign this Agreement or any of its rights, duties or
obligations hereunder without the prior written consent of AGENT and all LENDERS
and any purported assignment or delegation without such consent shall be void
11.6 No delay or omission to exercise any right, power or remedy accruing
to AGENT or any LENDER upon any breach or default (whether such breach or
default is now or hereafter occurring) of BORROWER under this Agreement, any
Revolving Note or any of the other Loan Documents shall (a) impair any such
right, power or remedy of AGENT or any such LENDER, (b) be construed to be a
waiver of any such breach or default, or an acquiescence therein, or (c) be
construed to be a waiver of or an acquiescence in any similar breach or default
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of AGENT or any such LENDER of any breach or default under
this Agreement, any Revolving Note or any of the other Loan Documents, or any
waiver on the part of AGENT or any LENDER of any provision or condition of this
Agreement or any of such other Loan Documents, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Revolving Notes or any of the other
Loan Documents, or by law or otherwise afforded to of AGENT or any LENDER shall
be cumulative and not alternative.
11.7 (a) BORROWER will pay the reasonable fees and the reasonable
out-of-pocket expenses incurred by AGENT in connection with (1) the preparation
of this Agreement and other related documents, whether or not the transactions
hereby contemplated shall be consummated, (2) the making of the Revolving Loan
hereunder and (3) the determination and/or enforcement of the rights of AGENT in
connection with such documents and/or with the Revolving Loan. Such
out-of-pocket expenses include but are not limited to, charges for the
examination of title, inspections and drawings of paper, recording and filing
fees, and all reasonable attorneys' fees, including the fees and disbursements
of AGENT's counsel.
(b) Whenever any attorney is used to provide advice to AGENT regarding
AGENT's relationship with BORROWER or whenever any attorney is used to collect
any obligation or to determine, preserve or enforce any right of AGENT or any
LENDER against BORROWER or against the Collateral under this Agreement, any
Revolving Note or any of the other Loan Documents, whether by suit or other
means, BORROWER agrees to pay the reasonable attorney's fees and other costs and
expenses incurred by AGENT or such LENDER. BORROWER also agrees to pay AGENT's
attorneys a reasonable fee and costs and expenses for enforcing against third
parties any other rights of AGENT pertaining hereto including AGENT's defending
against any claim pertaining to the Collateral, provided, however, that BORROWER
shall not be obligated to pay for more than one attorney representing AGENT and
the LENDERS except during such period of time as an Event of Default may have
occurred and is continuing.
(c) Any payment required of BORROWER hereunder shall be made within 10 days
of AGENT's request that BORROWER do so. The amount of all such expenses may, at
the option of AGENT, either be directly charged against a specially designated
demand deposit account of BORROWER at AGENT or, in the absence of such
designation or in the event that there are insufficient funds in such designated
account, then to any demand deposit account of BORROWER at AGENT as of each due
date. In the event that there are insufficient funds in any such account on any
applicable payment due date, then AGENT is hereby authorized to effect payment
by charge against the Revolving Loan by increasing the principal balance of the
Revolving Loan as though an Advance were taken by BORROWER against the Revolving
Loan in the amount of any payment effected by AGENT. BORROWER's failure to make
any such payment or AGENT's inability to charge against or add to the Revolving
Loan shall be an Event of Default hereunder.
(d) Until paid by BORROWER, all of the expenses set forth in this Section
above shall bear interest at the Default Rate and all such amounts shall be
added to the Revolving Loan and shall be secured by the Collateral.
11.8 Nothing in this Agreement shall be deemed any waiver or prohibition of
AGENT's or any LENDER's right of set-off.
11.9 This Agreement and each of the other Loan Documents shall be governed
by, and construed under, the laws of the State of New Jersey.
11.10 BORROWER agrees that, in addition to any other available forum, any
suit, action or proceeding against it arising under or growing out of, or
relating to this Agreement or any note or other instrument or agreement required
hereunder, or any other instrument executed by BORROWER for the benefit of AGENT
or any LENDER, may be instituted in any Federal court in the State of New Jersey
or any State court in the State of New Jersey or in any other court having
jurisdiction, and BORROWER hereby waives any objection which it might have now
or hereafter to the laying of the venue of any such suit, action or proceeding,
and irrevocably submits to the jurisdiction of any such court in any suit,
action or proceeding and waives any claim or defense of inconvenient forum.
11.11 (a) This Agreement shall not be effective against AGENT unless signed
by an officer of AGENT.
(b) This Agreement shall not be effective against any LENDER unless signed
by an officer of such LENDER.
(c) This Agreement contains the entire understanding of the parties and any
promises or representations not herein contained shall have no force and effect,
unless in writing, duly signed by the party to be charged.
11.12 As it relates to AGENT, neither this Agreement nor any portion or
provision hereof may be changed, modified, amended, waived, supplemented,
discharged, canceled or terminated orally or by any course of dealing, or in any
manner other than by an agreement in writing, signed by AGENT.
11.13 The security interests, liens, and rights granted to AGENT and each
LENDER hereunder shall continue in full force and effect notwithstanding the
fact that BORROWER's account may, from time to time, be temporarily in a credit
position.
11.14 All representations, warranties, covenants, waivers and agreements
contained herein shall survive execution hereof, unless otherwise provided.
11.15 The provisions of this Agreement are severable, and if any clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision in this Agreement in any jurisdiction. Each of the
covenants, agreements and conditions contained in this Agreement is independent
and compliance by BORROWER with any of them shall not excuse non-compliance by
BORROWER with any other. All covenants hereunder shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default if such action is taken or condition exists.
11.16 Any requirement in this Agreement that AGENT or any LENDER act
reasonably or any requirement in this Agreement that AGENT or any LENDER show
materiality shall be broadly and liberally construed in favor of AGENT and each
such LENDER bearing in mind the need of AGENT and each LENDER to protect its
security interests and to realize upon the Collateral.
11.17 In the event of any inconsistency between this Agreement and any
other documents affording AGENT or any LENDER rights and remedies, such
inconsistency shall be resolved by an interpretation which expands such rights
rather than limits such rights.
11.18 BORROWER understands that AGENT will order confirmatory searches
after the date of this Agreement in order to verify that all UCC-1 Financing
Statements have been filed and that AGENT holds the lien priorities against the
Collateral as required by this Agreement. BORROWER agrees to pay all of AGENT's
expenses, including reasonable attorneys' fees, incurred in procuring and
reviewing such searches. By BORROWER's execution of this Agreement, BORROWER
hereby authorizes AGENT to directly charge such expenses against a specially
designated demand deposit account of BORROWER at AGENT or, in the absence of
such designation or in the event that there are insufficient funds in such
designated account, then to any demand deposit account of BORROWER at AGENT as
of each due date. In the event that there are insufficient funds in any such
account on any applicable payment due date, then AGENT is hereby authorized to
effect payment by charge against the Revolving Loan by increasing the principal
balance of the Revolving Loan as though an Advance were taken by BORROWER
against the Revolving Loan in the amount of any payment effected by AGENT.
BORROWER's failure to make any such payment or AGENT's inability to charge
against or add to the Revolving Loan shall be an Event of Default hereunder.
11.19 Nothing herein contained shall be construed to constitute AGENT or
any LENDER as BORROWER's agent for any purpose whatsoever. In addition, neither
AGENT nor any LENDER shall be responsible or liable for (a) any acts of omission
or commission, (b) any error of judgment, (c) any mistake of fact, (d) any
shortage, discrepancy, impairment, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof or (e) any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts Receivable or any
instrument received in payment thereof or for any damage resulting therefrom.
11.20 Upon receipt of an affidavit of an officer of AGENT as to the loss,
theft, destruction or mutilation of any Revolving Note or any other security
document which is not of public record, BORROWER will issue, in lieu thereof, a
replacement Revolving Note or other security document in the same principal
amount thereof and otherwise of like tenor.
11.21 This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by facsimile shall be as effective as delivery
of a manually executed counterpart of this Agreement.
11.22 BORROWER AND AGENT AND EACH LENDER MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR AGENT AND EACH LENDER TO ENTER INTO THIS AGREEMENT AND MAKE THE
REVOLVING LOAN.
IN WITNESS WHEREOF, BORROWER and AGENT and LENDERS have caused this Loan
and Security Agreement to be executed by their respective duly authorized
officers on the date and year first above written.
WITNESS: FIVE STAR GROUP, INC.
By:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Grad, President
Assistant Secretary
FLEET BANK, NATIONAL ASSOCIATION
By:
▇▇▇▇▇ ▇▇▇▇▇ Vice President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
DIME COMMERCIAL CORP.
By:
▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President
Address: 1180 Avenue of the Americas
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
SUMMIT BANK
By:
▇▇▇▇▇ ▇▇▇▇▇
Vice President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
