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EXHIBIT 10.13
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
AMONG
CELEBRITY, INC.,
THE XXXXXX CORPORATION,
STAR WHOLESALE FLORIST, INC.,
VALUE FLORIST SUPPLIES, INC.,
AND
INDIA EXOTICS, INC.,
AS BORROWERS, ON THE ONE HAND,
AND
FOOTHILL CAPITAL CORPORATION,
ON THE OTHER HAND
DATED AS OF JULY 15, 1999
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TABLE OF CONTENTS
Page(s)
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1. DEFINITIONS AND CONSTRUCTION.......................................................................1
1.1 Definitions...............................................................................1
1.2 Accounting Terms.........................................................................20
1.3 Code.....................................................................................20
1.4 Construction.............................................................................20
1.5 Schedules and Exhibits...................................................................20
2. LOAN AND TERMS OF PAYMENT.........................................................................20
2.1 Revolving Advances.......................................................................20
2.2 Letters of Credit........................................................................21
2.3 [Intentionally Deleted]..................................................................24
2.4 [Intentionally Deleted]..................................................................24
2.5 Overadvances.............................................................................24
2.6 Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.............................................................................24
2.7 Collection of Accounts...................................................................26
2.8 Crediting Payments; Application of Collections...........................................26
2.9 Designated Account.......................................................................27
2.10 Maintenance of Loan Account; Statements of Obligations...................................27
2.11 Fees.....................................................................................27
3. CONDITIONS; TERM OF AGREEMENT.....................................................................28
3.1 Conditions Precedent to the Effectiveness of this Agreement..............................28
3.2 Conditions Precedent to all Advances and all Letters of Credit...........................29
3.3 Condition Subsequent.....................................................................29
3.4 Term; Automatic Renewal..................................................................30
3.5 Effect of Termination....................................................................30
3.6 Early Termination by Borrowers...........................................................30
3.7 Termination Upon Event of Default........................................................31
4. CREATION OF SECURITY INTEREST.....................................................................31
4.1 Grant of Security Interest...............................................................31
4.2 Negotiable Collateral....................................................................31
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral...............................................................................31
4.4 Delivery of Additional Documentation Required............................................32
4.5 Power of Attorney........................................................................32
4.6 Right to Inspect.........................................................................33
5. REPRESENTATIONS AND WARRANTIES....................................................................33
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5.1 No Encumbrances..........................................................................33
5.2 Eligible Accounts........................................................................33
5.3 Eligible Inventory.......................................................................33
5.4 Equipment................................................................................33
5.5 Location of Inventory and Equipment......................................................33
5.6 Inventory Records........................................................................34
5.7 FEIN.....................................................................................34
5.8 Due Organization and Qualification; Subsidiaries.........................................34
5.9 Due Authorization; No Conflict...........................................................34
5.10 Litigation...............................................................................35
5.11 GAAP Financial Statements; No Material Adverse Change. ..................................36
5.12 Solvency.................................................................................36
5.13 Employee Benefits........................................................................36
5.14 Environmental Condition..................................................................36
6. AFFIRMATIVE COVENANTS.............................................................................37
6.1 Accounting System........................................................................37
6.2 Collateral Reporting.....................................................................37
6.3 Financial Statements, Reports, Certificates..............................................37
6.4 Tax Returns..............................................................................39
6.5 Guarantor Reports........................................................................39
6.6 Returns..................................................................................39
6.7 Title to Equipment.......................................................................39
6.8 Maintenance of Equipment.................................................................40
6.9 Taxes....................................................................................40
6.10 Insurance................................................................................40
6.11 No Setoffs or Counterclaims..............................................................41
6.12 Location of Inventory and Equipment......................................................42
6.13 Compliance with Laws.....................................................................42
6.14 Employee Benefits........................................................................42
6.15 Leases...................................................................................43
7. NEGATIVE COVENANTS................................................................................43
7.1 Indebtedness.............................................................................43
7.2 Liens....................................................................................44
7.3 Restrictions on Fundamental Changes......................................................44
7.4 Disposal of Assets.......................................................................44
7.5 Change Name..............................................................................44
7.6 Guarantee................................................................................44
7.7 Nature of Business.......................................................................45
7.8 Prepayments and Amendments...............................................................45
7.9 Change of Control........................................................................45
7.10 Consignments.............................................................................45
7.11 Distributions............................................................................45
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7.12 Accounting Methods.......................................................................45
7.13 Investments..............................................................................46
7.14 Transactions with Affiliates.............................................................46
7.15 Suspension...............................................................................46
7.16 Intentionally Deleted....................................................................46
7.17 Use of Proceeds..........................................................................46
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees...................................................................46
7.19 No Prohibited Transactions Under ERISA...................................................46
7.20 Financial Covenants......................................................................47
7.21 Capital Expenditures.....................................................................48
8. EVENTS OF DEFAULT.................................................................................48
9. FOOTHILL'S RIGHTS AND REMEDIES....................................................................50
9.1 Rights and Remedies......................................................................50
9.2 Remedies Cumulative......................................................................52
10. TAXES AND EXPENSES................................................................................52
11. WAIVERS; INDEMNIFICATION..........................................................................53
11.1 Demand; Protest; etc.....................................................................53
11.2 Foothill's Liability for Collateral......................................................53
11.3 Indemnification..........................................................................53
11.4 Joint Borrowers..........................................................................54
12. NOTICES...........................................................................................60
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................................................61
14. DESTRUCTION OF BORROWERS' DOCUMENTS...............................................................62
15. GENERAL PROVISIONS................................................................................62
15.1 Effectiveness............................................................................62
15.2 Successors and Assigns...................................................................62
15.3 Section Headings.........................................................................63
15.4 Interpretation...........................................................................63
15.5 Severability of Provisions...............................................................63
15.6 Amendments in Writing....................................................................63
15.7 Counterparts; Telefacsimile Execution....................................................63
15.8 Revival and Reinstatement of Obligations.................................................63
15.9 Integration..............................................................................64
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SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Existing Indebtedness
Exhibit C-1 Form of Compliance Certificate
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (THIS
"AGREEMENT"), is entered into as of July 15, 1999, among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of business
located at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx
00000-0000, on the one hand, and each of the Borrowers, with their chief
executive offices all at 0000 Xxx Xxxxx Xxxxxxx, Xxxxx, Xxxxx 00000, on the
other hand.
RECITALS
A. Borrowers and Foothill have entered into that certain Loan and
Security Agreement, dated as of January 30, 1998, as amended by Amendments One
through Five thereto (the "Original Loan Agreement");
B. Borrowers have requested that Foothill amend certain provisions of
the Original Loan Agreement, and Foothill has agreed; and
C. Foothill and Borrowers are amending and restating the Original Loan
Agreement in accordance with the terms and conditions set forth herein.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to a
Person arising out of the sale or lease of goods or the rendition of services by
such Person, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
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"Affiliate" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is under common
control with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 20% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agreement" has the meaning set forth in the preamble
hereto.
"Amortized Seasonal Amount" means, for any day for which
the Seasonal Limit is being determined, the result of: A - [A/60 x B] where A is
the aggregate outstanding amount of Seasonal Borrowing Facility Advances as of
the last day of the most recent Seasonal Borrowing Period, and B is the number
of days since the last day of the most recent Seasonal Borrowing Period.
"Applicable Margin" means, with respect to any Advance:
commencing on the first day of the first month following an adjustment as
provided in the immediately succeeding sentence, the amount set forth below
which corresponds to the EBITDA set forth below for the four fiscal quarter
period of Celebrity ended with the most recent fiscal quarter of Celebrity for
which Foothill receives the financial statements and EBITDA Certificate required
below, determined and adjusted as provided herein. The Applicable Margin shall
be adjusted after each delivery to Foothill of the financial statements of
Celebrity required pursuant to Section 6.3 for each fiscal quarter of Celebrity
commencing with the quarter ending on or about June 30, 1999, together with the
corresponding EBITDA Certificate for the four fiscal quarter period ending on
the last day of such fiscal quarter, each such adjustment to be effective on the
first day of the first calendar month after each such delivery.
EBITDA Applicable Margin
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Less than $5,000,000 0.50%
Equal to or greater than
$5,000,000, but equal to or less
than $8,000,000 0.25%
Greater than $8,000,000 0.00%
Notwithstanding anything in this definition to the
contrary, (i) in the event that Foothill shall fail to receive any such
financial statements and the related EBITDA Certificate for any fiscal quarter
of Celebrity within 45 days following the end of such fiscal quarter, then the
Applicable Margin shall, at the end of such thirtieth day, immediately and
without notice or further action be the highest Applicable Margin provided
herein (such
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Applicable Margin to be in effect until the first day of the first calendar
month after Foothill receives the quarterly financial statements of Celebrity
required under Section 6.3 for the last month of the most recent fiscal quarter
of Celebrity and the related EBITDA Certificate) and (ii) in the event that,
with respect to any four fiscal quarter period of Celebrity which shall be a
Fiscal Year, the audited financial statements of Celebrity required under
Section 6.3 for such Fiscal Year shall indicate an EBITDA for such four fiscal
quarter period (as determined by Foothill) less than that reflected in the
EBITDA Certificate delivered to Foothill for such four fiscal quarter period,
the Applicable Margin shall be adjusted retroactively (to the effective date of
the Applicable Margin which was determined based upon the delivery of such
incorrect EBITDA Certificate) to reflect an Applicable Margin based upon the
EBITDA determined from the audited financial statements and Celebrity shall make
payments to Foothill to reflect such adjustment.
"Authorized Person" means any officer or other employee of
Borrower.
"Average Unused Portion of Maximum Revolving Amount"
means, as of any date of determination, (a) the Maximum Revolving Amount, less
(b) the sum of (i) the average Daily Balance of Advances that were outstanding
during the immediately preceding month, plus (ii) the average Daily Balance of
the undrawn Letters of Credit that were outstanding during the immediately
preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined
in Section 3(35) of ERISA) for which any Borrower, any Subsidiary of any
Borrower, or any ERISA Affiliate has been an "employer" (as defined in Section
3(5) of ERISA) within the past six years.
"Borrower" means any one of Celebrity, Xxxxxx, Exotics,
Florist Supplies, or Star.
"Borrowers' Books" means all of Borrowers' books and
records including: ledgers; records indicating, summarizing, or evidencing
Borrowers' properties or assets (including the Collateral) or liabilities; all
information relating to Borrowers' business operations or financial condition;
and all computer programs, disk or tape files, printouts, runs, or other
computer prepared information.
"Borrowing Base" has the meaning set forth in Section
2.1(a).
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
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"Celebrity" means Celebrity, Inc., a Texas corporation.
"Celebrity Hong Kong" means Celebrity Exports
International Limited, a Hong Kong corporation.
"Change of Control" shall be deemed to have occurred at
such time as: (a) Xxxxxx X. Xxxxxxxxx, Xx., any corporation or partnership under
the control of Xx. Xxxxxxxxx, or the trustee of any trust of which Xx. Xxxxxxxxx
is the settlor or primary beneficiary) ceases to own more than 40% of the total
voting power of all classes of stock then outstanding of Celebrity entitled to
vote in the election of directors ("Voting Stock"); provided, however, that a
Change of Control shall be deemed to occur if, during a time when Xx.
Xxxxxxxxx'x holdings of Voting Stock are 50% or less, any other "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934 (the "Act")) shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Act) of more than 20% of the Voting Stock; (b)
Celebrity ceases to own, directly or indirectly, all of the voting power of all
of the Voting Stock of each other Borrower or (c) Xxxxxx X. Xxxxxxxxx, Xx., the
existing chief executive officer of Celebrity, shall no longer serve in such
capacity.
"Closing Date" means July 16, 1999.
"Xxxxxx" means The Xxxxxx Corporation, a California
corporation.
"Code" means the California Uniform Commercial Code.
"Collateral" means each Borrower's right, title, and
interest in each of the following:
(a) Accounts,
(b) Borrowers' Books,
(c) Equipment,
(d) General Intangibles,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
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(h) [Intentionally Deleted],
(i) any money, or other assets of Borrowers that now or
hereafter come into the possession, custody, or control of Foothill, and
(j) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral of Borrowers, and any and all Accounts, Borrowers'
Books, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, Real Property, money, deposit accounts, or other tangible
or intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory
of any Borrower, in each case, in form and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments,
and other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C-1 and delivered by the chief accounting officer of a
Borrower to Foothill.
"Daily Balance" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with
the giving of notice, the passage of time, or both, would be an Event of
Default.
"Designated Account" means account number 182215394 of
Borrowers maintained with Borrowers' Designated Account Bank, or such other
deposit account of Borrowers (located within the United States) which has been
designated, in writing and from time to time, by Borrowers to Foothill.
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"Designated Account Bank" means Bank One Texas, N.A.,
whose office is located at Dallas, Texas, and whose ABA number is 000000000.
"Dilution" means, for any Borrower, in each case based
upon the experience of the immediately prior 3 months, the result of dividing
the Dollar amount of (a) bad debt write-downs, discounts, advertising, returns,
promotions, credits, or other dilutive items with respect to the Accounts of
such Borrower, by (b) such Borrower's Collections (excluding extraordinary
items) plus the Dollar amount of clause (a).
"Dilution Reserve" means, as of any date of determination,
an aggregate amount sufficient to reduce Foothill's advance rates against
Eligible Accounts of each Borrower by the amount, expressed as a percent, by
which Dilution for such Borrower is in excess of 4.0%. As an example, if
Dilution for Xxxxxx were 4.75%, then such advance rate for Xxxxxx would be
reduced by 0.75 percentage points.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"EBITDA" means, at any time of determination, the
consolidated net income of Celebrity and its Subsidiaries (excluding
extraordinary items) for the prior 12 month period (a) plus all interest
expense, income tax expense, depreciation and amortization (including
amortization of any goodwill or other intangibles) for the period, (b) plus or
minus any other non-cash charges which have been subtracted or amounts which
have been added in calculating consolidated net income for the period.
"EBITDA Certificate" means a certificate of the chief
financial officer of Celebrity to be delivered in connection with the end of
each fiscal quarter of Celebrity, and setting forth Celebrity's EBITDA as of the
last day of such fiscal quarter of Celebrity, together with such supporting
documentation and calculations as Foothill may reasonably request with respect
to such EBITDA.
"Eligible Accounts" means those Accounts created by a
Borrower in the ordinary course of business, that arise out of such Borrower's
sale of goods or rendition of services, that strictly comply with each and all
of the representations and warranties respecting Accounts made by such Borrower
to Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in all respects; provided, however, that standards of
eligibility may be fixed and revised from time to time by Foothill in Foothill's
reasonable credit judgment. In determining the
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amount to be so included, Accounts shall be valued net of any sales taxes
thereon or debit memos. Eligible Accounts shall not include the following:
(a) Accounts with selling terms of more than 180 days, or
Accounts that the Account Debtor has failed to pay within 60 days after their
due date (or within 30 days after their due date with respect to Accounts with
selling terms of greater than 90 days);
(b) Accounts owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is
an employee, Affiliate, or agent of a Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, unless (y) the Account is supported by an
irrevocable letter of credit satisfactory to Foothill (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Foothill and
is directly drawable by Foothill, or (z) the Account is covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts owing by AAFES or any other
military post exchange, or Accounts with respect to which the relevant Borrower
has complied, to the satisfaction of Foothill, with the Assignment of Claims
Act, 31 U.S.C. ss. 3727), or (ii) any State of the United States (exclusive,
however, of Accounts owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of any Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the Account;
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(h) Accounts with respect to an Account Debtor whose total
obligations owing to Borrowers exceed 10% of all Eligible Accounts of Borrowers
in the aggregate (except where the Account Debtor is Wal-Mart Stores, Inc.,
Kmart Corporation, or Hobby Lobby Stores, Inc., in which case such percentage
shall be 15% for each, or, where the Account Debtor is Michaels Stores, Inc., in
which case such percentage shall be 45%), to the extent of the obligations owing
by such Account Debtor in excess of such percentage;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods giving rise
to such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
(l) Accounts that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by a
Borrower of the subject contract for goods or services.
"Eligible In-Transit Inventory" means those items of
Inventory of a Borrower that do not qualify as Eligible Landed Inventory solely
because they are not in a location set forth on Schedule E-1 but: (a) such
Inventory is currently in-transit from a location not set forth on Schedule E-1
to a location set forth on Schedule E-1, (b) title to such Inventory has passed
to a Borrower, (c)(i) either documents of title with respect to such Inventory
have been delivered to Foothill or its agent, or Foothill is satisfied that its
security interest in such documents (and the Inventory represented thereby) has
been perfected and is not subject to another Lien, and (ii) upon Foothill's
request, any such documents of title shall have been issued naming Foothill as
consignee; (d) such Inventory is insured against types of loss, damage, hazards,
and risks, and in amounts, satisfactory to Foothill in its discretion, and (e)
such Inventory either (i) has been paid for or, (ii) if purchased under an
Inventory Letter of Credit, such Inventory Letter of Credit either has been
drawn upon in full and reimbursed, or expired undrawn, or (iii) if purchased on
open account, the seller has disclaimed (or Foothill is otherwise satisfied that
there does not exist) any lien on or security interest in such Inventory or the
documents of title therefor; in each case, with documentation therefor
(including agreements with shippers, customs brokers or other holders of
documents of title) in form and substance satisfactory to Foothill in its
discretion.
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"Eligible Inventory" means the Eligible In-Transit
Inventory and the Eligible Landed Inventory.
"Eligible Landed Inventory" means Inventory consisting of
first quality finished goods held for sale in the ordinary course of a
Borrower's business and raw materials for such finished goods, that are located
at or in-transit between such Borrower's premises identified on Schedule E-1,
that strictly comply with each and all of the representations and warranties
respecting Inventory made by such Borrower to Foothill in the Loan Documents,
and that are and at all times continue to be acceptable to Foothill in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable credit judgment.
An item of Inventory shall not be included in Eligible Landed Inventory if:
(a) it is not owned solely by such Borrower or such
Borrower does not have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1 and is not in transit between any such locations;
(c) it is not located on property owned or leased by a
Borrower or in a contract warehouse, in each case, subject to a Collateral
Access Agreement executed by the mortgagee, lessor, the warehouseman, or other
third party, as the case may be, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of Foothill;
(e) it consists of goods returned or rejected by such
Borrower's customers; and
(f) it is obsolete or slow moving, out of season, work-in-
process, a component that is not part of finished goods, or constitutes spare
parts, packaging and shipping materials, supplies used or consumed in such
Borrower's business, Inventory subject to a Lien in favor of any third Person,
xxxx and hold goods, defective goods, "seconds," or Inventory acquired on
consignment.
"Equipment" means all of a Person's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories,
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accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to
ERISA whose employees are treated as employed by the same employer as the
employees of a Borrower under IRC Section 414(b), (b) any trade or business
subject to ERISA whose employees are treated as employed by the same employer as
the employees of a Borrower under IRC Section 414(c), (c) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any organization subject to
ERISA that is a member of an affiliated service group of which a Borrower is a
member under IRC Section 414(m), or (d) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any party subject to ERISA that is a party to
an arrangement with a Borrower and whose employees are aggregated with the
employees of such Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of a Borrower, any of
its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in
which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of a Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by a Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Exotics" means India Exotics, Inc., a Texas corporation.
"FEIN" means Federal Employer Identification Number.
"Florist Supplies" means Value Florist Supplies, Inc., a
Texas corporation.
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"Foothill" has the meaning set forth in the preamble to
this Agreement.
"Foothill Account" has the meaning set forth in Section
2.7.
"Foothill Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by a Borrower
under any of the Loan Documents that are paid or incurred by Foothill; fees or
charges paid or incurred by Foothill in connection with Foothill's transactions
with Borrowers, including, fees or charges for photocopying, notarization,
couriers and messengers, telecommunication, public record searches (including
tax lien, litigation, and UCC searches and including searches with the patent
and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals), real estate surveys, real estate title policies and
endorsements, and environmental audits; costs and expenses incurred by Foothill
in the disbursement of funds to Borrowers (by wire transfer or otherwise);
charges paid or incurred by Foothill resulting from the dishonor of checks;
costs and expenses paid or incurred by Foothill to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral or any portion thereof, irrespective
of whether a sale is consummated; costs and expenses paid or incurred by
Foothill in examining Borrowers' Books; costs and expenses of third party claims
or any other suit paid or incurred by Foothill in enforcing or defending the
Loan Documents or in connection with the transactions contemplated by the Loan
Documents or Foothill's relationship with Borrowers or any guarantor; and
Foothill's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing, defending, or concerning the Loan Documents (including attorneys fees
and expenses incurred in connection with a "workout," a "restructuring," or an
Insolvency Proceeding concerning Borrowers or any guarantor of the Obligations),
irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as
in effect from time to time in the United States, consistently applied.
"General Intangibles" means all of any Person's present
and future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or
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tapes, literature, reports, catalogs, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Governmental Authority" means any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" means that certain Continuing Guaranty dated as
of January 30, 1998, by Magicsilk in favor of Foothill.
"Hazardous Materials" means (a) substances that are
defined or listed in, or otherwise classified pursuant to, any applicable laws
or regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of a Person for
borrowed money, (b) all obligations of a Person evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of a Person in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of a Person under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any property or asset of a Person, irrespective of whether such obligation or
liability is assumed, and (e) any obligation of a Person guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to such Person) any indebtedness, lease, dividend, letter of
credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or
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informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intellectual Property Security Agreement" means each of
the agreements so denominated, dated as of January 30, 1998, between Foothill,
on the one hand, and a Borrower or Magicsilk, on the other hand.
"Intangible Assets" means, with respect to any Person,
that portion of the book value of all of such Person's assets that would be
treated as intangibles under GAAP.
"Inventory" means all present and future inventory in
which a Person has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of such Person's present and
future raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Inventory Letter of Credit" means a documentary Letter of
Credit issued to support the purchase by a Borrower of Inventory prior to
transit to a location set forth on Schedule E-1, that provides that all draws
thereunder must require presentation of customary documentation (including, if
applicable, commercial invoices, packing list, certificate of origin, xxxx of
lading or airway xxxx, customs clearance documents, quota statement, inspection
certificate, beneficiaries statement, and xxxx of exchange, bills of lading,
dock warrants, dock receipts, warehouse receipts, or other documents of title)
in form and substance satisfactory to Foothill and reflecting the passage to
such Borrower of title to first quality Inventory conforming to such Borrower's
contract with the seller thereof. Any such Letter of Credit shall cease to be an
"Inventory Letter of Credit" at such time, if any, as the goods purchased
thereunder become Eligible Landed Inventory.
"Inventory Reserves" means reserves (determined from time
to time by Foothill in its discretion) for (a) the estimated costs relating to
unpaid freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible In-Transit
Inventory by Borrowers, plus (b) the estimated reclamation claims of unpaid
sellers of Inventory sold to Borrowers, plus (c) commissions payable by any
Borrower in respect of its Inventory, plus (d) ad valorem taxes, if any, that
would result in a xxxxxx or inchoate Lien that is or could be prior to the
Foothill security interest.
"Investment Property" means all of each Borrower's
"investment property" as that term is defined in Section 9115 of the Code.
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"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section
2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute, or
contract, whether such interest shall be recorded or perfected, and whether such
interest shall be contingent upon the occurrence of some future event or events
or the existence of some future circumstance or circumstances, including the
lien or security interest arising from a mortgage, deed of trust, encumbrance,
pledge, hypothecation, assignment, deposit arrangement, security agreement,
adverse claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Real
Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Letters of
Credit, the Lockbox Agreements, the Guaranty, the Intellectual Property Security
Agreements, the Stock Pledges, any note or notes executed by any Borrower and
payable to Foothill, and any other agreement entered into, now or in the future,
in connection with this Agreement.
"Lockbox Account" shall mean a depositary account
established pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among a Borrower or
Borrowers, Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means Bank One Texas, N.A., or such other
banks as may be agreed to by Foothill and Borrowers from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
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"Magicsilk" means Magicsilk, Inc. a Texas corporation.
"Material Adverse Change" means (a) a material adverse
change in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of a Borrower, (b) the
material impairment of a Borrower's ability to perform its obligations under the
Loan Documents to which it is a party or of Foothill to enforce the Obligations
or realize upon the Collateral, (c) a material adverse effect on the value of
the Collateral or the amount that Foothill would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral, or (d) a material impairment of the priority of
Foothill's Liens with respect to the Collateral.
"Maximum Revolving Amount" means $26,500,000.
"MLBFS Guaranty" means that certain guarantee by one or
more of the Borrowers in favor of Xxxxxxx Xxxxx Business Financial Services,
Inc. ("MLBFS"), dated on or about April 22, 1999, respecting the obligations of
Crest Properties, Ltd. under its $4,500,000 Term Loan Agreement with MLBFS.
"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which a Borrower, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of a Person's present
and future letters of credit, notes, drafts, instruments, Investment Property,
securities (including the shares of stock of Subsidiaries of such Person),
documents, personal property leases (wherein such Person is the lessor), and
chattel paper.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrowers' Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by a Borrower
to Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and any
Borrower, and irrespective of whether for the payment of money), whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from a
Borrower to others that Foothill may have obtained by assignment or otherwise,
and
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further including all interest not paid when due and all Foothill Expenses that
a Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"OLV" means, with respect to a Borrower's Inventory, the
orderly liquidation value of such Inventory, net of all operating costs and fees
associated with such liquidation, as determined by one or more appraisers
acceptable to Foothill.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold
a participation interest in its rights under the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Equipment Dispositions" means a sale or
disposition of Equipment that is no longer used or useful in the business of a
Borrower; provided, however, that (a) in the event of any such sale or
disposition of Equipment effected without replacement of such Equipment, or
where replacement Equipment is leased or purchased subject to a Permitted Lien,
then such Borrower shall deliver all cash proceeds of any such sale or
disposition to Foothill to be applied to the Obligations, (b) in the event of
any such sale or disposition of Equipment that is not covered by the preceding
clause (a), then such Borrower shall give Foothill evidence of the use of the
proceeds of such sale or disposition to finance replacement Equipment which
shall be subject to a first priority Lien in favor of Foothill, and (c) the
aggregate amount of all Permitted Equipment Dispositions during any calendar
year may not exceed $250,000.
"Permitted Liens" means (a) Liens held by Foothill, (b)
Liens for unpaid taxes that either (i) are not yet due and payable or (ii) are
the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases and purchase money security
interests and Liens of lessors under capital leases to the extent that the
acquisition or lease of the underlying asset is permitted under Section 7.21 and
so long as the Lien only attaches to the asset purchased or acquired and only
secures the purchase price of the asset, (e) Liens arising by operation of law
in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of a Borrower and not
in connection with the borrowing of money, and which Liens either (i) are for
sums not yet due and payable, or (ii) are the subject of Permitted Protests, (f)
Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens or deposits to secure
performance of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of a Borrower and not in
connection with the borrowing of money, (h) Liens
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arising by reason of security for surety or appeal bonds in the ordinary course
of business of a Borrower, (i) Liens of or resulting from any judgment or award
that would not cause a Material Adverse Change and as to which the time for the
appeal or petition for rehearing of which has not yet expired, or in respect of
which a Borrower is in good faith prosecuting an appeal or proceeding for a
review, and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (j) [intentionally deleted], and (k)
with respect to any Real Property, easements, rights of way, zoning and similar
covenants and restrictions, and similar encumbrances that customarily exist on
properties of Persons engaged in similar activities and similarly situated and
that in any event do not materially interfere with or impair the use or
operation of the Collateral by any Borrower or the value of Foothill's Lien
thereon or therein, or materially interfere with the ordinary conduct of the
business of a Borrower.
"Permitted Protest" means the right of a Borrower to
protest any Lien (other than any such Lien that secures the Obligations), tax
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on the books of such Borrower in an amount
that is reasonably satisfactory to Foothill, (b) any such protest is instituted
and diligently prosecuted by such Borrower in good faith, and (c) Foothill is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Liens of Foothill in
and to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by a Borrower or with respect to which
it may incur liability.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by a Borrower.
"Reference Rate" means the variable rate of interest, per
annum, most recently announced by Xxxxx Fargo Bank, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
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"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Retiree Health Plan" means an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Seasonal Borrowing Facility" means that portion of the
Borrowing Base set forth in Section 2.1 (a).
"Seasonal Borrowing Facility Advances" means Advances
outstanding under the Seasonal Borrowing Facility, as determined by Foothill.
"Seasonal Borrowing Period" means either of the periods of
July 15, 1999 through September 14, 1999 and January 15, 2000 through February
14, 2000.
"Seasonal Limit" means the following Dollar amounts during
the following periods:
Period Amount
------ ------
7/15/99 through
9/13/99 $750,000
1/15/00 through
2/14/00, $500,000
each day from
9/14/99 through
11/11/99, and from
2/15/00 through
4/14/00, the Amortized Seasonal Amount
11/12/99 through
1/14/00, and on and
after 4/15/00 $0.00
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"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of the properties
and assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) the present fair salable value of
the properties and assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Star" means Star Wholesale Florist, Inc., a Texas
corporation.
"Stock Pledges" means either of the Security Agreement
Stock Pledges, dated as of January 30, 1998, by Celebrity and Star,
respectively, in favor of Foothill.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Tangible Net Worth" means, as of any date of
determination, the difference of (a) a Person's total stockholder's equity,
minus (b) the sum of: (i) all Intangible Assets of such Person, (ii) all of such
Person's prepaid expenses, and (iii) all amounts due to such Person from
Affiliates.
"Value" means, with respect to a Borrower's Inventory, the
lower of such Borrower's cost or market value, determined on a basis consistent
with such Borrower's current and historical accounting practices.
"Voidable Transfer" has the meaning set forth in Section
15.8.
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1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrowers on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of Default
shall "continue" or be "continuing" until such Event of Default has been waived
in writing by Foothill. Section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any reference in
this Agreement or in the Loan Documents to this Agreement or any of the Loan
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrowers in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount less the outstanding balance of all undrawn or unreimbursed
Letters of Credit, or (ii) the Borrowing Base less (A) the aggregate amount of
all undrawn or unreimbursed Letters of Credit (other than Inventory Letters of
Credit), less (B) 45% of the aggregate amount of all undrawn or unreimbursed
Inventory Letters of Credit. For purposes of this Agreement, "Borrowing Base",
as of any date of determination, shall mean the result of:
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(w) up to the Seasonal Limit; provided, however, that
Advances will only be made under this clause (w) during a
Seasonal Borrowing Period and only so long as at the time of
such request Celebrity's EBITDA for its most recently
completed four fiscal quarters (as set forth on the most
current EBITDA Certificate) is at least $5,000,000, plus
(x) the lesser of (i) (1) 85% of all Eligible
Accounts, less (2) the amount, if any, of the Dilution
Reserve, and (ii) an amount equal to Borrowers' Collections
with respect to Accounts for the immediately preceding 90 day
period, plus
(y) the least of (i) 1.50 times the credit
availability created by clause (x) above, (ii) $17,500,000,
and (iii) 55% of the Value of Eligible Inventory (but in no
event shall Advances against Eligible In-Transit Inventory of
Borrowers exceed, in the aggregate at any one time,
$2,500,000, and in no event shall the aggregate Advances
against Eligible Inventory of Borrowers exceed, at any one
time, 90.5% of the OLV of Borrowers' Inventory minus the
amount of the Inventory Reserve (if any), minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Sections 2.1(b), 6.15 and 10.
(b) Anything to the contrary in Section 2.1(a) above
notwith standing, Foothill may create reserves against the Borrowing Base or
reduce its advance rates based upon Eligible Accounts or Eligible Inventory
without declaring an Event of Default if it determines that there has occurred a
Material Adverse Change.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Revolving Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
2.2 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of a Borrower (each,
an "L/C") or to issue guarantees of payment (each such guaranty, an "L/C
Guaranty") with respect
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to letters of credit issued by an issuing bank for the account of a Borrower.
Foothill shall have no obligation to issue a Letter of Credit if any of the
following would result:
(i) the sum of 55% of the aggregate amount of all
undrawn and unreimbursed Inventory Letters of Credit, plus
100% of the aggregate amount of all other types of undrawn and
unreimbursed Letters of Credit, would exceed the Borrowing
Base less the amount of outstanding Advances; or
(ii) the aggregate amount of all undrawn or
unreimbursed Letters of Credit (including Inventory Letters of
Credit) would exceed the lower of: (x) the Maximum Revolving
Amount less the amount of outstanding Advances; or (y)
$1,000,000; or
(iii) the outstanding Obligations would exceed the
Maximum Revolving Amount.
Each Borrower expressly understands and agrees that Foothill shall have no
obligation to arrange for the issuance by issuing banks of the letters of credit
that are to be the subject of L/C Guarantees. Each Letter of Credit shall have
an expiry date no later than 60 days prior to the date on which this Agreement
is scheduled to terminate under Section 3.4 (without regard to any potential
renewal term) and all such Letters of Credit shall be in form and substance
acceptable to Foothill in its sole discretion. If Foothill is obligated to
advance funds under a Letter of Credit, Borrowers immediately shall reimburse
such amount to Foothill and, in the absence of such reimbursement, the amount so
advanced immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances under Section 2.6.
(b) Each Borrower hereby agrees to indemnify, save,
defend, and hold Foothill harmless from any loss, cost, expense, or liability,
including payments made by Foothill, expenses, and reasonable attorneys fees
incurred by Foothill arising out of or in connection with any Letter of Credit.
Each Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any letters of credit guarantied by Foothill and opened to or
for such Borrower's account or by Foothill's interpretations of any Letter of
Credit issued by Foothill to or for such Borrower's account, even though this
interpretation may be different from such Borrower's own, and Borrowers
understand and agree that Foothill shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following any
Borrower's instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Each Borrower understands
that the L/C Guarantees may require Foothill to indemnify the issuing bank for
certain costs or liabilities arising out of claims
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by a Borrower against such issuing bank. Each Borrower hereby agrees to
indemnify, save, defend, and hold Foothill harmless with respect to any loss,
cost, expense (including reasonable attorneys fees), or liability incurred by
Foothill under any L/C Guaranty as a result of Foothill's indemnification of any
such issuing bank.
(c) Each Borrower hereby authorizes and directs any bank
that issues a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the issuing
bank pursuant to such letter of credit, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in connection
with such letter of credit and the related application. A Borrower may or may
not be the "applicant" or "account party" with respect to such letter of credit.
(d) Any and all charges, commissions, fees, and costs
incurred by Foothill relating to the letters of credit guaranteed by Foothill
shall be considered Foothill Expenses for purposes of this Agreement and
immediately shall be reimbursable by Borrowers to Foothill.
(e) Immediately upon the termination of this Agreement,
Borrowers agree to either (i) provide cash collateral to be held by Foothill in
an amount equal to 102% of the maximum amount of Foothill's obligations under
outstanding Letters of Credit, or (ii) cause to be delivered to Foothill
releases of all of Foothill's obligations under outstanding Letters of Credit.
At Foothill's discretion, any proceeds of Collateral received by Foothill after
the occurrence and during the continuation of an Event of Default may be held as
the cash collateral required by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
by any governmental authority of any such applicable law, treaty, rule, or
regulation, or (ii) compliance by the issuing bank or Foothill with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(A) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing bank or
Foothill any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto;
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and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or Foothill of issuing, making, guaranteeing, or maintaining
any letter of credit, or Letter of Credit, as applicable, or to reduce the
amount receivable in respect thereof by such issuing bank or Foothill, then, and
in any such case, Foothill may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrowers,
and Borrowers shall pay on demand such amounts as the issuing bank or Foothill
may specify to be necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate set forth in
Section 2.6(a)(i) or (c)(i), as applicable. The determination by the issuing
bank or Foothill, as the case may be, of any amount due pursuant to this Section
2.2(f), as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.3 [INTENTIONALLY DELETED]
2.4 [INTENTIONALLY DELETED]
2.5 OVERADVANCES. If, at any time or for any reason, the
amount of Obligations owed by Borrowers to Foothill pursuant to Sections 2.1 and
2.2 is greater than either the Dollar or percentage limitations set forth in
Sections 2.1 or 2.2 (an "Overadvance"), Borrowers immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay Advances outstanding under Section 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure Borrower's obligation to repay Foothill
for all amounts paid pursuant to Letters of Credit.
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) below,
(i) all Obligations (except for undrawn Letters of Credit and the Seasonal
Borrowing Facility Advances) shall bear interest on the Daily Balance at a per
annum rate equal to the Applicable Margin plus the Reference Rate, and (ii) the
Seasonal Borrowing Facility Advances shall bear interest at a per annum rate of
1.00% above the Reference Rate.
(b) Letter of Credit Fee. Borrowers shall pay Foothill a
fee (in addition to the charges, commissions, fees, and costs set forth in
Section 2.2(d)) equal to 1.50% per annum times the aggregate undrawn amount of
all Letters of Credit outstanding as of the end of each day.
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(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, (i) all Obligations (except for undrawn
Letters of Credit) shall bear interest on the Daily Balance at a per annum rate
equal to 4.50 percentage points above the Reference Rate, and (ii) the Letter of
Credit fee provided in Section 2.6(b) shall be increased to 4.50% per annum
times the aggregate undrawn amount of all Letters of Credit outstanding as of
the end of each day.
(d) Minimum Interest. In no event shall the rate of
interest chargeable hereunder for any day be less than 6.0% per annum. To the
extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum daily rate, the interest rate chargeable
hereunder for such day automatically shall be deemed increased to the minimum
rate.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Each Borrower hereby authorizes Foothill, at its option,
without prior notice to such Borrower, to charge such interest and Letter of
Credit fees, all Foothill Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in Section 2.2(d) (as and when accrued
or incurred), the fees and charges provided for in Section 2.11 (as and when
accrued or incurred), and all installments or other payments due under any Loan
Document to Borrowers' Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is 8.0% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrowers and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto as of the date of this Agreement, Borrowers are and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from
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Borrowers in excess of such legal maximum, whenever received, shall be applied
to reduce the principal balance of the Obligations to the extent of such excess.
2.7 COLLECTION OF ACCOUNTS. Borrowers shall at all times
maintain lockboxes (the "Lockboxes") and shall instruct all Account Debtors with
respect to the Accounts, General Intangibles, and Negotiable Collateral of
Borrowers to remit all Collections in respect thereof to such Lockboxes.
Borrowers, Foothill, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of a Lockbox
Account for the deposit of Collections at a Lockbox Bank. Each Borrower agrees
that all Collections and other amounts received by such Borrower from any
Account Debtor or any other source immediately upon receipt shall be deposited
into a Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby
shall be modified by a Borrower without the prior written consent of Foothill.
Upon the terms and subject to the conditions set forth in the Lockbox
Agreements, all amounts received in each Lockbox Account shall be wired each
Business Day into an account (the "Foothill Account") maintained by Foothill at
a depositary selected by Foothill.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The
receipt of any Collections by Foothill (whether from transfers to Foothill by
the Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Foothill Account or unless and until such Collection item is honored
when presented for payment. Foothill shall be entitled to charge Borrowers for
one Business Day of "clearance" or "float" at the rate set forth in Section
2.6(a)(i) or Section 2.6(c)(i), as applicable, on all Collections that are
received by Foothill (regardless of whether forwarded by the Lockbox Banks to
Foothill, whether provisionally applied to reduce the Obligations under Section
2.1, or otherwise). This across-the-board one Business Day clearance or float
charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrowers, and shall
apply irrespective of the characterization of whether receipts are owned by a
Borrower or Foothill, and whether or not there are any outstanding Advances, the
effect of such clearance or float charge being the equivalent of charging one
Business Day of interest on such Collections. Should any Collection item not be
honored when presented for payment, then Borrowers shall be deemed not to have
made such payment, and interest shall be recalculated accordingly. Anything to
the contrary contained herein notwithstanding, any Collection item shall be
deemed received by Foothill only if it is received into the Foothill Account on
a Business Day on or before 11:00 a.m. California time. If any Collection item
is received into the Foothill Account on a non-Business Day or after 11:00 a.m.
California time on a
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Business Day, it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make the
Advances, and to arrange for the Letters of Credit, under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to Section 2.6(e).
Borrowers agree to establish and maintain a single Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrowers and made by Foothill hereunder. Unless otherwise
agreed by Foothill and Borrowers, any Advance requested by Borrowers and made by
Foothill hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
At the request of Borrowers, to facilitate and expedite the administration and
accounting processes and procedures of their borrowings under this Agreement,
Foothill has agreed, in lieu of maintaining separate loan accounts on Foothill's
books in the name of each of the Borrowers, that Foothill shall maintain a
single account on its books in the names of all of the Borrowers (the "Loan
Account"). All Advances made by Foothill to Borrowers or for Borrower's account,
including accrued interest, Foothill Expenses, and any other payment Obligations
of Borrowers shall be made jointly and severally to the Borrowers and shall be
charged to the Loan Account. In accordance with Section 2.8, the Loan Account
will be credited with all payments received by Foothill from any Borrower or for
any Borrowers' account, including all amounts received in the Foothill Account
from any Lockbox Bank. Foothill shall render one statement regarding the Loan
Account to Celebrity on behalf of Borrowers, including principal, interest,
fees, and including an itemization of all charges and expenses constituting
Foothill Expenses owing, and such statements shall be conclusively presumed to
be correct and accurate and constitute an account stated between Borrowers and
Foothill unless, within 30 days after receipt thereof by Borrowers, Borrowers
shall deliver to Foothill written objection thereto describing the error or
errors contained in any such statements. Each Borrower hereby expressly agrees
and acknowledges that Foothill shall have no obligation to account separately to
such Borrower.
2.11 FEES. Borrowers shall pay to Foothill the following fees:
(a) [Intentionally Deleted]
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in an amount equal to
0.25% per annum times the Average Unused Portion of the Maximum Revolving
Amount;
(c) [Intentionally Deleted]
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(d) Financial Examination, Documentation, and Appraisal
Fees. Foothill's customary fee of $750 per day per examiner, plus out-of-pocket
expenses for each financial analysis and examination (i.e., audits) of Borrowers
performed by personnel employed by Foothill; Foothill's customary appraisal fee
of $1,500 per day per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by personnel employed by Foothill; and, the actual
charges paid or incurred by Foothill if it elects to employ the services of one
or more third Persons to perform such financial analyses and examinations (i.e.,
audits) of Borrowers or to appraise the Collateral; provided that there will be
no fewer than three appraisals per year; and provided further that $50,000 per
year shall be the maximum liability of Borrowers under this Section 2.11(d) for
fees and costs of audits and appraisals conducted while there are no continuing
Events of Default and while Celebrity's EBITDA for its most recently completed
four fiscal quarters (as set forth on the most recent EBITDA Certificate) is at
least $6,000,000; and, on each January 30 during the term of this Agreement,
Foothill's customary fee of $1,000 per year for its loan documentation review;
and
(e) Servicing Fee. On the first day of each month during
the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $2,000.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT. The
effectiveness of this Agreement, is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions on
or before the Closing Date:
(a) Foothill shall have received UCC searches reflecting
the filing of its financing statements and fixture filings or otherwise
satisfactory to Foothill;
(b) Foothill shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Foothill may require;
(c) Foothill shall have received satisfactory evidence
that all tax returns required to be filed by Borrowers have been timely filed
and all taxes upon each Borrower or its properties, assets, income, and
franchises (including real property taxes and payroll taxes) have been paid
prior to delinquency, except such taxes that are the subject of a Permitted
Protest; and
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(d) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF
CREDIT. The following shall be conditions precedent to all Advances and all
Letters of Credit:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred
and be continuing on the date of such extension of credit, nor shall either
result from the making thereof; and
(c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any governmental authority
against any Borrower, Foothill, or any of their Affiliates.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to the
effectiveness of this Agreement, Borrowers shall perform or cause to be
performed the following on or before July 30, 1999 (the failure by Borrowers to
so perform or cause to be performed constituting an Event of Default):
(a) Foothill shall have received duly executed amendments
and restatements to, or reaffirmation of, each of the following documents, as
Foothill shall require, and each such document shall be in full force and
effect:
(i) the Lockbox Agreements;
(ii) the Intellectual Property Security Agreements;
(iii) the Continuing Guaranty by Magicsilk in favor
of Foothill, together with Magicsilk's Intellectual Property Security Agreement;
and
(iv) the Stock Pledges;
(b) Foothill shall have received a certificate from the
Secretary or Assistant Secretary of each Borrower attesting to the resolutions
of each Borrower's Board of Directors authorizing its execution, delivery, and
performance of this
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Agreement and the other Loan Documents to which such Borrower is a party and
authorizing specific officers of such Borrower to execute the same;
(c) Foothill shall have received copies of each
Borrower's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary or Assistant Secretary of such
Borrower;
(d) Foothill shall have received an opinion of Borrowers'
counsel in form and substance satisfactory to Foothill in its sole discretion.
3.4 TERM; AUTOMATIC RENEWAL. This Agreement shall become
effective upon the execution and delivery hereof by Borrowers and Foothill and
shall continue in full force and effect for a term ending on the date (the
"Renewal Date") that is three years from the Closing Date and automatically
shall be renewed for successive one year periods thereafter, unless sooner
terminated pursuant to the terms hereof. Either party may terminate this
Agreement effective on the Renewal Date or on any one year anniversary of the
Renewal Date by giving the other party at least 90 days prior written notice.
The foregoing notwithstanding, Foothill shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrowers with respect to any outstanding Letters of Credit, and the accrued and
unpaid amount of any fees) immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrowers of Borrowers' duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated. If
Borrowers have sent a notice of termination pursuant to the provisions of
Section 3.4, but fail to pay the Obligations in full on the date set forth in
said notice, then Foothill may, but shall not be required to, renew this
Agreement for an additional term of one year.
3.6 EARLY TERMINATION BY BORROWERS. The provisions of Section
3.4 that allow termination of this Agreement by Borrowers only on the Renewal
Date and certain anniversaries thereof notwithstanding, Borrowers have the
option, at any time upon 90 days prior written notice to Foothill, to terminate
this Agreement by paying to Foothill, in cash, the Obligations (including an
amount equal to 102% of the undrawn amount of the Letters of Credit, and the
accrued and unpaid amount of any fees), in full, together with a premium (the
"Early Termination Premium") equal to (a) 2% of the Maximum Revolving Amount if
the termination is effective on or before the first
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anniversary of the Closing Date, and (b) 1% of the Maximum Revolving Amount if
the termination is effective after the first anniversary of the Closing Date but
on or before the Renewal Date, or during the first six months of any automatic
one year renewal period if the term of this Agreement has been renewed pursuant
to Section 3.4.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrowers shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrowers agree that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to
Foothill a continuing security interest in all of such Borrower's currently
existing and hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by such Borrower of each of its covenants and duties under the Loan Documents.
Foothill's security interests in the Collateral shall attach to all Collateral
without further act on the part of Foothill or Borrowers. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding,
except as specifically permitted by Section 7.3, no Borrower has any authority,
express or implied, to dispose of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrowers, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND
NEGOTIABLE COLLATERAL. At any time, Foothill or Foothill's designee may, after
the occurrence of an Event of Default, (a) notify customers or Account Debtors
of any Borrower that the Accounts, General Intangibles, or Negotiable Collateral
of such Borrower have been assigned to Foothill or that Foothill has a security
interest therein, and (b) collect the Accounts, General Intangibles, and
Negotiable Collateral of such Borrower directly and charge the collection costs
and expenses to the Loan Account. Each Borrower agrees that it will hold in
trust for Foothill, as Foothill's trustee, any Collections that it receives
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and immediately will deliver said Collections to Foothill in their original form
as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, Borrowers shall execute and deliver to Foothill
all financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, control agreements, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill reasonably may request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral, and in
order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 POWER OF ATTORNEY. Each Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as such Borrower's true and lawful attorney,
with power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in Section 4.4, sign the name of such
Borrower on any of the documents described in Section 4.4, (b) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, sign such Borrower's name on any invoice or xxxx of lading relating to
any Account of such Borrower, drafts against Account Debtors, schedules and
assignments of Accounts of such Borrower, verifications of Accounts of such
Borrower, and notices to Account Debtors, (c) send requests for verification of
Accounts of such Borrower, (d) endorse such Borrower's name on any Collection
item that may come into Foothill's possession, (e) at any time that an Event of
Default has occurred and is continuing or Foothill deems itself insecure, notify
the post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Foothill, to receive and open all
mail addressed to such Borrower, and to retain all mail relating to the
Collateral of such Borrower and forward all other mail to such Borrower, (f) at
any time that an Event of Default has occurred and is continuing or Foothill
deems itself insecure, make, settle, and adjust all claims under such Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, settle and adjust
disputes and claims respecting the Accounts of such Borrower directly with
Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as such Borrower's attorney, and each and every one of Foothill's
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
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4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrowers' Books and to check, test, and appraise the Collateral in
order to verify Borrowers' financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, each
Borrower makes the following representations and warranties which shall be true,
correct, and complete in all respects as of the date hereof, and shall be true,
correct, and complete in all respects as of the Closing Date, and at and as of
the date of the making of each Advance or Letter of Credit, made thereafter, as
though made on and as of the date of such Advance or Letter of Credit (except to
the extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 NO ENCUMBRANCES. Each Borrower has good and indefeasible
title to its Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts of each Borrower
are bona fide existing obligations created by the sale and delivery of Inventory
or the rendition of services to Account Debtors in the ordinary course of such
Borrower's business, unconditionally owed to such Borrower without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation except in
the ordinary course of business with respect to immaterial claims and disputes.
The property giving rise to such Eligible Accounts has been delivered to the
Account Debtor, or to the Account Debtor's agent for immediate shipment to the
Account Debtor. Borrowers have not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory of Borrowers is
of good and merchantable quality, free from defects.
5.4 EQUIPMENT. All of the Equipment of Borrowers is used or
held for use in Borrowers' business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment of Borrowers are not stored with a bailee, warehouseman, or similar
party (without Foothill's prior written consent) and are located only at the
locations identified on Schedule 6.12 or otherwise permitted by Section 6.12.
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5.6 INVENTORY RECORDS. Each Borrower keeps correct and
accurate records itemizing and describing the kind, type, and quantity of its
Inventory, and such Borrower's cost therefor.
5.7 FEIN. Each Borrower's FEIN is set forth below:
Borrower FEIN
-------- ----
Celebrity 00-0000000
Xxxxxx 00-0000000
Exotics 00-0000000
Star 00-0000000
Florist Supplies 01135-6462
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its incorporation and
qualified and licensed to do business in, and in good standing in, any state
where the failure to be so licensed or qualified reasonably could be expected to
cause a Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate
list of each Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by such Borrower. All of the outstanding capital stock of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock
(or any securities, instruments, warrants, options, purchase rights, conversion
or exchange rights, calls, commitments or claims of any character convertible
into or exercisable for capital stock) of any direct or indirect Subsidiary of
any Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action.
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(b) The execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which it is a party do not
and will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to such Borrower, the Governing Documents of such Borrower, or any
order, judgment, or decree of any court or other Governmental Authority binding
on such Borrower, (ii) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual
obligation or material lease of such Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any properties
or assets of such Borrower, other than Permitted Liens, or (iv) require any
approval of stockholders or any approval or consent of any Person under any
material contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and mortgages, the execution, delivery, and
performance by each Borrower of this Agreement and the Loan Documents to which
such Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any federal,
state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which any
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Borrower, will be the legally valid and
binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by each Borrower to Foothill in and
to its properties and assets pursuant to this Agreement and the other Loan
Documents are validly created, perfected, and first priority Liens, subject only
to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending
by or against any Borrower before any court or administrative agency and no
Borrower has any knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving any Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which a Borrower is the plaintiff; (b)
matters disclosed on Schedule 5.10; and (c) matters arising after the date
hereof that, if decided adversely to a Borrower, would not cause a Material
Adverse Change.
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5.11 GAAP FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE.
All financial statements relating to any Borrower or any guarantor of the
Obligations that have been delivered by any Borrower to Foothill have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present such Borrower's (or such guarantor's, as
applicable) financial condition as of the date thereof and such Borrower's
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to any Borrower (or such guarantor, as applicable)
since the date of the latest financial statements submitted to Foothill on or
before the Closing Date.
5.12 SOLVENCY. Each Borrower is Solvent. No transfer of
property is being made by any Borrower and no obligation is being incurred by
any Borrower in connection with the transactions contemplated by this Agreement
or the other Loan Documents with the intent to hinder, delay, or defraud either
present or future creditors of any Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrowers, any of their
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any
Benefit Plan. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrowers or their Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrowers or their Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of Borrowers' properties or
assets has ever been used by any Borrower or, to the best of each Borrower's
knowledge, by previous owners or operators in the disposal of, or to produce,
store, handle, treat, release, or transport, any Hazardous Materials, except in
compliance with applicable law. None of Borrowers' properties or assets has ever
been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by any Borrower. No Borrower has received
a summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal or state governmental agency concerning any action
or omission by any Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
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6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and accurate system
of accounting that enables such Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to its Collateral that
contain information as from time to time may be requested by Foothill. Such
Borrower also shall keep a modern inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to its Inventory.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register for each
of Exotics, Xxxxxx, and Celebrity since the last such schedule and a calculation
of the Borrowing Base as of such date, (b) on a monthly basis and, in any event,
by no later than the 10th day of each month during the term of this Agreement,
(1) a detailed calculation of the Borrowing Base for each of Exotics, Xxxxxx,
and Celebrity and on a consolidated basis, and (2) a detailed aging, by total,
of such Borrower's Accounts, together with a reconciliation to the detailed
calculation of the Borrowing Base previously provided to Foothill, (c) on a
monthly basis and, in any event, by no later than the 10th day of each month
during the term of this Agreement, a summary aging, by vendor, of such
Borrower's accounts payable and any book overdraft, (d) on a weekly basis,
Inventory reports specifying such Borrower's cost of its Inventory by category,
with additional detail showing additions to and deletions from its Inventory,
(e) upon request, notice of all returns, disputes, or claims, (f) upon request,
copies of invoices in connection with its Accounts, customer statements, credit
memos, remittance advices and reports, deposit slips, shipping and delivery
documents in connection with its Accounts and for Inventory and Equipment
acquired by such Borrower, purchase orders and invoices, (g) on a quarterly
basis, a detailed list of such Borrower's customers, (h) upon request, such
Borrower's electronic data; and (i) such other reports as to the Collateral or
the financial condition of such Borrower or the financial condition and agings
of Celebrity Hong Kong, as Foothill may request from time to time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver or
cause to be delivered to Foothill: (a) upon request by Foothill, Celebrity's
"Weekly Consolidated Tactical Cash Model"; (b) as soon as available, but in any
event within 30 days after the end of each month, a company prepared balance
sheet as of month end, and an income statement and statement of cash flows
covering each Borrower's operations during such period; (c) as soon as
available, but in any event within 90 days after the end of
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Celebrity's fiscal years, consolidated financial statements of Celebrity for
each such fiscal year, audited by independent certified public accountants
reasonably acceptable to Foothill and certified, without any qualifications, by
such accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants have reviewed Sections 6.1, 6.11, 6.14, 6.15, 7.1, 7.2, 7.4, 7.10,
7.11, 7.12, 7.14, 7.18, 7.20, and 7.21 of this Agreement, insofar as such
Sections relate to financial and accounting matters, and that as a result of
such review such accountants do not have knowledge of any failure to comply with
such Sections on the part of Borrowers; and (d) by April 15, of each year during
the term of this Agreement, Foothill shall have received from Celebrity a
business plan (with projections) for Borrowers reflecting periods through June
30 of the following year, in each case acceptable to Foothill in its sole
discretion. Such audited financial statements shall include a balance sheet,
income statement, and statement of cash flows and, if prepared, such
accountants' letter to management. All such monthly financial statements
required under clause (b) of the first sentence of Section 6.3 shall be prepared
on a consolidated basis and shall be accompanied by a consolidating income
statement prepared so as to present Celebrity and each of its Subsidiaries
separately.
Together with the above, Celebrity also shall deliver to
Foothill its Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings it makes with the Securities and Exchange
Commission, as soon as the same are filed, or any other information that is
provided by Celebrity to its shareholders generally, and any other report
reasonably requested by Foothill relating to the financial condition of any
Borrower.
Each month, together with the financial statements
provided pursuant to Section 6.3, such Borrower shall deliver to Foothill an
EBITDA Certificate (if such month is also the last month of a fiscal quarter of
Celebrity) and a Compliance Certificate signed by its chief financial officer to
the effect that: (i) all financial statements delivered or caused to be
delivered to Foothill hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of such Borrower, (ii) the representations and
warranties of such Borrower contained in this Agreement and the other Loan
Documents are true and correct in all material respects on and as of the date of
such certificate, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date),
(iii) for each month that also is the date on which a financial covenant in
Section 7.20 is to be tested, such Borrower is in compliance at the end of such
period with the applicable financial covenants contained in Section 7.20 (and
demonstrating such compliance in reasonable detail), and (iv) on the date of
delivery of such certificate to Foothill there does not exist any condition or
event that constitutes a Default or Event of Default (or, in the case of clauses
(i), (ii), or (iii), to the extent of
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any non-compliance, describing such non-compliance as to which he or she may
have knowledge and what action such Borrower has taken, is taking, or proposes
to take with respect thereto).
Such Borrower shall issue written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
such Borrower that Foothill may request. Such Borrower hereby irrevocably
authorizes and directs all auditors, accountants, or other third parties to
deliver to Foothill, at such Borrower's expense, copies of such Borrower's
financial statements, papers related thereto, and other accounting records of
any nature in their possession, and to disclose to Foothill any information they
may have regarding such Borrower's business affairs and financial conditions.
6.4 TAX RETURNS. Deliver to Foothill copies of each of such
Borrower's future federal income tax returns, and any amendments thereto, within
30 days of the filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any guarantor of any of the
Obligations to deliver its annual financial statements (to the extent not
included in the financial statements delivered under Section 6.3) at the time
when Celebrity provides its audited financial statements to Foothill and copies
of all federal income tax returns as soon as the same are available and in any
event no later than 30 days after the same are required to be filed by law.
6.6 RETURNS. Cause returns and allowances, if any, as between
such Borrower and its Account Debtors to be on the same basis and in accordance
with the usual customary practices of such Borrower, as they exist at the time
of the execution and delivery of this Agreement. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any Inventory
to such Borrower, such Borrower promptly shall determine the reason for such
return and, if such Borrower accepts such return, issue a credit memorandum
(with a copy to be sent to Foothill upon Foothill's request) in the appropriate
amount to such Account Debtor. If, at a time when an Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to such
Borrower, such Borrower promptly shall determine the reason for such return and,
if Foothill consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Foothill upon Foothill's request)
in the appropriate amount to such Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, such Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of its Equipment.
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6.8 MAINTENANCE OF EQUIPMENT. Maintain its Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those items
of Equipment that constitute fixtures or accessions on the Closing Date, such
Borrower shall not permit any item of its Equipment to become a fixture to real
estate or an accession to other property (other than to repair or replace any
such fixture or accession), and such Equipment shall at all times remain
personal property.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against such Borrower or any of its property to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Such Borrower shall make due and timely payment or deposit of
all such federal, state, and local taxes, assessments, or contributions required
of it by law, and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect thereto.
Such Borrower will make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Foothill with proof satisfactory
to Foothill indicating that such Borrower has made such payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep its Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, all as are ordinarily insured against by other
owners in similar businesses. Such Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to such Borrower's ownership and use of its Collateral, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
(b) Intentionally Deleted
(c) Intentionally Deleted.
(d) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the State of California. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU
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(NS) mortgagee endorsement, or an equivalent endorsement satisfactory to
Foothill, showing Foothill as a loss payee thereof, and shall contain a waiver
of warranties. Every policy of insurance referred to in this Section 6.10 shall
contain an agreement by the insurer that it will not cancel such policy except
after 30 days prior written notice to Foothill and that any loss payable
thereunder shall be payable notwithstanding any act or negligence of such
Borrower or Foothill which might, absent such agreement, result in a forfeiture
of all or a part of such insurance payment. Such Borrower shall deliver to
Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor.
(e) Certificates satisfactory to Foothill evidencing such
insurance shall be delivered to Foothill at least 30 days prior to the
expiration of the existing or preceding policies. Such Borrower shall give
Foothill prompt notice of any single loss (in excess of $25,000) covered by such
insurance. Foothill shall have the exclusive right to adjust any losses in
excess of $25,000 (or, if an Event of Default has occurred and is continuing, or
Foothill deems itself insecure, to adjust all losses) payable under any such
insurance policies without any liability to such Borrower whatsoever in respect
of such adjustments. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be paid
over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to such Borrower under stage payment
terms satisfactory to Foothill for application to the cost of repairs,
replacements, or restorations. All repairs, replacements, or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to
the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Foothill shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order or form as Foothill shall determine.
(f) Such Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.10, unless Foothill is included thereon as named
insured with the loss payable to Foothill under a standard California 438BFU
(NS) Mortgagee endorsement, or its local equivalent. Such Borrower immediately
shall notify Foothill whenever such separate insurance is taken out, specifying
the insurer thereunder and full particulars as to the policies evidencing the
same, and originals of such policies immediately shall be provided to Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of such Borrower without setoff
or counterclaim and free and clear of, and without deduction or withholding for
or on account of, any federal, state, or local taxes.
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6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep its Inventory
(other than In-Transit Inventory) and Equipment only at the locations identified
on Schedule 6.12 (or in transit between them); provided, however, that Borrowers
may amend Schedule 6.12 so long as such amendment occurs by written notice to
Foothill not less than 30 days prior to the date on which the Inventory or
Equipment of Borrowers is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrowers provide any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests in such assets and also provides to Foothill a Collateral Access
Agreement.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to cause a Material Adverse Change.
6.14 EMPLOYEE BENEFITS.
(a) Deliver to Foothill: (i) promptly, and in any event
within 10 Business Days after such Borrower or any of its Subsidiaries knows or
has reason to know that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement of the
chief financial officer of such Borrower describing such ERISA Event and any
action that is being taking with respect thereto by such Borrower, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC. Such Borrower or such Subsidiary, as applicable,
shall be deemed to know all facts known by the administrator of any Benefit Plan
of which it is the plan sponsor, (ii) promptly, and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with respect to any Benefit Plan and all communications
received by such Borrower, any of its Subsidiaries or, to the knowledge of such
Borrower, any ERISA Affiliate with respect to such request, and (iii) promptly,
and in any event within 3 Business Days after receipt by such Borrower, any of
its Subsidiaries or, to the knowledge of such Borrower, any ERISA Affiliate, of
the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed
to administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and
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written descriptions thereof that have been distributed to employees or former
employees of such Borrower or its Subsidiaries; (ii) the most recent
determination letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three most recent plan years, annual reports on Form 5500 Series
required to be filed with any governmental agency for each Benefit Plan; (iv)
all actuarial reports prepared for the last three plan years for each Benefit
Plan; (v) a listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions required to be made by such Borrower or any
ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to such Borrower or any ERISA Affiliate regarding withdrawal liability
under any Multiemployer Plan; and (vii) the aggregate amount of the most recent
annual payments made to former employees of such Borrower or its Subsidiaries
under any Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which such Borrower is a party or by which such Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that such Borrower fails timely to make payment
of such rents and other amounts payable when due under its leases, Foothill
shall be entitled, in its discretion, to reserve an amount equal to such unpaid
amounts against the Borrowing Base.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, such Borrower will not do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness to any Person other than a Borrower, except:
(a) Indebtedness evidenced by this Agreement, together
with Indebtedness to issuers of letters of credit that is the subject of L/C
Guarantees;
(b) Indebtedness set forth in the latest financial
statements of Borrowers submitted to Foothill on or prior to the Closing Date,
or in Schedule 7.1;
(c) Indebtedness secured by Permitted Liens;
(d) the guaranty of Indebtedness of Celebrity Hong Kong,
which such Indebtedness shall not exceed $7,000,000 outstanding at any one time
and the MLBFS Guaranty, which shall not exceed $4,500,000 at any one time; and
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(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c) or (d) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrowers, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(e) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any
merger, consolidation, reorganization, or recapitalization (other than reverse
stock splits), or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of its property or assets;
provided, however, that any Borrower may be merged or liquidated into any other
Borrower upon 30 days' advance written notice to Foothill.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of such Borrower's properties or assets other than: (a)
sales of Inventory to buyers in the ordinary course of such Borrower's business
as currently conducted; and (b) Permitted Equipment Dispositions.
7.5 CHANGE NAME. Change such Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity, or
add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except (a) as permitted by
Section 7.1, and
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(b) by endorsement of instruments or items of payment for deposit to the account
of such Borrower or which are transmitted or turned over to Foothill.
7.7 NATURE OF BUSINESS. Make any change in the principal
nature of such Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Prepay, redeem, retire, defease, purchase, or
otherwise acquire any Indebtedness owing to any Person, except (i) payments of
the Obligations in accordance with this Agreement, (ii) in connection with a
refinancing permitted by Section 7.1(e), and (iii) in connection with Permitted
Equipment Dispositions; and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness for
borrowed money.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any of its
Inventory on xxxx and hold, sale or return, sale on approval, or other
conditional terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay
any dividends (in cash or other property, other than capital stock) on, or
purchase, acquire, redeem, or retire any of such Borrower's capital stock, of
any class, whether now or hereafter outstanding, except for (i) dividends
payable to a Borrower; (ii) purchases, acquisitions, or redemptions of a
Borrower's stock from, or retirements of a Borrower's stock held by, another
Borrower; and (iii) the repurchase of up to $175,000 of common stock pursuant to
existing stock purchase obligations.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement whether currently
existing or at any time hereafter entered into, with any third party accounting
firm or service bureau for the preparation or storage of such Borrower's
accounting records without said accounting firm or service bureau agreeing to
provide Foothill information regarding the Collateral or such Borrower's
financial condition. Such Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Foothill pursuant to or in
accordance with this Agreement, and agrees that Foothill may contact directly
any such accounting firm or service bureau in order to obtain such information.
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7.13 INVESTMENTS. Directly or indirectly make, acquire, or
incur any liabilities (including contingent obligations) for or in connection
with (a) the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person (other than a Borrower), (b) loans, advances, capital
contributions, or transfers of property to a Person (other than a Borrower), or
(c) the acquisition of all or substantially all of the properties or assets of a
Person (other than a Borrower), except for (i) trade credit in the ordinary
course; and (ii) up to $50,000 per month of advances to employees for expenses
in the ordinary course of business.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
such Borrower (other than another Borrower) except for transactions that are in
the ordinary course of such Borrower's business, upon fair and reasonable terms,
that are fully disclosed to Foothill, and that are no less favorable to such
Borrower than would be obtained in an arm's length transaction with a
non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.16 INTENTIONALLY DELETED.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances made
hereunder for any purpose other than, consistent with the terms and conditions
hereof, for its lawful and permitted corporate purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY
AND EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification, such Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment of such Borrower shall not at any time now or hereafter be stored with
a bailee, warehouseman, or similar party without Foothill's prior written
consent.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of such Borrower to
engage, in any prohibited transaction which is reasonably likely to result in a
civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
IRC for which
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a statutory or class exemption is not available or a private exemption has not
been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of such Borrower to
fail, to pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of such Borrower
to terminate, any Benefit Plan where such event would result in any liability of
such Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of such Borrower to
fail, to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of such Borrower to
fail, to pay any required installment or any other payment required under
Section 412 of the IRC on or before the due date for such installment or other
payment;
(g) amend, or permit any Subsidiary of such Borrower to
amend, a Plan resulting in an increase in current liability for the plan year
such that either of such Borrower, any Subsidiary of such Borrower or any ERISA
Affiliate is required to provide security to such Plan under Section 401(a)(29)
of the IRC; or
(h) withdraw, or permit any Subsidiary of such Borrower
to withdraw, from any Multiemployer Plan where such withdrawal is reasonably
likely to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of such Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20 FINANCIAL COVENANTS. Have Celebrity fail to maintain:
(a) [Intentionally Deleted.]
(b) [Intentionally Deleted.]
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(c) Tangible Net Worth. Tangible Net Worth of at least
the $6,500,000 at all times; and
(d) EBITDA. EBITDA of at least $4,000,000 as of the end
of each of its fiscal quarters.
7.21 CAPITAL EXPENDITURES. Allow Borrowers, in the aggregate,
to make capital expenditures in any fiscal year in excess of $2,000,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrowers fail to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If any Borrower fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between such Borrower and Foothill; provided, however, that Borrowers' failure
to perform, keep, or observe the terms of Sections 6.2, 6.3, 6.4, 6.7, 6.8, 6.13
or 6.15 shall not constitute an Event of Default unless such failure continues
for five days or more;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Borrower's properties or
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Borrower;
8.6 If an Insolvency Proceeding is commenced against any
Borrower and any of the following events occur: (a) such Borrower consents to
the institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; provided, however, that, during
the pendency of such period, Foothill shall be relieved of its obligation to
extend credit hereunder; (d) an interim trustee is appointed to take
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possession of all or a substantial portion of the properties or assets of, or to
operate all or any substantial portion of the business of, such Borrower; or (e)
an order for relief shall have been issued or entered therein;
8.7 If any Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
8.8 If a notice of Lien, levy, or assessment (other than a
Permitted Lien) is filed of record with respect to any of any Borrower's
properties or assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal, or governmental
agency, or if any taxes or debts owing at any time hereafter to any one or more
of such entities becomes a Lien (other than a Permitted Lien), whether xxxxxx or
otherwise, upon any of such Borrower's properties or assets and the same is not
paid on the payment date thereof; provided, however, that no such notice of
Lien, levy, or assessment, and no such Lien, shall constitute an Event of
Default under this Section 8.8 to the extent that Borrower is diligently
pursuing the cure thereof by appropriate means and that (a) the aggregate amount
in respect of all such Liens or notices under this provision is less than
$50,000, (b) such Lien, levy, or assessment is not a federal tax lien, and (c)
such Lien, levy, or assessment is satisfied within 30 days of the date that it
arose; provided further, however, that Foothill may establish a reserve as
provided under Section 10 during the pendency of such period;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of any Borrower's properties or assets; provided,
however, that no such Lien or encumbrance shall constitute an Event of Default
under this Section 8.9 to the extent that Borrower is diligently pursuing the
cure thereof by appropriate means and that (a) the aggregate amount of all
judgments and claims subject to such Liens or encumbrances does not exceed at
any one time $50,000; and (b) such Lien or encumbrance is satisfied or released
within 30 days of the date thereof or has been and remains stayed pending
appeal; provided further, however, that Foothill may establish a reserve as
provided in Section 10 during the pendency of such period;
8.10 If there is a default in any agreement concerning
Indebtedness of more than $100,000 or any other material agreement to which any
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of such Borrower's obligations thereunder or terminate such contract;
8.11 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the
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Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report made to
Foothill by any Borrower or any officer, employee, agent, or director of any
Borrower, or if any such warranty or representation is withdrawn in any material
respect; or
8.13 If the obligation of any guarantor under its guaranty or
of any other third Person under any Loan Document is breached, limited or
terminated by operation of law or by the guarantor or other third Person
thereunder, or any such guarantor or other third Person becomes the subject of
an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrowers under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrowers and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Collateral and without
affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Borrowers' Loan Account with only the
net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrowers to hold all of their returned
Inventory in trust for Foothill, segregate all such returned Inventory from all
other property of any
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Borrower or in any Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon any Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrowers
agree to assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Each Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or Lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrowers' owned or leased premises, each Borrower hereby grants Foothill a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to any Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
any Borrower held by Foothill (including any amounts received in the Lockbox
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of any Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of any Borrower held by Foothill, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Foothill is hereby granted a license or other right
to use, without charge, any Borrower's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and each Borrower's rights under all licenses and all franchise
agreements shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including any Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
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(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrowers and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a public
sale is to be made of the Collateral, then the time on or after which the
private sale or other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrowers as provided in Section 12, at least 5 days
before the date fixed for the sale, or at least 5 days before the date on or
after which the private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of the Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market. Notice to Persons other than Borrowers
claiming an interest in the Collateral shall be sent to such addresses as they
have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrowers. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrowers.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by
Foothill of one right or remedy shall be deemed an election, and no waiver by
Foothill of any Event of Default shall be deemed a continuing waiver. No delay
by Foothill shall constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish
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any required proof of payment or deposit, all as required under the terms of
this Agreement, then, to the extent that Foothill determines that such failure
by such Borrower could result in a Material Adverse Change, in its discretion
and without prior notice to Borrowers, Foothill may do any or all of the
following: (a) make payment of the same or any part thereof unless such payment
obligations are subject of a Permitted Protest; (b) set up such reserves in
Borrowers' Loan Account as Foothill deems necessary to protect Foothill from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type described in Section 6.10, and take any action with respect to such
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make similar payments in the future or a
waiver by Foothill of any Event of Default under this Agreement. Foothill need
not inquire as to, or contest the validity of, any such expense, tax, or Lien
and the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which such Borrower may in any way be liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code, Foothill
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Borrowers.
11.3 INDEMNIFICATION. Borrowers shall pay, indemnify, defend,
and hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration (including any of the foregoing arising out of the
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administration of the credit facilities hereunder on a joint borrowing basis) of
this Agreement and any other Loan Documents or the transactions contemplated
herein, and with respect to any investigation, litigation, or proceeding related
to this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event or circumstance in any manner
related thereto (all the foregoing, collectively, the "Indemnified
Liabilities"). Borrowers shall have no obligation to any Indemnified Person
under this Section 11.3 with respect to any Indemnified Liability that a court
of competent jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the
Obligations.
11.4 JOINT BORROWERS.
(a) Each Borrower agrees that it is jointly and severally,
directly and primarily liable to Foothill for payment in full of all
Obligations, whether for principal, interest or otherwise and that such
liability is independent of the duties, obligations, and liabilities of the
other Borrowers. Foothill may bring a separate action or actions on each, any,
or all of the Obligations against any Borrower, whether action is brought
against the other Borrowers or whether the other Borrowers are joined in such
action. In the event that any Borrower fails to make any payment of any
Obligations on or before the due date thereof, the other Borrowers immediately
shall cause such payment to be made or each of such Obligations to be performed,
kept, observed, or fulfilled.
(b) The Loan Documents are a primary and original
obligation of each Borrower, are not the creation of a surety relationship, and
are an absolute, unconditional, and continuing promise of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Loan Documents. Each Borrower agrees that its
liability under the Loan Documents shall be immediate and shall not be
contingent upon the exercise or enforcement by Foothill of whatever remedies it
may have against the other Borrowers, or the enforcement of any lien or
realization upon any security Foothill may at any time possess. Each Borrower
consents and agrees that Foothill shall be under no obligation (under Section
2899 or 3433 of the California Civil Code or otherwise) to marshal any assets of
any Borrower against or in payment of any or all of the Obligations.
(c) Each Borrower acknowledges that it is presently
informed as to the financial condition of the other Borrowers and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of nonpayment of the Obligations. Each Borrower hereby covenants that it will
continue to keep informed as
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to the financial condition of the other Borrowers, the status of the other
Borrowers and of all circumstances which bear upon the risk of nonpayment of the
Obligations. Absent a written request from any Borrower to Foothill for
information, such Borrower hereby waives any and all rights it may have to
require Foothill to disclose to such Borrower any information which Foothill may
now or hereafter acquire concerning the condition or circumstances of the other
Borrowers.
(d) The liability of each Borrower under the Loan
Documents includes Obligations arising under successive transactions continuing,
compromising, extending, increasing, modifying, releasing, or renewing the
Obligations, changing the interest rate, payment terms, or other terms and
conditions thereof, or creating new or additional Obligations after prior
Obligations have been satisfied in whole or in part. To the maximum extent
permitted by law, each Borrower hereby waives any right to revoke its liability
under the Loan Documents as to future indebtedness, and in connection therewith,
each Borrower hereby waives any rights it may have under Section 2815 of the
California Civil Code. If such a revocation is effective notwithstanding the
foregoing waiver, each Borrower acknowledges and agrees that (a) no such
revocation shall be effective until written notice thereof has been received by
Foothill, (b) no such revocation shall apply to any Obligations in existence on
such date (including, any subsequent continuation, extension, or renewal
thereof, or change in the interest rate, payment terms, or other terms and
conditions thereof), (c) no such revocation shall apply to any Obligations made
or created after such date to the extent made or created pursuant to a legally
binding commitment of Foothill in existence on the date of such revocation, (d)
no payment by such Borrower or from any other source prior to the date of such
revocation shall reduce the maximum obligation of the other Borrowers hereunder,
and (e) any payment by such Borrower or from any source other than Borrowers,
subsequent to the date of such revocation, shall first be applied to that
portion of the Obligations as to which the revocation is effective and which are
not, therefore, guaranteed hereunder, and to the extent so applied shall not
reduce the maximum obligation of each Borrower hereunder.
(e) (i) Each Borrower absolutely, unconditionally,
knowingly, and expressly waives:
(1) (A) notice of acceptance hereof; (B) notice of any
loans or other financial accommodations made or extended under the Loan
Documents or the creation or existence of any Obligations; (C) notice
of the amount of the Obligations, subject, however, to each Borrower's
right to make inquiry of Foothill to ascertain the amount of the
Obligations at any reasonable time; (D) notice of any adverse change in
the financial condition of the other Borrowers or of any other fact
that might increase such Borrower's risk hereunder; (E) notice of
presentment for payment, demand, protest, and notice
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thereof as to any instruments among the Loan Documents; and (F) all
notices (except if such notice is specifically required to be given to
Borrowers hereunder or under the Loan Documents) and demands to which
such Borrower might otherwise be entitled.
(2) its right, under Sections 2845 or 2850 of the
California Civil Code, or otherwise, to require Foothill to institute
suit against, or to exhaust any rights and remedies which Foothill has
or may have against, the other Borrowers or any third party, or against
any Collateral provided by the other Borrowers, or any third party. In
this regard, each Borrower agrees that it is bound to the payment of
all Obligations, whether now existing or hereafter accruing, as fully
as if such Obligations were directly owing to Foothill by such
Borrower. Each Borrower further waives any defense arising by reason of
any disability or other defense (other than the defense that the
Obligations shall have been fully and finally performed and
indefeasibly paid) of the other Borrowers or by reason of the cessation
from any cause whatsoever of the liability of the other Borrowers in
respect thereof.
(3) (A) any rights to assert against Foothill any
defense (legal or equitable), set-off, counterclaim, or claim which
such Borrower may now or at any time hereafter have against the other
Borrowers or any other party liable to Foothill; (B) any defense,
set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Obligations or any
security therefor; (C) any defense such Borrower has to performance
hereunder, and any right such Borrower has to be exonerated, provided
by Sections 2819, 2822, or 2825 of the California Civil Code, or
otherwise, arising by reason of: the impairment or suspension of
Foothill's rights or remedies against the other Borrowers; the
alteration by Foothill of the Obligations; any discharge of the other
Borrowers' obligations to Foothill by operation of law as a result of
Foothill's intervention or omission; or the acceptance by Foothill of
anything in partial satisfaction of the Obligations; (D) the benefit of
any statute of limitations affecting such Borrower's liability
hereunder or the enforcement thereof, and any act which shall defer or
delay the operation of any statute of limitations applicable to the
Obligations shall similarly operate to defer or delay the operation of
such statute of limitations applicable to such Borrower's liability
hereunder.
(ii) Each Borrower absolutely, unconditionally, knowingly,
and expressly waives any defense arising by reason of or deriving from (i) any
claim or defense based upon an election of remedies by Foothill including any
defense based upon an election of remedies by Foothill under the provisions of
Sections 580a, 580b, 580d, and 726 of the California Code of Civil Procedure or
any similar law of California or
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any other jurisdiction; or (ii) any election by Foothill under Bankruptcy Code
Section 1111(b) to limit the amount of, or any collateral securing, its claim
against the Borrowers. Pursuant to California Civil Code Section 2856(b):
"Each Borrower waives all rights and
defenses arising out of an election of remedies by the
creditor, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed such Borrower's rights of
subrogation and reimbursement against the other Borrowers by
the operation of Section 580(d) of the California Code of
Civil Procedure or otherwise."
"Each Borrower waives all rights and
defenses that Guarantor may have because another Borrower's
Obligations are secured by real property. This means, among
other things:
"(1) Foothill may collect from such Borrower
without first foreclosing on any real or personal
property collateral pledged by another Borrower.
"(2) If Foothill forecloses on any real
property collateral pledged by another Borrower:
(A) The amount of the Obligations
may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if
the collateral is worth more than the sale price.
(B) Foothill may collect from such
Borrower even if Foothill, by foreclosing on the real
property collateral, has destroyed any right such
Borrower may have to collect from another Borrower.
"This is an unconditional and irrevocable
waiver of any rights and defenses such Borrower may
have because the Obligations are secured by real
property. These rights and defenses include, but are
not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California
Code of Civil Procedure."
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If any of the Obligations at any time is secured by a mortgage or deed of trust
upon real property, Foothill may elect, in its sole discretion, upon a default
with respect to the Obligations, to foreclose such mortgage or deed of trust
judicially or nonjudicially in any manner permitted by law, before or after
enforcing the Loan Documents, without diminishing or affecting the liability of
any Borrower hereunder except to the extent the Obligations are repaid with the
proceeds of such foreclosure. Each Borrower understands that (a) by virtue of
the operation of California's antideficiency law applicable to nonjudicial
foreclosures, an election by Foothill nonjudicially to foreclose such a mortgage
or deed of trust probably would have the effect of impairing or destroying
rights of subrogation, reimbursement, contribution, or indemnity of such
Borrower against the other Borrowers or other guarantors or sureties, and (b)
absent the waiver given by such Borrower, such an election would prevent
Foothill from enforcing the Loan Documents against such Borrower. Understanding
the foregoing, and understanding that such Borrower is hereby relinquishing a
defense to the enforceability of the Loan Documents, such Borrower hereby waives
any right to assert against Foothill any defense to the enforcement of the Loan
Documents, whether denominated "estoppel" or otherwise, based on or arising from
an election by Foothill nonjudicially to foreclose any such mortgage or deed of
trust. Each Borrower understands that the effect of the foregoing waiver may be
that each Borrower may have liability hereunder for amounts with respect to
which such Borrower may be left without rights of subrogation, reimbursement,
contribution, or indemnity against the other Borrower or other guarantors or
sureties. Each Borrower also agrees that the "fair market value" provisions of
Section 580a of the California Code of Civil Procedure shall have no
applicability with respect to the determination of such Borrower's liability
under the Loan Documents.
(iii) Until such time as all Obligations have been fully,
finally, and indefeasibly paid in full, in cash, each Borrower hereby
absolutely, unconditionally, knowingly, and expressly postpones: (1) any right
of subrogation such Borrower has or may have as against the other Borrowers with
respect to the Obligations; (2) any right to proceed against the other Borrowers
or any other Person, now or hereafter, for contribution, indemnity,
reimbursement, or any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which such Borrower may now have or hereafter
have as against the other Borrowers with respect to the Obligations; and (3) any
right to proceed or seek recourse against or with respect to any property or
asset of the other Borrowers.
(IV) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS SECTION 11.4, EACH BORROWER HEREBY
ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO
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ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY
ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815,
2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850, CALIFORNIA CODE
OF CIVIL PROCEDURE SECTIONS 580A, 580B, 580C, 580D, AND 726, AND CHAPTER 2 OF
TITLE 14 OF THE CALIFORNIA CIVIL CODE.
(f) Each Borrower consents and agrees that, without notice
to or by such Borrower, and without affecting or impairing the liability of such
Borrower hereunder, Foothill may, by action or inaction:
(i) compromise, settle, extend the duration or the
time for the payment of, or discharge the
performance of, or may refuse to or otherwise
not enforce the Loan Documents, or any part
thereof, with respect to the other Borrowers;
(ii) release the other Borrowers or grant other
indulgences to the other Borrowers in respect
thereof; or
(iii) release or substitute any guarantor, if any, of
the Obligations, or enforce, exchange, release,
or waive any security for the Obligations or any
guaranty of the Obligations, or any portion
thereof.
(g) Foothill shall have the right to seek recourse against
each Borrower to the fullest extent provided for herein, and no election by
Foothill to proceed in one form of action or proceeding, or against any party,
or on any obligation, shall constitute a waiver of Foothill's right to proceed
in any other form of action or proceeding or against other parties unless
Foothill has expressly waived such right in writing. Specifically, but without
limiting the generality of the foregoing, no action or proceeding by Foothill
under the Loan Documents shall serve to diminish the liability of any Borrower
thereunder except to the extent that Foothill finally and unconditionally shall
have realized indefeasible payment by such action or proceeding.
(h) The Obligations shall not be considered indefeasibly
paid for purposes of this Section 11.4 unless and until all payments to Foothill
are no longer subject to any right on the part of any person, including any
Borrower, any Borrower as a debtor in possession, or any trustee (whether
appointed pursuant to 11 U.S.C., or otherwise) of any Borrower's assets to
invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be
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fraudulent or preferential. Upon such full and final performance and
indefeasible payment of the Obligations, Foothill shall have no obligation
whatsoever to transfer or assign its interest in the Loan Documents to any
Borrower. In the event that, for any reason, any portion of such payments to
Foothill is set aside or restored, whether voluntarily or involuntarily, after
the making thereof, then the obligation intended to be satisfied thereby shall
be revived and continued in full force and effect as if said payment or payments
had not been made, and each Borrower shall be liable for the full amount
Foothill is required to repay plus any and all costs and expenses (including
attorneys' fees and attorneys' fees incurred pursuant to 11 U.S.C.) paid by
Foothill in connection therewith.
Borrowers and each of them warrant and agree that each of the
waivers and consents set forth herein are made after consultation with legal
counsel and with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrowers otherwise
may have against other Borrowers, the Lender Group or others, or against
Collateral. If any of the waivers or consents herein are determined to be
contrary to any applicable law or public policy, such waivers and con sents
shall be effective to the maximum extent permitted by law.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
IF TO BORROWERS: C/O CELEBRITY, INC.
MAILING ADDRESS: X.X. Xxx 0000
Xxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Xx.
PHYSICAL DELIVERY
ADDRESS: 0000 Xxx Xxxxx Xxxxxxx
Xxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Xx.
Fax No. 000.000.0000
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WITH COPIES TO: XXXXXXXX & KNIGHT, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Fax No. 000.000.0000
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
WITH COPIES TO: BUCHALTER, NEMER, FIELDS &
YOUNGER
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 000.000.0000
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3 days
after the deposit thereof in the mail. Each Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when deposited in the mail or personally delivered,
or, where permitted by law, transmitted by telefacsimile or other similar method
set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND
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THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT
THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY. EACH BORROWER AND FOOTHILL WAIVE, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. EACH BORROWER AND FOOTHILL HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
BORROWER AND FOOTHILL REPRESENTS THAT THEY HAVE REVIEWED THIS WAIVER AND EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill 4
months after they are delivered to or received by Foothill, unless Borrowers
request, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrowers' expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrowers and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that no Borrower may assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release the assigning Borrower from its Obligations. Foothill may
assign this Agreement and its rights and
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duties hereunder and no consent or approval by Borrowers is required in
connection with any such assignment. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in Foothill's rights and benefits hereunder. In connection with any
such assignment or participation, Foothill may disclose all documents and
information which Foothill now or hereafter may have relating to any Borrower or
any Borrower's business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person, Foothill thereafter shall be released
from such assigned obligations to Borrowers and such assignment shall effect a
novation between Borrowers and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against Foothill
or Borrowers, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.5 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by both Foothill and Borrowers.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the
incurrence or payment of the Obligations by any Borrower or any guarantor of the
Obligations or the transfer by either or both of such parties to Foothill of any
property of either or both of
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such parties should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrowers or such guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof, and amends and
restates and supersedes the Original Loan Agreement in its entirety.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
CELEBRITY, INC.,
a Texas corporation
By /s/ XXXX XXXXXXX
----------------------------------------
Title: Vice President & Chief Financial
------------------------------------
Officer
THE XXXXXX CORPORATION,
a California corporation
By /s/ XXXX XXXXXXX
----------------------------------------
Title: Vice President & Chief Financial
------------------------------------
Officer
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STAR WHOLESALE FLORIST, INC.,
a Texas corporation
By /s/ XXXX XXXXXXX
----------------------------------------
Title: Vice President
------------------------------------
INDIA EXOTICS, INC.,
a Texas corporation
By /s/ XXXX XXXXXXX
----------------------------------------
Title: Vice President
------------------------------------
VALUE FLORIST SUPPLIES, INC.,
a Texas corporation
By /s/ XXXX XXXXXXX
----------------------------------------
Title: Vice President
------------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ XXXXX X. XXXXX
----------------------------------------
Title: Senior Vice President
------------------------------------
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COMPLIANCE CERTIFICATE SAMPLE COPY
(AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT SECTION 6.3)
Date , 199
--------------- --
FOOTHILL CAPITAL CORPORATION
000000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000-0000
Attention:
------------------------
RE: AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, DATED AS OF
______________ ___, 199___ (THE "AGREEMENT") BY AND BETWEEN FOOTHILL
CAPITAL CORPORATION ("FOOTHILL") AND ________________________
(COLLECTIVELY, "BORROWERS").
Dear :
---------------
In accordance with Section 6.3 of the Agreement, this letter shall serve as
certification to Foothill that to the best of my knowledge: (i) all financial
statements have been prepared in accordance with GAAP and fairly represent the
financial condition of Borrowers, (ii) the representations and warranties of
Borrowers set forth in the Agreement and other Loan Documents are true and
correct in all material respects on and as of the date of this certification,
(iii) as demonstrated on Exhibit 1 attached hereto, Borrowers are in compliance
with each of their financial covenants set forth in Section 7.20 of the
Agreement as of the date of this certification, and (iv) there does not exist
any condition or event that constitutes a Default or Event of Default. Such
certification is made as of the fiscal month ending , 199 .
-------------- --
Sincerely,
Chief Financial Officer
EXHIBIT C-1