AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, is entered into as
of September 17, 1997, between 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, and NATIONAL-STANDARD
COMPANY, an Indiana corporation ("Borrower"), with its chief executive office
located at 0000 Xxxxxxxx Xxxx, Xxxxx, Xxxxxxxx 00000.
R E C I T A L S:
WHEREAS, Borrower and Foothill are parties to that certain Loan and
Security Agreement, dated as of May 24, 1994 (the "Original Loan Agreement"), as
amended by that certain Amendment No. One to Loan and Security Agreement, dated
as of October 26, 1994, that certain Amendment No. Two to Loan and Security
Agreement, dated as of September 1, 1995, that certain Amendment No. Three to
Loan and Security Agreement, dated as of March 26, 1996, that certain Amendment
No. Four to Loan and Security Agreement, dated as of November 12, 1996, and that
certain Amendment No. Five to Loan and Security Agreement, dated as of February
18, 1997 (the Original Loan Agreement, as so amended and as otherwise modified
or supplemented from time to time prior to the Closing Date, is referred to
herein as the "Existing Loan Agreement");
WHEREAS, Borrower and Foothill desire to amend and restate the
Existing Loan Agreement in its entirety as provided in this Agreement, it being
understood that no repayment of the obligations under the Existing Loan
Agreement is being effected hereby, but merely an amendment and restatement in
accordance with the terms hereof.
A G R E E M E N T:
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:
"Abandoned Equipment" means certain of Borrower's Equipment composing
plating and cleaning lines at its Columbiana, Alabama location that it intends
to leave in place after it vacates the premises, the principal items of which
are described on Schedule A-1 attached hereto.
"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 Borrower
or Guarantor arising out of the sale or lease of goods or the rendition of
services by Borrower or Guarantor, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"Adjusted Base Rate" means, as of any date of determination, the Base
Rate (or, after the first adjustment to the Base Rate as set forth below, the
Adjusted Base Rate) in effect immediately prior to such date of determination,
as adjusted pursuant to the table set forth below according to the Interest
Coverage Ratio of Borrower for the four (4) fiscal quarter period then ended:
If the Interest Coverage Ratio for the four (4) fiscal quarter period then ended
is: Then, effective during the period commencing 45 days after the end of the
Measurement Period then ended and ending 45 days after the end of the next
Measurement Period, the new Adjusted Base Rate shall equal:
greater than four to one (4.00:1.00); the Minimum Adjusted Base Rate.
less than or equal to four to one (4.00:1.00), and greater than or equal to two
and one-half to one (2.50:1.00); the Base Rate.
less than two and one-half to one (2.50:1.00); the Maximum Adjusted Base
Rate.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Loan and Security
Agreement and any extensions, supplements, amendments, or modifications to or in
connection with this Amended and Restated Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of the Maximum Revolving Credit Amount" means
(a) the Maximum Revolving Credit Amount; less (b) (i) the average Daily Balance
of advances made by Foothill under Section 2.1 that were outstanding during the
immediately preceding month, plus (ii) the average Daily Balance of the undrawn
L/Cs and L/C Guarantees issued by Foothill under Section 2.2 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.
"Base Rate" means a rate: (a) with respect to all Obligations, other
than (i) Pound Advances, (ii) undrawn L/Cs and L/C Guarantees, and (iii) the
Obligations evidenced by the Equipment/Real Property Term Note and the New
Equipment Term Note, equal to one-half of one (0.50) percentage points above the
Reference Rate; and (b) with respect to the Obligations evidenced by the
Equipment/Real Property Term Note and the New Equipment Term Note, equal to
three-quarters of one (0.75) percentage points above the Reference Rate.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral or the Real Property) or
liabilities; all information relating to Borrower's business operations or
financial condition; and all computer programs, disc or tape files, printouts,
runs, or other computer prepared information, and the equipment containing such
information.
"Borrowing Base" has the meaning set forth in Section 2.1(a). For
purposes of this definition, (a) any amount that is denominated in a currency
other than (i) Dollars, or (ii) (if and to the extent any Pound Advances are
outstanding) Pounds, shall be valued in Dollars based on the applicable Exchange
Rate for such currency as of the date one day prior to the date of
determination, (b) any amount that is denominated in Dollars or Pounds shall be
valued in Dollars, and (c) (if and to the extent any Pound Advances are
outstanding) any amount that is denominated in Pounds shall be valued in Pounds.
"Business Day" means any day which is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close.
"Canadian Collateral" means the collateral that is the subject of the
Security Agreement.
"Canadian Guarantor" means National-Standard Company of Canada,
Limited, a Canadian corporation.
"Canadian Guaranty" means that certain General Continuing Guaranty
dated as of the Original Closing Date by Canadian Guarantor in favor of Foothill
and in the form of Exhibit G-1.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934; exclusive, however, of National-Standard
Company Master Investment Trust or National-Standard Company Employees' Stock
Savings Trust) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or indirectly, of more than 15%
of the total voting power of all classes of stock then outstanding of Borrower
normally entitled to vote in the election of directors.
"Closing Date" means the date of the first to occur of: the initial
revolving advance hereunder, the initial issuance of an L/C or an L/C Guaranty
hereunder, the funding of the Equipment/Real Property Term Loan hereunder, or
the initial funding under the New Equipment Term Loan Commitment hereunder.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts of Borrower;
Borrower's Books; the Equipment of Borrower; the General Intangibles; the
Inventory of Borrower; the Negotiable Collateral; any money, or other assets of
Borrower which now or hereafter come into the possession, custody, or control of
Foothill; and the proceeds and products, whether tangible or intangible, of any
of the foregoing including proceeds of insurance covering any or all of the
Collateral and proceeds of letters of credit, and any and all Accounts of
Borrower, Borrower's Books, Equipment of Borrower, General Intangibles,
Inventory of Borrower, Negotiable Collateral, 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.
"Consignment Agreements" means an agreement, substantially in the form
of Exhibit C-1 attached hereto, between Foothill and each vendor that consigns
Inventory to Borrower or Canadian Guarantor.
"Copyright Security Agreement" means a Copyright Security Agreement,
substantially in the form of Exhibit C-2 attached hereto, dated as of the
Original Closing Date, between Borrower and Foothill.
"Daily Balance" means the amount of an Obligation owed at the end of a
given day.
"Dollars and $" means and refers to United States of America dollars
or such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts in the
United States of America.
"Early Termination Premium" has the meaning set forth in Section 3.6.
"EBITDA" means, with respect to any fiscal period and without
duplication, (a) Net Income for that period, plus (b) Interest Expense for that
period, plus (c) the amount of taxes on or measured by income, in each case to
the extent deducted from revenues or included in revenues, as the case may be,
in the calculation of Net Income for that period, plus (d) depreciation and
amortization for that fiscal period, minus (e) (without duplication of amounts
under item (a) above) any gain or loss attributable to non-recurring items or
not attributable to core operations, minus (f) (without duplication of amounts
under item (a) above) costs directly attributable to mergers and acquisitions
that are permitted to be considered as operating expenses under GAAP.
"Eligible Accounts" means Eligible Domestic Accounts, Eligible
Canadian Foreign Accounts, and Eligible UK Foreign Accounts.
"Eligible Canadian Finished Goods Inventory" means that portion of
Eligible Inventory consisting of finished goods that are owned by Canadian
Guarantor.
"Eligible Canadian Foreign Accounts" means those Accounts that do not
qualify as Eligible Domestic Accounts solely because (a) they are created by
Canadian Guarantor instead of Borrower, and (b) (i) the Account Debtor is a
resident of Canada instead of the United States of America, or (ii) the payments
thereunder are payable in Canadian dollars instead of Dollars.
"Eligible Canadian Inventory" means that portion of Eligible Inventory
consisting of goods that are owned by Canadian Guarantor.
"Eligible Canadian Raw Materials Inventory" means that portion of
Eligible Inventory consisting of raw materials that are owned by Canadian
Guarantor.
"Eligible Canadian Work-in-Process Inventory" means that portion of
Eligible Inventory consisting of in-process wire of Canadian Guarantor.
"Eligible Domestic Accounts" means those Accounts created by Borrower
in the ordinary course of business that arise out of Borrower's sale of goods or
rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill, and that are and at all times shall
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. Eligible Domestic Accounts shall not
include the following:
(a) Accounts that the Account Debtor has failed to pay within
ninety (90) days of invoice date or Accounts with selling terms of more than
forty-five (45) days;
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(c) 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;
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States, and which are not either (i) covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill, or
(ii) supported by one or more letters of credit that are assignable by their
terms and have been delivered to Foothill in an amount, of a tenor, and issued
by a financial institution, acceptable to Foothill;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the United
States;
(f) Accounts with respect to which Borrower is or may become
liable to the Account Debtor for goods sold or services rendered by the Account
Debtor to Borrower;
(g) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, that, in the case of TRW Safety Systems, Inc.,
the total obligations owing to Borrower by such Account Debtor must exceed
thirty percent (30%) of all Eligible Accounts before the excess would be deemed
ineligible; provided further, that, in the case of Goodyear Tire & Rubber
Company, or Xxxxxx International, Inc., or in the case of any other Account
Debtor that is rated 5A1 by Dun & Bradstreet, the total obligations owing to
Borrower by such Account Debtor must exceed twenty percent (20%) of all Eligible
Accounts before the excess would be deemed ineligible;
(h) Accounts with respect to which the Account Debtor disputes
liability or makes any claim with respect thereto, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(j) Accounts owed by an Account Debtor that has failed to pay
fifty percent (50%) or more of its Accounts owed to Borrower within ninety (90)
days of the date of the applicable invoices;
(k) Accounts that are payable in other than Dollars; and
(l) Accounts that represent progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Borrower of the
subject contract for goods or services.
"Eligible Domestic Finished Goods Inventory" means that portion of
Eligible Inventory consisting of finished goods that are owned by Borrower.
"Eligible Domestic Raw Materials Inventory" means that portion of
Eligible Inventory consisting of raw materials that are owned by Borrower.
"Eligible Domestic Work-in-Process Inventory" means that portion of
Eligible Inventory consisting of woven wire cloth and in-process wire of
Borrower.
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's and Canadian
Guarantor's respective businesses and raw materials for and work-in-process of
such finished goods, that are located at Borrower's and Canadian Guarantor's
premises identified on Schedule E-1, are acceptable to Foothill in all respects,
and strictly comply with all of Borrower's and Canadian Guarantor's
representations and warranties to Foothill. Eligible Inventory shall not
include slow moving (i.e., Inventory that was purchased more than one year from
the date of determination) or unsaleable items, spare parts, packaging and
shipping materials, supplies used or consumed in Borrower's and Canadian
Guarantor's respective businesses, Inventory at any location other than those
set forth on Schedule E-1, Inventory subject to a security interest or lien in
favor of any third Person, xxxx and hold goods, Inventory that is not subject to
Foothill's perfected security interests, returned or defective goods, "seconds,"
and Inventory acquired on consignment. Eligible Inventory shall be valued at
the lower of Borrower's or Canadian Guarantor's, as the case may be, cost or
market value, net of the amount, without duplication, of the Reserves.
"Eligible UK Foreign Account" means any Account of NSC-UK: (a) that
does not qualify as an Eligible Domestic Account solely because of one or more
of the following three reasons: (x) such Account is an Account of NSC-UK rather
than of Borrower; (y) such Account is payable other than in Dollars; or (z) such
Account is excluded from "Eligible Domestic Accounts" by virtue of the exclusion
contained in clause (d) of such definition; and (b) with respect to which one or
more of the following is applicable: (i) both (A) the Account Debtor is a
resident of the United States of America, England, Scotland, Wales, Northern
Ireland, or the Republic of Ireland, and (B) the obligations of the Account
Debtor thereunder are payable in the official currency of one or more of the
United States of America, England, Scotland, Wales, Northern Ireland, or the
Republic of Ireland; (ii) such Account is supported by one or more letters of
credit satisfactory to Foothill in its sole discretion which letters of credit
have been assigned and delivered to Foothill in a manner acceptable to Foothill
in its sole discretion; (iii) such Account is supported by credit insurance
satisfactory to Foothill in its sole discretion which credit insurance has been
assigned to Foothill by means of an assignment satisfactory to Foothill in its
sole discretion; or (iv) such Account otherwise has been determined by Foothill
to be acceptable to Foothill as an Eligible UK Foreign Account in Foothill's
sole discretion.
"Environmental Laws" means any and all federal, state, and local laws,
statutes, ordinances, codes, regulations, rules, and other governmental
restrictions or requirements relating to the indoor or outdoor environment,
health, or safety, including the Federal Solid Waste Disposal Act, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976, the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Hazardous Materials
Transportation Act and the Federal Occupational Safety and Health Act of 1970,
and equivalent state and local statutes as now or at any time hereafter in
effect.
"Equipment" means all of Borrower's and Guarantor's present and
hereafter acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, dies, jigs, goods (other than consumer goods, farm products, or
Inventory), wherever located, and any interest of Borrower or Guarantor in any
of the foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located.
"Equipment/Real Property Term Loan" means the term loan made, or to be
made, by Foothill to Borrower pursuant to the terms of Section 2.3(a) hereof.
"Equipment/Real Property Term Note" has the meaning set forth in
Section 2.3(a) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any predecessor, successor, or superseding laws of
the United States of America, together with all regulations promulgated
thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which, within the meaning of Section 414 of the IRC, is:
(i) under common control with Borrower; (ii) treated, together with Borrower, as
a single employer; (iii) treated as a member of an affiliated service group of
which Borrower is also treated as a member; or (iv) is otherwise aggregated with
the Borrower for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA Event" shall mean any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan;
(ii) a Prohibited Transaction with respect to any Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan;
(iv) the complete or partial withdrawal of Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated as, a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; (v) a failure
to make full payment when due of all amounts which, under the provisions of any
Plan or applicable law, Borrower or any ERISA Affiliate is required to make that
is not the subject of a waiver by the Department of Labor; (vi) the filing of a
notice of intent to terminate, or the treatment of a plan amendment as a
termination, under Sections 4041 or 4041A of ERISA; (vii) an event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon Borrower or any ERISA Affiliate; and (ix) a
violation of the applicable requirements of Sections 404 or 405 of ERISA, or the
exclusive benefit rule under Section 403(c) of ERISA, by any fiduciary or
disqualified person with respect to any Plan for which Borrower or any ERISA
Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
"Exchange Rate" means and refers to the nominal rate of exchange
available to Foothill in a chosen foreign exchange market for the purchase by
Foothill at 12:00 noon, local time, one Business Day prior to any date of
determination, expressed as the number of units of such currency per one (1)
Dollar.
"Existing Loan Agreement" has the meaning set forth in the Recitals to
this Agreement.
"Existing Warrant" means that certain Warrant Purchase Agreement,
dated as of the Original Closing Date, between Borrower and Foothill and in the
form of Exhibit W-1.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including taxes,
photocopying, notarization, telecommunication and insurance premiums) required
to be paid by Borrower or Guarantor under any of the Loan Documents that are
paid or advanced by Foothill; documentation, filing, recording, publication,
appraisal (including periodic Worldwide Collateral or Real Property appraisals),
real estate survey, environmental audit, and search fees assessed, paid, or
incurred by Foothill in connection with Foothill's transactions with Borrower or
Guarantor; costs and expenses incurred by Foothill in the disbursement of funds
to Borrower (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
Worldwide Collateral or the Real Property, or any portion thereof, irrespective
of whether a sale is consummated; reasonable costs and expenses paid or incurred
by Foothill in examining Borrower's Books, or Guarantor's Books (as that term is
defined in the Canadian Guaranty), or the books and records of NSC-UK; costs and
expenses of third party claims or any other suit paid or incurred by Foothill in
enforcing or defending the Loan Documents; and Foothill's reasonable attorneys
fees and expenses incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including reasonable attorneys
fees and expenses incurred in connection with a "workout," a "restructuring," or
an Insolvency Proceeding concerning Borrower or any guarantor of the
Obligations), defending, or concerning the Loan Documents, 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 Borrower'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, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Guarantor" means Canadian Guarantor, and NSC-UK, and each of them,
and any one or more of them, jointly and severally, and their successors and
permitted assigns.
"Guaranty" means the Canadian Guaranty and the NSC-UK
Guaranty/Debenture, collectively and individually.
"Hazardous Materials" includes any flammable or explosive material,
radioactive material, hazardous waste, or hazardous or toxic substance or
chemical as defined in any Environmental Law, including petroleum, crude oil,
and fractions derived therefrom.
"Indebtedness" shall mean: (a) all obligations of Borrower for
borrowed money; (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, letter of credit guaranties,
bankers acceptances, interest rate swaps, controlled disbursement accounts, or
other financial products; (c) all obligations under capital leases; (d) all
obligations or liabilities of others secured by a lien or security interest on
any property or asset of Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of Borrower guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower) 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, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"Interest Coverage Ratio" means, as of the last day of any four
consecutive fiscal quarter period, the ratio obtained by dividing (a) EBITDA, by
(b) Interest Paid.
"Interest Expense" means, as of the last day of any fiscal period, the
sum of all interest, fees, charges, and related expenses paid or payable for
that fiscal period to a lender in connection with borrowed money or the deferred
purchase price of assets that is to be treated as interest in accordance with
GAAP.
"Interest Paid" means, as of the last day of any fiscal period, the
sum of all interest, fees, charges, and related expenses paid for that fiscal
period to a lender in connection with borrowed money or the deferred purchase
price of assets that is to be treated as interest in accordance with GAAP.
"Inventory" means all present and future inventory in which Borrower
or Guarantor has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's and Guarantor's
present and future raw materials, work in process, finished goods, and packing
and shipping materials, wherever located, and any documents of title
representing any of the above.
"Investment Property" means "investment property" as that term is
defined in Section 9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Joint Venture" means the joint venture formed pursuant to that
certain Joint Venture Agreement by and among Borrower, Toyota Tsusho America,
Fujita Kanaami, Xx. X. Xxxxxxxx, and Xx. X. Xxxx.
"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).
"LIBOR Supplement" means that certain LIBOR Supplement, dated as of
the date hereof, between Borrower and Foothill, a copy of which is attached
hereto as Exhibit L-1.
"Loan Documents" means this Agreement, the Lockbox Agreements, the
Mortgages, the Patent Collateral Assignment, the Trademark Security Agreement,
the Copyright Security Agreement, the Stock Pledge Agreement, the Equipment/Real
Property Term Note, the New Equipment Term Note, any other note or notes
executed by Borrower and payable to Foothill, the Canadian Guaranty, the
Security Agreement, the NSC-UK Guaranty/Debenture, the NSC-UK Subordination
Agreement, the NSPFTL Intercreditor Agreement, the Warrant, the Reaffirmation
Agreement, and any other agreement entered into in connection with this
Agreement.
"Lockbox Account" shall mean the depositary account established
pursuant to the respective Lockbox Agreement.
"Lockbox Agreements" those certain Lockbox Operating Procedural
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrower or
Guarantor, as applicable, Foothill, and one of the Lockbox Banks. Without
limiting the generality of the foregoing, the UK Lockbox Agreement is a Lockbox
Agreement.
"Lockbox Banks" means, in the United States, NBD and Comerica Bank, in
Canada, RBC, and, in England, the UK Lockbox Bank.
"Machinery and Equipment" means any Equipment other than that which is
purchased with, or financed by, the proceeds of a New Equipment Term Loan.
"Maturity Date" means October 1, 2000.
"Maximum Adjusted Base Rate" means a rate: (a) with respect to all
Obligations other than undrawn L/Cs and L/C Guarantees and the Obligations
evidenced by the Equipment/Real Property Term Note and the New Equipment Term
Note, equal to three-quarters of one (0.75) percentage points above the
Reference Rate; and (b) with respect to the Obligations evidenced by the
Equipment/Real Property Term Note and the New Equipment Term Note, one (1.00)
percentage points above the Reference Rate.
"Maximum Amount" means the sum of (a) the Maximum Revolving Credit
Amount, plus (b) the outstanding Obligations under the Equipment/Real Property
Term Loan, plus (c) the New Equipment Term Loan Commitment.
"Maximum Revolving Credit Amount" means Thirty Five Million Dollars
($35,000,000).
"Measurement Period" means any of the following periods: (a) the two-
quarter period ending December 31, 1997; (b) the two-quarter period ending June
30, 1998; (c) the two-quarter period ending December 31, 1998; (d) the two-
quarter period ending June 30, 1999; (e) the two-quarter period ending December
31, 1999; (e) the two-quarter period ending June 30, 2000; and (f) the "stub"
(i.e., less than two-quarter) period commencing July 1, 2000 and ending on the
Maturity Date.
"Midland Bank" means Midland Bank plc of England.
"Midland Bank Payoff Amount" means the aggregate amount necessary to
repay in full all obligations of NSC-UK to Midland Bank on the Old Fourth
Amendment Closing Date, as specified in the Midland Bank Payoff Letter.
"Midland Bank Payoff Letter" means a letter from Midland Bank to NSC-
UK, Borrower, and Foothill, dated as of the Old Fourth Amendment Closing Date,
or a date not more than seven days prior thereto, in form and substance
satisfactory to Foothill, setting forth the Midland Bank Payoff Amount as of the
Old Fourth Amendment Closing Date and containing the irrevocable agreement of
Midland Bank to release any liens, encumbrances, charges, pledges, or other
claims of Midland Bank on the property or assets of NSC-UK immediately upon
receipt of the Midland Bank Payoff Amount on the Old Fourth Amendment Closing
Date.
"Minimum Adjusted Base Rate" means a rate: (a) with respect to all
Obligations other than undrawn L/Cs and L/C Guarantees and the Obligations
evidenced by the Equipment/Real Property Term Note and the New Equipment Term
Note, equal to one-quarter of one (0.25) percentage points above the Reference
Rate; and (b) with respect to the Obligations evidenced by the Equipment/Real
Property Term Note and the New Equipment Term Note, equal to one-half of one
(0.50) percentage points above the Reference Rate.
"Mortgages" means one or more mortgages, deeds of trust, or deeds to
secure debt, executed by Borrower in favor of Foothill, the form and substance
of which shall be satisfactory to Foothill, that encumber the Real Property and
the related improvements thereto.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an ERISA Affiliate participate or to which Borrower or
any ERISA Affiliate contribute or are required to contribute.
"NBD" means NBD Bank, N.A., a national banking association.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, Investment Property, certificated
and uncertificated securities (including the shares of stock of subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"Net Income" means, with respect to any fiscal period, the
consolidated net income from continuing operations before extraordinary items of
Borrower and its Subsidiaries for that period, determined in accordance with
GAAP.
"New Equipment" means any Equipment that is purchased with, or
financed by, the proceeds of a New Equipment Term Loan.
"New Equipment Term Loan" means one or more of the term loans made, or
to be made, by Foothill to Borrower pursuant to the terms of Section 2.3(c)
hereof.
"New Equipment Term Loan Commitment" means, as of any date of
determination, the lesser of: (a) the sum of (i) Five Million Dollars
($5,000,000) PLUS (ii) the aggregate amount of principal paid in respect of the
Equipment/Real Property Term Loan since the Closing Date pursuant to Section
2.3(b); and (b) Ten Million Dollars ($10,000,000).
"New Equipment Term Note" has the meaning set forth in Section 2.3(c)
hereof.
"NSC-UK" means National-Standard Company, Ltd., a company organized
under the laws of England.
"NSC-UK Guaranty/Debenture" means a Guarantee and Debenture, dated as
of the Old Fourth Amendment Closing Date, executed by NSC-UK in favor of
Foothill and governed by the laws of England, in form (including in registrable
form) and substance satisfactory to Foothill and its English counsel, pursuant
to which NSC-UK guarantees the payment and performance of all Obligations of
Borrower to Foothill and grants fixed and floating charges in favor of Foothill
on all property and assets of NSC-UK to secure all present and future
Obligations of NSC-UK to Foothill.
"NSC-UK Subordination Agreement" means a written subordination
agreement entered into between Borrower and Foothill, and acknowledged and
consented to by NSC-UK, dated as of the Old Fourth Amendment Closing Date and
governed by the laws of California, in form and substance satisfactory to
Foothill and its California counsel, pursuant to which the payment of all
present and future obligations of NSC-UK to Borrower is expressly subordinated
to the payment and performance of present and future Obligations of NSC-UK to
Foothill, and pursuant to which Borrower agrees that the present and future
obligations of NSC-UK to Borrower shall be and remain unsecured, evidenced by
book account entries, and not evidenced by a promissory note or negotiable
instrument.
"NSPFTL" means National-Standard Pension Fund Trustees Limited.
"NSPFTL Intercreditor Agreement" means a Priorities Deed, in form and
substance satisfactory to Foothill and its counsel, among Foothill, NSPFTL, and
NSC-UK in respect of, among other things, the relative priorities of the
respective charges of Foothill and NSPFTL against the UK Collateral.
"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 owing to Foothill
under any outstanding L/Cs or L/C Guarantees, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
loan account pursuant to any agreement authorizing Foothill to charge Borrower's
loan account), obligations, fees, lease payments, guaranties, covenants, and
duties owing by Borrower or Guarantor to Foothill of any kind and description
(whether pursuant to or evidenced by the Loan Documents, by any note or other
instrument (including the Equipment/Real Property Term Note and the New
Equipment Term Note), or pursuant to any other agreement between Foothill and
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
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower or Guarantor is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"Old Foothill Term Loan Agreement" means that certain Term Loan and
Security Agreement, dated as April 10, 1991, between Foothill and Borrower, as
amended, restated, supplemented, or otherwise modified from time to time.
"Old First Amendment Closing Date" means September 1, 1995.
"Old Fourth Amendment Closing Date" means November 12, 1996.
"Old Fourth Amendment Closing Date Midland Bank Disbursement
Instruction Letter" means a letter of instruction from Borrower and NSC-UK to
Foothill, dated as of the Old Fourth Amendment Closing Date, in form and
substance satisfactory to Foothill, instructing Foothill to disburse the Midland
Bank Payoff Amount to Midland Bank in accordance with the instructions contained
in the Midland Bank Payoff Letter, for the account of NSC-UK with respect to the
concurrent intercompany loan to it by Borrower in such amount, and for the
account of Borrower with respect to the advance being made to it in such amount
by Foothill under the Agreement on the Old Fourth Amendment Closing Date.
"Original Closing Date" means May 24, 1994.
"Original Closing Date UK Investment Amount" means Seven Million Three
Hundred Twenty One Thousand Dollars ($7,321,000).
"Original Loan Agreement" has the meaning set forth in the Recitals to
this Agreement.
"Overadvance" has the meaning set forth in Section 2.4.
"Participant" means any Person, other than Foothill, that has
committed to provide a portion of the financing contemplated herein.
"Patent Security Agreement" means a Patent Security Agreement,
substantially in the form of Exhibit P-1 attached hereto, dated as of the
Original Closing Date, between Borrower and Foothill.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests held by
Foothill; (b) liens for unpaid taxes that are not yet due and payable and liens
for taxes (other than those that give rise to a tax lien that has priority over
the security interests of Foothill in and to the Collateral) that are the
subject of a good faith Permitted Protest; (c) liens and security interests set
forth on Schedule P-1 attached hereto; (d) purchase money security interests and
liens of lessors under capital leases to the extent that the acquisition or
lease of the underlying asset was permitted under Section 7.10, and so long as
the security interest or lien only secures the purchase price of the asset; (e)
easements, rights of way, reservations, covenants, conditions, restrictions,
zoning variances, and other similar encumbrances that do not materially
interfere with the use or value of the property subject thereto; (f) obligations
and duties as lessee under any lease existing on the date of this Agreement; (g)
mechanics', materialmen's, warehousemen's, or similar liens that arise by
operation of law; (h) exceptions listed in the title insurance or commitment
therefor to be delivered by Borrower hereunder in respect of the Real Property;
and (i) liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance, or other forms of governmental
insurance or benefits or to secure performance of tenders, statutory
obligations, leases, and contracts (other than for borrowed money) entered into
in the ordinary course of business.
"Permitted Protest" means the right of Borrower to protest any lien,
tax, rental payment, or other charge, other than any such lien or charge that
secures the Obligations, provided (i) a reserve with respect to such obligation
is established on the books of Borrower in an amount that is reasonably
satisfactory to Foothill, (ii) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (iii) 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 or security interests
of Foothill in and to the property or assets of Borrower.
"Person" means and includes natural persons, corporations, limited
partnerships, general 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 an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or to which
Borrower or any ERISA Affiliate makes, is making, or is obligated to make
contributions, including any Multiemployer Plan or Qualified Plan.
"Pound Advance Supplement" means that certain Pound Advance
Supplement, dated as of the date hereof, between Borrower and Foothill, a copy
of which is attached hereto as Exhibit P-2.
"Pound Advances" means revolving advances made in Pounds instead of
Dollars under this Agreement and the Pound Advance Supplement.
"Pounds and [symbol]" means and refers to United Kingdom pounds
sterling or such coin or currency of the United Kingdom as at the time of
payment shall be legal tender for the payment of public and private debts
in the United Kingdom.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c) of the IRC.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; and (c) cash
flow statements, all prepared on a basis consistent with Borrower's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
"Proportionate Value of the New Equipment" means, in connection with a
sale or other disposition of Machinery and Equipment and New Equipment, but no
Real Property, the amount derived by (a) determining the liquidation value of
the subject Machinery and Equipment (as such value has been estimated by an
auctioneer selected by Foothill), (b) determining the liquidation value of the
subject New Equipment (as such value has been estimated by an auctioneer
selected by Foothill), (c) determining the percentage produced by dividing the
amount of (b) by the sum of (a) plus (b), and (d) multiplying the percentage
determined in (c) times the aggregate net proceeds of such sale or other
disposition.
"Proportionate Value of the Real Property" means, in connection with a
sale or other disposition of Machinery and Equipment or New Equipment, on the
one hand, and Real Property, on the other hand, the amount derived by (a)
determining the liquidation value of the subject Machinery and Equipment or New
Equipment, as applicable (as such value or values have been estimated by an
auctioneer selected by Foothill), (b) determining the liquidation value of the
subject Real Property (as such value has been estimated by an auctioneer
selected by Foothill), (c) determining the percentage produced by dividing the
amount of (b) by the sum of (a) plus (b), and (d) multiplying the percentage
determined in (c) times the aggregate net proceeds of such sale or other
disposition.
"Qualified Plan" means a pension plan (as defined in Section 3(2) of
ERISA) intended to be tax-qualified under Section 401(a) of the IRC which
Borrower or any ERISA Affiliate sponsors, maintains, or to which any such person
makes, is making, or is obligated to make, contributions, or, in the case of a
multiple-employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"RBC" means The Royal Bank of Canada.
"Real Property" means the parcel or parcels of real property and the
related improvements thereto identified on Schedule R-1, and any parcels of real
property hereafter acquired by Borrower.
"Reference Rate" means the variable rate of interest, per annum, most
recently announced by Norwest Bank Minnesota, 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.
"Reportable Event" shall mean any event described in Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Reaffirmation Agreement" means the Reaffirmation Agreement, dated as
of the Closing Date, by Borrower and Guarantor, in the form of Exhibit R-1
attached hereto, pursuant to which each of Borrower and Guarantor reaffirms its
obligations under the Loan Documents to which it is party (including any
guaranties and grants of security interests in favor of Foothill)
notwithstanding the amendment and restatement of the Existing Loan Agreement
effected by this Agreement.
"Real Property Reserve" means an amount, determined by Foothill in its
reasonable discretion, sufficient to discharge any liens, charges, or
encumbrances against the Real Property that have, or are claimed to have,
priority over the liens created under the Mortgages in favor of Foothill.
"Relevant Closing Date" means, with respect to Borrower and Canadian
Guarantor, the Original Closing Date, and, with respect to NSC-UK, the Old
Fourth Amendment Closing Date.
"Reserves" means the shrinkage reserve, the obsolescence reserve, and
the reconciliation variance, in amounts deemed satisfactory by Foothill in its
reasonable judgment.
"Security Agreement" means that certain Security Agreement, dated as
of the Original Closing Date, between Guarantor and Foothill and in the form of
Exhibit S-1.
"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. In computing the amount
of liabilities at any time, there shall not be included in liabilities the
liabilities for retiree health care benefits that are attributable to years that
have yet to begin, irrespective of whether GAAP requires such future health care
benefits to be treated as a liability.
"Stock Pledge Agreement" means a Security Agreement-Stock Pledge,
substantially in the form of Exhibit S-1 attached hereto, dated as of the
Original Closing Date, between Borrower and Foothill.
"Term Loans" means, collectively, the Equipment/Real Property Term
Loan and the New Equipment Term Loan.
"Trademark Security Agreement" means a Trademark Security Agreement,
substantially in the form of Exhibit T-1 attached hereto, dated as of the
Original Closing Date, between Borrower and Foothill.
"UK Borrowing Base Component" means, as of any date of determination,
the lowest of (a) eighty-five percent (85%) of the amount of Eligible UK Foreign
Accounts, (b) Five Million Dollars ($5,000,000), and (c) (if and to the extent
any Pound Advances are outstanding) the Pounds equivalent of Five Million
Dollars ($5,000,000) determined at the Exchange Rate in respect of Pounds
applicable pursuant to the Pound Advance Supplement.
"UK Collateral" means all property and assets of NSC-UK subject to
charges in favor of Foothill pursuant to the NSC-UK Debenture.
"UK Lockbox Bank" means Midland Bank or such other bank in England
that is mutually acceptable to NSC-UK, Borrower, and Foothill, with which a
Lockbox Account is maintained, and that is a party to the UK Lockbox Agreement.
"UK Lockbox Agreement" means an agreement among Foothill, the UK
Lockbox Bank, and NSC-UK, in form and substance satisfactory to each of them,
with respect to the establishment and maintenance of a Lockbox Account for
Foothill with respect to NSC-UK.
"Unfunded Benefit Liability" means the excess of a Plan's benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) over the current value
of such Plan's assets, determined in accordance with the assumptions used by the
Plan's actuaries for funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Warrant" means the Existing Warrant, as amended by the Warrant
Amendment.
"Warrant Amendment" means that certain Amendment Number One to Warrant
Purchase Agreement, dated as of the Closing Date, between Borrower and Foothill
and in the form of Exhibit W-2, whereby Borrower agrees to extend the end of the
term of the Warrant from October 31, 1997 to October 31, 2001.
"Worldwide Collateral" means the Collateral, the Canadian Collateral,
and the UK Collateral.
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 Borrower 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. 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 revolving advances to Borrower in an
amount not to exceed the lesser of (1) the Borrowing Base, or (2) an amount
equal to Borrower's and Guarantor's aggregate cash collections with respect to
Accounts for the immediately preceding ninety (90) day period. For purposes of
this Agreement, "Borrowing Base", as of any date of determination, shall mean:
(i) an amount equal to the sum of: (A) eighty-five percent
(85%) of the amount of Eligible Domestic Accounts; (B) the lesser of (1) eighty-
five percent (85%) of the amount of Eligible Canadian Foreign Accounts, and (2)
Two Million Dollars ($2,000,000); and (C) the UK Borrowing Base Component; plus
(ii) an amount equal to the least of (A) the sum of: (1)(x)
sixty percent (60%) of the amount of Eligible Domestic Finished Goods Inventory,
(y) fifty percent (50%) of the amount of Eligible Domestic Raw Material
Inventory, and (z) fifty percent (50%) of the amount of Eligible Domestic Work-
in-Process Inventory; plus (2) the lesser of (a) the sum of (x) sixty percent
(60%) of the amount of Eligible Canadian Finished Goods Inventory, (y) fifty
percent (50%) of the amount of Eligible Canadian Raw Material Inventory, and (z)
fifty percent (50%) of the amount of Eligible Canadian Work-in-Process
Inventory, and (b) One Million Dollars ($1,000,000); (B) the amount of credit
availability created by Section 2.1(a)(i) above; and (C) Fifteen Million Dollars
($15,000,000); minus
(iii) the amount of the Real Property Reserve.
(b) Anything to the contrary in subsection (a) above
notwithstanding, Foothill may reduce its advance rates based upon Eligible
Domestic Accounts, Eligible Canadian Foreign Accounts, Eligible Domestic
Finished Goods Inventory, Eligible Domestic Raw Material Inventory, Eligible
Work-In-Process Inventory, Eligible Canadian Finished Goods Inventory, Eligible
Canadian Raw Material Inventory, or Eligible Canadian Work-In-Process Inventory
without declaring an Event of Default if it determines, in its reasonable
discretion, that there is a material impairment of the prospect of repayment of
all or any portion of the Obligations or a material impairment of the value or
priority of Foothill's security interests in the Collateral.
(c) Foothill shall have no obligation to make advances hereunder
to the extent they would cause the outstanding Obligations under this Section
2.1 to exceed the Maximum Revolving Credit Amount. Foothill shall have no
obligation to make advances under this Section 2.1 to the extent they would
cause the outstanding Obligations to exceed the Maximum Amount.
(d) Foothill is authorized to make advances under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Officer of Borrower or, without instructions, if pursuant to
Section 2.5(d). Borrower agrees to establish and maintain a single designated
deposit account for the purpose of receiving the proceeds of the advances
requested by Borrower and made by Foothill hereunder. Unless otherwise agreed
by Foothill and Borrower, any advance requested by Borrower and made by Foothill
hereunder shall be made to such designated deposit account. Amounts borrowed
pursuant to this Section 2.1 may be repaid without penalty or premium and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
(e) With respect to the revolving advances made hereunder
supported solely and directly by the UK Borrowing Base Component, Borrower shall
have the "Pound Advances Option", as defined in and subject to the terms and
conditions of the Pound Advances Supplement, which by this reference hereby is
incorporated herein in full and made a part hereof.
2.2 LETTERS OF CREDIT AND LETTER OF CREDIT GUARANTEES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue commercial or standby letters of credit for the account
of Borrower (each, an "L/C") or to issue standby letters of credit or guarantees
of payment (each such letter of credit or guaranty, an "L/C Guaranty") with
respect to commercial or standby letters of credit issued by another Person for
the account of Borrower in an aggregate face amount not to exceed the lesser of:
(i) the Borrowing Base less the amount of advances outstanding pursuant to
Section 2.1, and (ii) Four Million Dollars ($4,000,000). Borrower expressly
understands and agrees that Foothill shall have no obligation to arrange for the
issuance by other financial institutions of L/Cs that are to be the subject of
L/C Guarantees. Borrower and Foothill acknowledge and agree that certain of the
L/Cs that are to be the subject of L/C Guarantees may be outstanding on the
Original Closing Date. Each L/C and each letter of credit that is the subject
of an L/C Guaranty shall have an expiry date no later than twenty (20) days
prior to the date on which this Agreement is scheduled to terminate under
Section 3.4 hereof (without regard to any potential renewal term) and all such
L/Cs and letters of credit (and the applicable L/C Guarantees) shall be in form
and substance acceptable to Foothill in its sole discretion. Foothill shall not
have any obligation to issue L/Cs or L/C Guarantees to the extent that the face
amount of all outstanding L/Cs and L/C Guarantees, plus the amount of advances
outstanding pursuant to Section 2.1, would exceed the Maximum Revolving Credit
Amount. The L/Cs and the L/C Guarantees issued under this Section 2.2 shall be
used by Borrower, consistent with this Agreement, for its general working
capital purposes or to support its obligations with respect to workers'
compensation premiums or other similar obligations. If Foothill is obligated to
advance funds under an L/C or L/C Guaranty, the amount so advanced immediately
shall be deemed to be an advance made by Foothill to Borrower pursuant to
Section 2.1 and, thereafter, shall bear interest at the rates then applicable
under Section 2.5(a)(i) or Section 2.5(b)(i), as applicable.
(b) 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 L/Cs or L/C Guarantees, except to the
extent that such loss, cost, expense, or liability was caused by the gross
negligence or wilful misconduct of Foothill. 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 Borrower's account or by Foothill's
interpretations of any L/C issued by Foothill to or for Borrower's account, even
though this interpretation may be different from Borrower's own, and Borrower
understands and agrees that Foothill shall not be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrower's instructions or those contained in the L/Cs or any modifications,
amendments, or supplements thereto. Borrower understands that the L/C
Guarantees may require Foothill to indemnify the issuing bank for certain costs
or liabilities arising out of claims by Borrower against such issuing bank.
Borrower hereby agrees to indemnify, save, defend, and hold Foothill harmless
with respect to any loss, cost, expense (including attorneys fees), or liability
incurred by Foothill under any L/C Guaranty as a result of Foothill's
indemnification of any such issuing bank, except to the extent that such loss,
cost, expense, or liability was caused by the gross negligence or wilful
misconduct of Foothill.
(c) 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. Borrower may or may not
be the "applicant" or "account party" with respect to such L/Cs.
(d) Any and all service charges, commissions, fees, and costs of
the issuing bank (or other third party issuer) 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
Borrower to Foothill. On the first day of each month, Borrower will pay
Foothill a fee equal to one percent (1.00%) per annum times the average Daily
Balance of the undrawn L/Cs and L/C Guarantees that were outstanding during the
immediately preceding month. Service charges, commissions, fees, and costs may
be charged to Borrower's loan account at the time the service is rendered or the
cost is incurred.
(e) Immediately upon the termination of this Agreement, Borrower
agrees to either: (i) provide cash collateral to be held by Foothill in an
amount equal to the maximum amount of Foothill's obligations under L/Cs plus the
maximum amount of Foothill's obligations to any Person under outstanding L/C
Guarantees, or (ii) cause to be delivered to Foothill releases of all of
Foothill's obligations under its outstanding L/Cs and L/C Guarantees. 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).
2.3 EQUIPMENT/REAL PROPERTY TERM LOAN, AND NEW EQUIPMENT TERM LOAN
COMMITMENT; VOLUNTARY PREPAYMENT; MANDATORY PREPAYMENT.
(a) Subject to the terms and conditions of this Agreement,
Foothill: (i) agreed to make the "Equipment Term Loan" (as defined in the
Existing Loan Agreement) to Borrower on the Old First Amendment Closing Date and
the "Real Property Term Loan" (as defined in the Existing Loan Agreement) to
Borrower on the Original Closing Date; and (ii) has agreed to make an additional
term loan to Borrower on the Closing Date; in the original aggregate principal
amount of Fifteen Million Dollars ($15,000,000) (collectively, the
"Equipment/Real Property Term Loan"), to be evidenced by and repayable in
accordance with the terms and conditions of a consolidated, amended, and
restated renewal promissory note in the form of Exhibit E-1 (the "Equipment/Real
Property Term Note"), dated as of Closing Date, executed by Borrower in favor of
Foothill. All amounts evidenced by the Equipment/Real Property Term Note shall
constitute Obligations and shall be secured by the security interests and liens
granted by Borrower to Foothill in and to the Collateral and Real Property. The
Equipment/Real Property Term Loan shall be repaid in accordance with Section
2.3(b).
(b) The Equipment/Real Property Term Loan shall be repaid in
monthly installments of principal, each in the amount of Two Hundred Fifty
Thousand Dollars ($250,000). Each such installment shall be due and payable on
the first day of each month commencing on October 1, 1997 and continuing until
and including the date on which the unpaid balance of the Equipment/Real
Property Term Loan is paid in full. The outstanding principal balance and all
accrued and unpaid interest under the Equipment/Real Property Term Loan shall be
due and payable upon the termination of this Agreement, whether by its terms, by
prepayment, by acceleration, or otherwise.
(c) Subject to the terms and conditions of this Agreement,
Foothill has agreed to make a series of term loans to Borrower in an aggregate
amount at any one time outstanding of up to the New Equipment Term Loan
Commitment, to be evidenced by and repayable in accordance with the terms and
conditions of a single promissory note in the form of Exhibit N-1 (the "New
Equipment Term Note"), dated as of the Closing Date, executed by Borrower in
favor of Foothill. Each such New Equipment Term Loan shall be made by Foothill
at such times and in such amounts as Borrower may request in writing, shall be
advanced directly to the applicable vendor or Borrower, as the case may be, and
once borrowed may be repaid or prepaid without penalty and then, subject to the
terms and conditions of this Agreement, reborrowed at any time during the term
of this Agreement. The foregoing notwithstanding: (i) each borrowing of a New
Equipment Term Loan shall be in a minimum principal amount of Two Hundred
Thousand Dollars ($200,000), or such lesser amount as is the then unfunded
balance of the New Equipment Term Loan Commitment; and (ii) each borrowing of a
New Equipment Term Loan shall be in an amount, as determined by Foothill, up to
seventy-five percent (75%) of Borrower's invoice cost (net of installation and
other so-called `soft costs') of new Equipment to be purchased by Borrower or
Equipment that has been purchased by Borrower within the prior sixty (60) days,
in each case, that is acceptable to Foothill in all respects and that is not to
be affixed to real property or become installed in or affixed to other goods.
All amounts evidenced by the New Equipment Term Note shall constitute
Obligations and shall be secured by the security interests and liens granted by
Borrower to Foothill in and to the Collateral and Real Property. Anything
contained in this Section 2.3(c) to the contrary notwithstanding, Foothill shall
have no obligation to make New Equipment Term Loans hereunder to the extent they
would cause (y) the outstanding New Equipment Term Loans to exceed the New
Equipment Term Loan Commitment, or (z) the aggregate principal balance of the
outstanding New Equipment Term Loans and the Equipment/Real Property Term Loan
to exceed Twenty Million Dollars ($20,000,000).
(d) Borrower shall have the right, at any time and from time to
time, upon not less than twenty (20) days prior written notice to Foothill, to
prepay, in whole or in part and without premium or penalty, the Term Loans;
provided, however, that if the proposed voluntary prepayment is being made in
conjunction with an early termination of the Loan Agreement, then such
prepayment may not be made except in accordance with the terms and conditions
set forth in Section 3.5. With each prepayment, Borrower shall also pay
interest accrued and unpaid on the principal amount so repaid to the date of
such prepayment. Each partial prepayment shall be in a minimum aggregate amount
equal to One Hundred Thousand Dollars ($100,000). Any voluntary prepayment
pursuant to this Section 2.3(d) shall be applied pro rata to the Equipment/Real
Property Term Loan and the New Equipment Term Loan. Any prepayment of the
principal balance of each Term Loan shall be applied to the scheduled
installments of principal thereof in the inverse order of their maturity.
(e) (i) Immediately upon receipt by Borrower or Canadian
Guarantor of any proceeds from the sale or other disposition of all or a portion
of the Machinery and Equipment, the Real Property, or the New Equipment,
Borrower shall prepay the Term Loans in an amount equal to all such proceeds,
such amounts to be applied to the installments due thereunder in the inverse
order of their maturity as follows:
(A) To the extent that such proceeds are attributable
solely to the sale or other disposition of
Machinery and Equipment, Foothill will apply such
proceeds to reduce the Equipment/Real Property
Term Note;
(B) To the extent that such proceeds are attributable
solely to the sale or other disposition of Real
Property, Foothill will apply such proceeds to
reduce the Equipment/Real Property Term Note;
(C) To the extent that such proceeds are attributable
solely to the sale or other disposition of New
Equipment, Foothill will apply such proceeds to
reduce the New Equipment Term Note; and
(D) To the extent that such proceeds are attributable
to the sale or other disposition of Machinery and
Equipment, Real Property, or New Equipment, as
part of one sale or other disposition, Foothill
will apportion such proceeds in the manner set
forth in Section 2.3(e)(ii), and thereafter apply
the applicable portion of such proceeds to the
Equipment/Real Property Term Note or the New
Equipment Term Note, as applicable.
(ii) The following shall be the method of determining the
amount of the proceeds from the sale or other disposition of Collateral that is
attributable to the Machinery and Equipment portion, the Real Property portion,
and the New Equipment portion thereof, as applicable:
(A) If Machinery and Equipment or New Equipment, on
the one hand, and Real Property, on the other
hand, is sold as part of one sale or other
disposition, then Foothill shall determine the
Proportionate Value of the Real Property and shall
proceed to apply to the Equipment/Real Property
Term Note the portion of the aggregate proceeds
equal to the Proportionate Value of the Real
Property;
(B) In the case of such an allocation where the sale
or other disposition involves both Machinery and
Equipment and New Equipment, then after such
application of the Proportionate Value of the Real
Property to the Equipment/Real Property Term Note,
Foothill shall determine the proportion that the
subject Machinery and Equipment and New Equipment
bear to each other (based upon the liquidation
values that were estimated by the auctioneer
selected by Foothill) and shall apply such
proportion of the balance of the aggregate
proceeds of such sale or other disposition to the
Equipment/Real Property Term Note or New Equipment
Term Note, as applicable;
(C) In the case of such an allocation where the sale
or other disposition involves Machinery and
Equipment or New Equipment, but not both, then
after such application of the Proportionate Value
of the Real Property to the Equipment/Real
Property Term Note, Foothill shall apply the
balance of the aggregate proceeds of the sale or
other disposition to the Equipment/Real Property
Term Note or New Equipment Term Note, as
applicable; and
(D) If Machinery and Equipment and New Equipment, but
no Real Property, is sold as part of one sale or
other disposition, then Foothill shall determine
the Proportionate Value of the New Equipment and
shall proceed to apply to the New Equipment Term
Note the portion of the aggregate proceeds equal
to the Proportionate Value of the New Equipment
and the balance of the proceeds of such sale or
other disposition to the Equipment/Real Property
Term Note.
(iii) In the event that any proceeds from the sale or other
disposition of Collateral are to be applied to any of the Equipment/Real
Property Term Note and the New Equipment Term Note pursuant to Section 2.3(e)(i)
or Section 2.3(e)(ii) and such promissory note already has been, or by such
application will be, paid off in full, then the amount or balance of such amount
otherwise to be applied to that promissory note shall be applied, pro rata, to
such of the Equipment/Real Property Term Note and the New Equipment Term Note
not already paid off in full. In the event that all of the Equipment/Real
Property Term Note and the New Equipment Term Note already have been, or by such
application will be, paid off in full, then the amount or balance of such amount
otherwise to be applied to those promissory notes pursuant to Section 2.3(e)(i)
or Section 2.3(e)(ii) shall be applied to reduce the amount of outstanding
advances made pursuant to Section 2.1. The provisions of this Section 2.3(e)
requiring all proceeds from any sale or other disposition of all or any portion
of the Machinery and Equipment, the Real Property, or the New Equipment shall in
no way be construed as a consent by Foothill to any such sale or other
disposition or as a waiver of the provisions of Section 7.4 with respect to all
or any portion of the Machinery and Equipment, the Real Property, or the New
Equipment.
2.4 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower 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"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to repay non-
contingent Obligations and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to L/Cs or L/C Guarantees.
2.5 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate.
(i) Adjusted Base Rate. All Obligations, except for Pound
Advances and undrawn L/Cs and L/C Guarantees, shall bear interest, on the
average Daily Balance, at the then extant Adjusted Base Rate.
(ii) Adjusted Net LIBOR Rate. With respect to all
Obligations other than Pound Advances and undrawn L/Cs and L/C Guarantees
and in lieu of having interest charged at the Adjusted Base Rate, Borrower
shall have the "LIBOR Option", as defined in, and subject to the terms and
conditions of, the LIBOR Supplement, which by this reference hereby is
incorporated herein in full and made a part hereof.
(iii) Pound Advances. All Pound Advances shall bear
interest, on the actual Daily Balance, at a rate equal to the "Adjusted UK
LIBOR Rate" as defined in the Pound Advance Supplement, which by this
reference hereby is incorporated herein in full and made a part hereof.
(b) Default Rate. (i) All Obligations, except for undrawn L/Cs
and L/C Guarantees, shall bear interest, from and after the occurrence and
during the continuance of an Event of Default, at a rate equal to three (3.00)
percentage points above (x) the then extant Adjusted Base Rate, or (y) in the
case of any "Adjusted Net LIBOR Rate Loan" (as defined in the LIBOR Supplement),
the then extant "Adjusted Net LIBOR Rate" (as defined in the LIBOR Supplement),
or (z) in the case of any Pound Advance, the then extant "Adjusted UK LIBOR
Rate" (as defined in the Pound Advance Supplement). (ii) From and after the
occurrence and during the continuance of an Event of Default, the fee provided
in Section 2.2(d) shall be increased to a fee equal to four percent (4.00%) per
annum times the average Daily Balance of the undrawn L/Cs and L/C Guarantees
that were outstanding during the immediately preceding month.
(c) Minimum Interest. In no event shall any rate of interest
chargeable hereunder be less than six percent (6%) per annum (it being
understood that the amounts payable under Section 2.2(d) hereof constitute fees
and not interest). To the extent that interest accrued hereunder with respect
to such advances at the rate set forth herein (including the minimum interest
rate) would yield less than the foregoing minimum amount, the interest rate
chargeable hereunder for the period in question automatically shall be deemed
increased to that rate that would result in the minimum amount of interest being
accrued and payable hereunder.
(d) Payments. Interest hereunder shall be due and payable, in
arrears, on the first day of each month during the term hereof. Borrower hereby
authorizes Foothill, at its option, without prior notice to Borrower, to charge
such interest, all Foothill Expenses (as and when incurred), and all
installments or other payments due under the Equipment/Real Property Term Note
or the New Equipment Term Note, or any other note or any other Loan Document to
Borrower's loan account, which amounts thereafter shall accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the date of this
Agreement is eight and one-half percent (8.50%) 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. The rates of interest
charged hereunder shall be based upon the average Reference Rate in effect
during the month. All interest and fees chargeable under the Loan Documents
shall be computed on the basis of a three hundred sixty (360) day year for the
actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, the
Equipment/Real Property Term Note, or the New Equipment Term Note, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any applicable law. Borrower and Foothill, in executing this Agreement,
the Equipment/Real Property Term Note, and the New Equipment Term Note, intend
legally to agree upon the rate or rates of interest and manner of payment stated
within it; provided, however, that, anything contained herein or in the
Equipment/Real Property Term Note or the New Equipment Term Note 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, the Equipment/Real Property Term Note, and the New Equipment
Term Note, Borrower is and shall be liable only for the payment of such maximum
as allowed by law, and payment received from Borrower 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.
2.6 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of
any wire transfer of funds, check, or other item of payment by Foothill (whether
from transfers to Foothill by the Lockbox Banks pursuant to the Lockbox
Agreements or otherwise) immediately shall be applied to provisionally reduce
the Obligations, but shall not be considered a payment on account unless such
wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Foothill or unless and until such check or other
item of payment is honored when presented for payment. From and after the
Original Closing Date, Foothill shall be entitled to charge Borrower for one (1)
Business Day of `clearance' at the rate set forth in Section 2.5(a)(i) or
Section 2.5(b)(i), as applicable, on all collections, checks, wire transfers, or
other items of payment that are received by Foothill (regardless of whether
forwarded by the Lockbox Banks to Foothill, whether provisionally applied to
reduce the Obligations, or otherwise). This across-the-board one (1) Business
Day clearance charge on all receipts is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's facility to Borrower,
and shall apply irrespective of the characterization of whether receipts are
owned by Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should any check or item of payment not be honored
when presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any wire transfer, check, or other
item of payment shall be deemed received by Foothill only if it is received into
Foothill's Operating Account (as such account is identified in the Lockbox
Agreements) on or before 11:00 a.m. Los Angeles time. If any wire transfer,
check, or other item of payment is received into Foothill's Operating Account
(as such account is identified in the Lockbox Agreements) after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.7 STATEMENTS OF OBLIGATIONS. Foothill shall render statements to
Borrower of the Obligations, 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 Borrower and Foothill unless, within
thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered or certified mail at its address specified in Section 12,
written objection thereto describing the error or errors contained in any such
statements.
2.8 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. A one time closing fee of Seventy Five
Thousand Dollars ($75,000) which is earned, in full, on the Closing Date and is
due and payable by Borrower to Foothill in connection with this Agreement on the
Closing Date;
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, a fee in an amount equal to one-quarter of one percent
(0.25%) per annum times the Average Unused Portion of the Maximum Revolving
Credit Amount;
(c) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill, its Participants, or their
agents, it being the expectation that, in the absence of an Event of Default,
Foothill, its Participants, and their agents will not perform an audit
examination of Borrower and its business more frequently than once per quarter;
Foothill's customary appraisal fee of One Thousand Five Hundred Dollars ($1,500)
per day per appraiser, plus out-of-pocket expenses for each appraisal of the
Collateral performed by Foothill or its agents, it being the expectation that,
in the absence of an Event of Default, Foothill will not perform an appraisal of
the Collateral and the Real Property more frequently than once per year; and
(d) Collateral Maintenance Fee. On the first day of each month
during the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a collateral maintenance fee in an amount equal to Ten Thousand
Dollars ($10,000) per month.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE, INITIAL L/C OR L/C
GUARANTY, THE EQUIPMENT/REAL PROPERTY TERM LOAN, OR INITIAL FUNDING UNDER THE
NEW EQUIPMENT TERM LOAN COMMITMENT. The obligation of Foothill to make the
initial revolving advance, to provide the initial L/C or L/C Guaranty, to make
the Equipment/Real Property Term Loan, or to make the initial funding under the
New Equipment Term Loan Commitment 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) the Closing Date shall occur on or before September 26,
1997;
(b) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
i) the Equipment/Real Property Term Note and the New
Equipment Term Note;
ii) the Warrant Amendment;
iii) the Reaffirmation Agreement;
iv) the LIBOR Supplement;
v) the Pound Advance Supplement;
vi) amendments of or supplements to such other Loan
Documents, financing statements, and fixture filings as
Foothill may require, in each case, in form and substance
satisfactory to Foothill;
vii) (A) all required consents of Foothill's participants in
the Obligations to the amendment and restatement of the
Existing Loan Agreement and Foothill's execution, delivery,
and performance of this Agreement, and (B) such amendments
or modifications to the respective participation agreements
of such particpants in order to reflect the amendment and
restatement of the Existing Loan Agreement by this
Agreement; in each case in form and substance satisfactory
to Foothill;
(c) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the incumbency and signatures of authorized
officers of Borrower and to the resolutions of Borrower's Board of Directors
authorizing its execution and delivery of this Agreement and the other Loan
Documents to which it is a party and authorizing specific officers thereof to
execute and deliver the same;
(d) Foothill shall have received copies of Borrower's By-laws
and Articles or Certificate of Incorporation, as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of Borrower;
(e) Foothill shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing Date,
by the Secretary of State of the state of incorporation of Borrower, which
certificate shall indicate that Borrower is in good standing in such state;
(f) Foothill shall have received certificates of corporate
status with respect to Borrower, each dated within fifteen (15) days of the
Closing Date, such certificates to be issued by the Secretary of State of the
states in which its failure to be duly qualified or licensed would have a
material adverse effect on the financial condition or properties and assets of
Borrower, which certificates shall indicate that Borrower is in good standing;
(g) Foothill shall have received a certificate from the
Secretary of Canadian Guarantor attesting to the incumbency and signatures of
authorized officers of Canadian Guarantor and to the resolutions of Canadian
Guarantor's Board of Directors authorizing its execution and delivery of the
Loan Documents to which it is a party and authorizing specific officers thereof
to execute and deliver the same;
(h) Foothill shall have received copies of Canadian Guarantor's
By-laws and Articles or Certificate of Incorporation (or Canadian equivalent),
as amended, modified, or supplemented to the Closing Date, certified by the
Secretary of Canadian Guarantor;
(i) Foothill shall have received a certificate from a director
of NSC-UK attesting to the incumbency and signatures of authorized directors of
NSC-UK and to the resolutions of NSC-UK's Board of Directors authorizing its
execution and delivery of the Loan Documents to which it is a party and
authorizing specific directors thereof to execute and deliver the same;
(j) Foothill shall have received either (i) copies of NSC-UK's
By-laws and Articles or Certificate of Incorporation (or British equivalent), as
amended, modified, or supplemented to the Closing Date, certified by a director
of NSC-UK, or (ii) a certificate of a director of NSC-UK (in form and substance
satisfactory to Foothill) certifying that the copies of NSC-UK's By-laws and
Articles or Certificate of Incorporation (or British equivalent) which were
delivered to Foothill on the Old Fourth Amendment Closing Date (y) have not been
rescinded, terminated, replaced, amended, supplemented, or otherwise modified
since the Old Fourth Amendment Closing Date, and (z) remain in full force and
effect.
(k) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
and
(l) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, L/CS, L/C GUARANTEES, THE
EQUIPMENT/REAL PROPERTY TERM LOAN, OR FUNDINGS UNDER THE NEW EQUIPMENT TERM LOAN
COMMITMENT. The following shall be conditions precedent to all advances, L/Cs,
L/C Guarantees, the making of the Equipment/Real Property Term Loan, or fundings
under the New Equipment Term Loan Commitment hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such revolving advance, L/C, L/C Guaranty, the
making of the Equipment/Real Property Term Loan, or funding under the New
Equipment Term Loan Commitment, 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 Event of Default or event which with the giving of notice
or passage of time would constitute an Event of Default shall have occurred and
be continuing on the date of such revolving advance, L/C, L/C Guaranty, the
making of the Equipment/Real Property Term Loan, or funding under the New
Equipment Term Loan Commitment, nor shall either result from the making of the
advance; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the making of such revolving
advance, L/C, L/C Guaranty, the making of the Equipment/Real Property Term Loan,
or funding under the New Equipment Term Loan Commitment shall have been issued
and remain in force by any governmental authority against Borrower, Foothill, or
any of their Affiliates.
3.3 CONDITIONS SUBSEQUENT TO ALL ADVANCES, L/CS, L/C GUARANTEES, THE
EQUIPMENT/REAL PROPERTY TERM LOAN, AND FUNDINGS UNDER THE NEW EQUIPMENT TERM
LOAN COMMITMENT. The following shall be conditions subsequent to all revolving
advances, L/Cs, L/C Guarantees, the making of the Equipment/Real Property Term
Loan, or fundings under the New Equipment Term Loan Commitment hereunder:
(a) Within 60 days following the Closing Deadline, Foothill
shall have received each of the following documents, duly executed, and each
such document shall be in full force and effect:
(1) such amendments of or supplements to the Mortgages as
Foothill may require, in each case in form and
substance satisfactory to Foothill; and
(2) such amendments of or endorsements to title insurance
policies held by Foothill with respect to the Mortgages
as Foothill may require, in each case in form and
substance satisfactory to Foothill.
3.4 TERM. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Foothill and shall continue in full force
and effect for a term ending on the Maturity Date. 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, all
Obligations (including contingent reimbursement obligations under any
outstanding L/Cs or L/C Guarantees) immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrower of Borrower's duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral and
the Real Property shall remain in effect until all Obligations have been fully
and finally discharged and Foothill's obligation to provide advances hereunder
is terminated.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any
time upon ninety (90) days prior written notice to Foothill, to terminate this
Agreement by paying to Foothill, in cash, the Obligations (including an amount
equal to the full amount of the L/Cs or L/C Guarantees), together with a premium
(the "Early Termination Premium") equal to: (a) if such payment is made on or
prior to October 1, 1998, two percent (2.0%) of the Maximum Amount; (b) if such
payment is made during the period commencing on October 2, 1998 and ending on
October 1, 1999, one percent (1.0%) of the Maximum Amount; (c) if such payment
is made during the period commencing on October 2, 1999 and ending on March 1,
2000, one-half of one percent (0.5%); and (d) if such payment is made
thereafter, zero; provided, however, that if Borrower is acquired by or merged
with and into another Person and the Obligations are concurrently repaid in full
in cash by Borrower as a result of funds proximately provided by Foothill in
connection with such merger or acquisition, Borrower need not pay the Early
Termination Premium.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates this
Agreement upon the occurrence of an Event of Default that intentionally is
caused by Borrower for the purpose, in Foothill's reasonable judgment, of
avoiding payment of the Early Termination Premium provided in Section 3.6, 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, Borrower 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 Borrower agrees 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. Borrower hereby grants to Foothill a
continuing security interest in all 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 Borrower and Guarantor
of each of their respective 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 Borrower. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding,
except for the sale of Inventory to buyers in the ordinary course of business,
Borrower has no authority, express or implied, to dispose of any item or portion
of the Collateral or the Real Property.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. On or before the Relevant Closing Date, Foothill, Borrower and
Guarantor, and the Lockbox Banks shall enter into the Lockbox Agreements, in
form and substance satisfactory to Foothill in its sole discretion, (x) pursuant
to which all of Borrower's cash receipts, checks, and other items of payment
(including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax
refunds) will be forwarded to Foothill on a daily basis, and (y) pursuant to
which all of Guarantor's cash receipts, checks, and other items of payment
(including, insurance proceeds, proceeds of cash sales, rental proceeds, and tax
refunds) will be deposited to an account of Foothill to be transferred, so long
as no Event of Default has occurred and is continuing, to an account of
Guarantor. At any time, Foothill or Foothill's designee may: (a) notify
customers or Account Debtors of Borrower and Guarantor that the Accounts of
Borrower and Guarantor, General Intangibles, or Negotiable Collateral have been
assigned to Foothill or that Foothill has a security interest therein; and (b)
collect the Accounts of Borrower and Guarantor, General Intangibles, and
Negotiable Collateral directly and charge the collection costs and expenses to
Borrower's loan account. Borrower agrees that it will hold in trust for
Foothill, as Foothill's trustee, any cash receipts, checks, and other items of
payment (including, insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) that it receives and immediately will deliver said cash
receipts, checks, and other items of payment 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, Borrower shall execute and deliver, and cause Guarantor
to execute and deliver, to Foothill all financing statements, continuation
financing statements, fixture filings, security agreements, chattel mortgages,
pledges, assignments, endorsements of certificates of title, applications for
title, affidavits, reports, notices, schedules of accounts, letters of
authority, and all other documents that Foothill may reasonably request, in form
satisfactory to Foothill, to perfect and continue perfected Foothill's security
interests in the Collateral and the Real Property, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to: (a) if Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of 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 (in
accordance with Section 1208 of the Code), sign Borrower's name on any invoice
or xxxx of lading relating to any Account, drafts against Account Debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
Account Debtors; (c) send requests for verification of Accounts; (d) endorse
Borrower's name on any checks, notices, acceptances, money orders, drafts, or
other item of payment or security 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 (in accordance with Section 1208 of the Code), notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by Foothill, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower; (f) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure (in accordance with Section
1208 of the Code), make, settle, and adjust all claims under 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 (in accordance with Section
1208 of the Code), settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be executed and delivered
any documents and releases which Foothill determines to be necessary. The
appointment of Foothill as 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.
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 Borrower's Books and to check, test, and appraise the Collateral or the
Real Property in order to verify Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral or
the Real Property.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral and the Real Property, free and clear of liens, claims,
security interests, or encumbrances, except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are, at the time of the
creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, 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 Borrower's and Guarantor's respective
businesses, unconditionally owed to Borrower or Guarantor, as the case may be,
without defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. 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 and unconditional acceptance by the Account Debtor. At the time of
the creation of an Eligible Account and as of each date on which Borrower
includes an Eligible Account in a Borrowing Base calculation or certification,
neither Borrower nor Guarantor has received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
applicable Account Debtor regarding such Eligible Account.
5.3 ELIGIBLE INVENTORY. All Eligible Inventory is now and at all
times hereafter shall be of good and merchantable quality, free from defects.
5.4 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and Equipment
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 6.15 or otherwise permitted by Section 6.15. The foregoing to the
contrary notwithstanding, Borrower and Canadian Guarantor shall be permitted to
have Inventory situated at locations other than those set forth on Schedule 6.15
so long as such Inventory is consigned to a third Person, so long as the maximum
amount of Inventory at any one such location does not exceed $100,000, and so
long as the aggregate amount of all Inventory at such locations does not exceed
$750,000.
5.5 INVENTORY RECORDS. Each of Borrower and Guarantor now keeps, and
hereafter at all times shall keep, correct and accurate records itemizing and
describing the kind, type, quality, and quantity of the Inventory, and
Borrower's or Guarantor's cost therefor, as the case may be.
5.6 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is 00-0000000.
5.7 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Borrower is
duly organized and existing and in good standing under the laws of the state 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 could
reasonably be expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), finances, or prospects of
Borrower or on the value of the Collateral or the Real Property to Foothill.
Borrower has no subsidiaries other than Canadian Guarantor, National-Standard
Export Corp., and NSC-UK.
5.8 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of each of the Loan Documents to which Borrower is a party are
within Borrower's corporate powers, have been duly authorized, and are not in
conflict with nor constitute a breach of any provision contained in Borrower's
Articles or Certificate of Incorporation, or By-laws, nor will they constitute
an event of default under any material agreement to which Borrower is a party or
by which its properties or assets may be bound.
5.9 LITIGATION. There are no actions or proceedings pending by or
against Borrower or Guarantor before any court or administrative agency and
Borrower does not have knowledge or belief of any pending, threatened, or
imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Borrower or Guarantor, except for ongoing
collection matters in which Borrower or Guarantor is the plaintiff, matters
disclosed on Schedule 5.9, and matters arising after the date hereof that, if
decided adversely to Borrower or Guarantor, as the case may be, would not
materially impair the prospect of repayment of the Obligations or performance by
Guarantor of its obligations under the Guaranty or materially impair the value
or priority of Foothill's security interests in the Worldwide Collateral or the
Real Property.
5.10 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION. All financial
statements relating to Borrower or Guarantor that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP and fairly
present Borrower's (or Guarantor's, as applicable) financial condition as of the
date thereof and Borrower's (or Guarantor's, as applicable) results of
operations for the period then ended. There has not been a material adverse
change in the financial condition of Borrower (or Guarantor, as applicable)
since the date of the latest financial statements submitted to Foothill on or
before the Closing Date.
5.11 SOLVENCY. Each of Borrower and Guarantor is Solvent. No
transfer of property is being made by Borrower or Guarantor, as the case may be,
and no obligation is being incurred by Borrower or Guarantor, as the case may
be, 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 Borrower or Guarantor, as the case may be.
5.12 EMPLOYEE BENEFITS. Each Plan is in compliance in all material
respects with the applicable provisions of ERISA and the IRC. Each Qualified
Plan and Multiemployer Plan has been determined by the Internal Revenue Service
to qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under Section 501 of the IRC, and, to the
best knowledge of Borrower, nothing has occurred that would cause the loss of
such qualification or tax-exempt status. There are no accumulated funding
deficiencies with respect to any Plan maintained or sponsored by Borrower or any
ERISA Affiliate, nor with respect to any Plan to which Borrower or any ERISA
Affiliate contributes or is obligated to contribute which could reasonably be
expected to have a material adverse effect on the financial condition of
Borrower. No Plan subject to Title IV of ERISA has any Unfunded Benefit
Liability the required ammortization of which could reasonably be expected to
have a material adverse effect on the financial condition of Borrower. Neither
Borrower nor any ERISA Affiliate has transferred any Unfunded Benefit Liability
to a person other than Borrower or an ERISA Affiliate or has otherwise engaged
in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA
which could reasonably be expected to have a material adverse effect on the
financial condition of Borrower. Neither Borrower nor any ERISA Affiliate has
incurred nor reasonably expects to incur (x) any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA (other than
premiums due but not delinquent under Section 4007 of ERISA) with respect to a
Plan, which could, in either event, reasonably be expected to have a material
adverse effect on the financial condition of Borrower. Except as set forth on
Schedule 5.12 attached hereto, no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the IRC has been
made with respect to any Plan. No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan which could reasonably be expected to
have a material adverse effect on the financial condition of Borrower. Borrower
and each ERISA Affiliate have complied in all material respects with the notice
and continuation coverage requirements of Section 4980B of the IRC.
5.13 ENVIRONMENTAL CONDITION. (a) Borrower represents and warrants to
Foothill that (i) if Borrower or any tenant, subtenant, or occupant uses
Hazardous Materials, such use shall only be in the ordinary course of its
business at the Real Property and shall be in substantial compliance with all
Environmental Laws governing said use, except for violations or alleged
violations of financial responsibility requirements as set forth in 40 Code of
Federal Regulations and corresponding state regulations, with respect to closed
surface impoundments which exist as of the date hereof at the Real Property, the
estimated amount of Borrower's aggregate liability for which Borrower from time
to time shall furnish to Foothill upon request by Foothill; (ii) Borrower shall
conduct and complete all investigations, studies, sampling, and testing
(including environmental audits or assessments) requested by Foothill based upon
a reasonable need therefor, and all remedial, removal, and other actions
necessary to clean up and remove, report or otherwise remedy (to "Remedy") all
Hazardous Materials on, under, from, or affecting the Real Property as required
by all Environmental Laws, with the approval of appropriate federal, state, and
local governmental authorities, and in accordance with the enforceable orders
and directives of all federal, state, and local governmental authorities,
provided, however, that, the foregoing notwithstanding, Borrower shall not be
required to Remedy any Hazardous Materials on, under, from, or affecting the
Real Property, where no enforcement action has been taken by any federal state
or local governmental authority with respect thereto, and no affirmative
obligation to Remedy has been imposed by any applicable Environmental Law,
unless, in either case, the cost to Remedy would when aggregated with all other
such costs have a material adverse effect on Borrower's business or financial
condition or upon the Real Property; provided further, however, that, the
foregoing notwithstanding, where enforcement action has been taken by any
federal, state, or local governmental authority with respect to any Hazardous
Materials on, under, from, or affecting the Real Property, Borrower shall not be
required to comply with any mandates in such action so long as Borrower
diligently is proceeding in good faith to contest such action, and such
compliance or action is held in abeyance voluntarily, or by stay, injunction, or
otherwise.
(b) Subject to the limitations set forth below, Borrower shall
defend, indemnify, and hold harmless Foothill, its employees, agents, officers,
and directors (collectively, the "Indemnitees"), from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs, or
expenses, including, attorneys and consultants fees, investigation and
laboratory fees, court costs, and litigation expenses incurred by Foothill,
whether prior to or after the date hereof and whether direct, indirect, known or
unknown, contingent or otherwise, as a result of or arising from any suit,
claim, investigation, action, or proceeding, whether threatened or initiated,
asserting any legal or equitable remedy under any Environmental Law. The
indemnity obligations hereunder shall survive the termination of the other
provisions of this Agreement and the full and final payment of the Obligations.
The indemnity obligations hereunder are specifically limited as follows:
(i) Borrower shall have no indemnity obligation with
respect to Hazardous Materials that are first introduced to the Real Property or
any part of the Real Property subsequent to the date that Borrower's interest in
and possession of the Real Property or any part of the Real Property shall be
fully terminated by foreclosure of the applicable Mortgage or acceptance of a
deed in lieu of foreclosure;
(ii) Borrower shall have no indemnity obligation with
respect to any Hazardous Materials introduced to the Real Property or any part
of the Real Property by Foothill, its successors or assigns, except to the
extent that (a) such Hazardous Materials existed on, under, from, or affecting
the Real Property prior to Foothill's introduction of such Hazardous Materials,
or (b) any release or threatened release of such Hazardous Materials was caused
in whole or in part by the acts or omissions of Borrower, its agents, or
employees; and
(iii) Borrower shall have no indemnity obligation to the
extent Foothill shall have been guilty of any grossly negligent act or willful
misconduct that shall have been the proximate cause of a release of Hazardous
Materials that otherwise would be been subject to the indemnity under this
Section 5.13(b).
(c) Borrower agrees that in the event that a Mortgage is foreclosed
or Borrower tenders a deed in lieu of foreclosure, Borrower shall deliver the
Real Property to Foothill free of any and all Hazardous Materials that are then
required to be removed (whether over time or immediately) pursuant to applicable
federal, state and local laws, ordinances, rules, or regulations affecting the
Real Property so that the condition of the Real Property shall conform with all
Environmental Laws affecting the Real Property.
(d) Any and all amounts owed by Borrower to Foothill under this
Section 5.13 shall constitute additional Obligations secured by the security
interests created under this Agreement and the liens and security interest
created by the Mortgages.
5.14 RELIANCE BY FOOTHILL; CUMULATIVE. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated with each advance or issuance of an L/C or L/C Guaranty and shall be
conclusively presumed to have been relied on by Foothill regardless of any
investigation made or information possessed by Foothill. The warranties and
representations set forth herein shall be cumulative and in addition to any and
all other warranties and representations that Borrower now or hereafter shall
give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall, and shall
cause Guarantor to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting in accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as from time to time may be requested by Foothill. Borrower also
shall, and shall cause Guarantor to keep proper books of account showing all
sales, claims, and allowances on its Inventory.
6.2 COLLATERAL REPORTS. Deliver to Foothill, no later than the tenth
(10th) day of each month during the term of this Agreement, a detailed aging, by
total, of the Accounts, a reconciliation statement, and a summary aging of all
accounts payable and an aging of the accounts payable owed to Borrower's and
Guarantor's largest (by accounts payable) ten (10) vendors and any book
overdraft. Original sales invoices evidencing daily sales shall be mailed by
Borrower or Guarantor, as applicable, to each Account Debtor with, at Foothill's
request, a copy to Foothill, and, at Foothill's direction following the
occurrence of and during the continuation of an Event of Default, the invoices
shall indicate on their face that the Account has been assigned to Foothill and
that all payments are to be made directly to Foothill. Borrower shall, and
shall cause Guarantor to deliver to Foothill, as Foothill may from time to time
require, collection reports, sales journals, invoices, original delivery
receipts, customer's purchase orders, shipping instructions, bills of lading,
and other documentation respecting shipment arrangements. Absent such a request
by Foothill, copies of all such documentation shall be held by Borrower or
Guarantor, as applicable, as custodian for Foothill. In addition, from time to
time, Borrower shall deliver and cause Guarantor to deliver to Foothill such
other and additional information or documentation as Foothill may request.
6.3 SCHEDULES OF ACCOUNTS. With such regularity as Foothill shall
require, Borrower shall provide and shall cause Guarantor to provide to Foothill
with schedules describing all Accounts. Foothill's failure to request such
schedules or Borrower's or Guarantor's failure to execute and deliver such
schedules shall not affect or limit Foothill's security interests or other
rights in and to the Accounts.
6.4 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within thirty (30) days
after the end of each month during each of Borrower's fiscal years (except for
the month of September, which shall be within sixty (60) days), a company
prepared balance sheet, income statement, and cash flow statement covering
Borrower's operations during such period; and (b) as soon as available, but in
any event within ninety (90) days after the end of each of Borrower's fiscal
years, financial statements of Borrower 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 do not have knowledge of the
existence of any event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice, constitute an Event of
Default. Such audited financial statements shall include a balance sheet,
profit and loss statement, and cash flow statement, and, if prepared, such
accountants' letter to management. Borrower and Guarantor shall have issued
written instructions to their independent certified public accountants
authorizing them to communicate with Foothill and to release to Foothill
whatever financial information concerning Borrower or Guarantor that Foothill
may request; provided, however, that Borrower and Guarantor shall not be liable
if such accountants fail to comply with Foothill's request unless their failure
is caused by the gross negligence or wilful misconduct of Borrower or Guarantor.
In addition to the financial statements referred to above, Borrower agrees to
deliver financial statements prepared on a consolidating basis so as to present
Borrower and each subsidiary of Borrower separately, and on a consolidated
basis.
Together with the above, Borrower also shall deliver to Foothill
Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by Borrower or Guarantor with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower and Guarantor to their
respective shareholders, and any other report reasonably requested by Foothill
relating to the Collateral, the Real Property, or the financial condition of
Borrower or Guarantor.
Each month, together with the financial statements provided pursuant
to Section 6.4(a), Borrower shall deliver to Foothill a certificate signed by
its chief financial officer to the effect that: (i) all reports, statements, or
computer prepared information of any kind or nature delivered or caused to be
delivered to Foothill hereunder have been prepared in accordance with GAAP and
fairly present the financial condition of Borrower and Guarantor; (ii) Borrower
is in timely compliance with all of its covenants and agreements hereunder;
(iii) the representations and warranties of Borrower and Guarantor contained in
the 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); and (iv) on the date of delivery of such certificate to Foothill there
does not exist any condition or event that constitutes an Event of Default (or,
in each case, to the extent of any non-compliance, describing such non-
compliance as to which he or she may have knowledge and what action Borrower or
Guarantor, as applicable, has taken, is taking, or proposes to take with respect
thereto).
As soon as available and in any event no later than sixty (60) days
after the start of each fiscal year of Borrower, Borrower will deliver
Borrower's Projections to Foothill. Such Projections shall be for the
forthcoming three (3) years, year by year, and for the forthcoming fiscal year,
month by month.
Borrower hereby irrevocably authorizes all auditors, accountants, or
other third parties to deliver to Foothill, at Borrower's expense, copies of
Borrower's and Guarantor'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 Borrower's or Guarantor's
business affairs and financial conditions.
6.5 TAX RETURNS. Borrower agrees to deliver to Foothill copies of
each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.6 GUARANTOR REPORTS. Borrower agrees to cause Guarantor to deliver
its annual financial statements at the time when Borrower provides its audited
financial statements to Foothill and copies of all income tax returns as soon as
the same are available and in any event no later than thirty (30) days after the
same are required to be filed by law.
6.7 DESIGNATION OF INVENTORY. Borrower shall now and from time to
time hereafter, but not less frequently than weekly, execute and deliver, and
cause Canadian Guarantor to execute and deliver, to Foothill a designation of
Inventory specifying Borrower's and Canadian Guarantor's respective costs and
the wholesale market value of Borrower's and Canadian Guarantor's respective raw
materials, work in process, and finished goods. Borrower shall now and from
time to time hereafter, but not less frequently than monthly, execute and
deliver, and cause Canadian Guarantor to execute and deliver, to Foothill a
report specifying the amount, in pounds, of Inventory that is comprised of goods
consigned by third Persons to Borrower or Canadian Guarantor and the locations
thereof, containing, in such case, a reconciliation statement reconciling the
current information as against the information contained in the report issued
for the prior month, specifying the amount of Inventory that is consigned by
Borrower or Canadian Guarantor to third Persons and the name of such consignees
and the locations of such consigned Inventory, and further specifying such other
information as Foothill may reasonably request. Borrower agrees that it will,
and will cause Canadian Guarantor to, keep any and all Inventory that is
consigned by one or more third Persons to it segregated from the remainder of
its Inventory and conspicuously marked as consigned Inventory and acknowledges
and agrees that no Inventory that is used to calculate the Borrowing Base shall
consist of Inventory consigned by one or more third Persons to Borrower or
Canadian Guarantor nor Inventory consigned by Borrower or Canadian Guarantor to
one or more third Persons.
6.8 RETURNS. Returns and allowances, if any, as between Borrower and
Guarantor and their respective Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower and Guarantor,
respectively, 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 Borrower or Guarantor,
Borrower or Guarantor, as applicable, promptly shall determine the reason for
such return and, if Borrower or Guarantor, as the case may be, accepts such
return, issue a credit memorandum (with, at Foothill's request, a copy to be
sent to Foothill) 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 Borrower or Guarantor, Borrower or Guarantor, as
applicable, promptly shall determine the reason for such return and, if Foothill
consents (which consent shall not be unreasonably withheld), Borrower or
Guarantor, as the case may be, shall issue a credit memorandum (with, at
Foothill's request, a copy to be sent to Foothill) in the appropriate amount to
such Account Debtor. On a daily basis, Borrower shall notify Foothill of all
returns and recoveries and shall notify Foothill of all disputes and claims in
excess of $20,000 per dispute or claim.
6.9 TITLE TO EQUIPMENT. Upon Foothill's request, Borrower
immediately shall deliver and shall cause Guarantor to deliver to Foothill,
properly endorsed, any and all evidences of ownership of, certificates of title,
or applications for title to any items of Equipment.
6.10 MAINTENANCE OF EQUIPMENT. Except for the Abandoned Equipment,
Borrower shall keep and maintain and shall cause Guarantor to keep and maintain
the 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.
Borrower shall not and shall cause Guarantor not to permit any item of Equipment
to become a fixture to real estate or an accession to other property, and the
Equipment is now and shall at all times remain personal property.
6.11 TAXES. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or Guarantor or any of their property have been paid, and shall hereafter be
paid in full, before delinquency or before the expiration of any extension
period. Borrower shall and shall cause Guarantor to make due and timely payment
or deposit of all 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. Borrower will and will cause Guarantor to 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 Borrower or
Guarantor, as applicable, has made such payments or deposits. The foregoing to
the contrary notwithstanding, Borrower and Guarantor shall not be required to
pay or discharge any such assessment or tax (other than payroll taxes or any
taxes that are the subject of a Federal tax lien) so long as the validity
thereof shall be the subject of a Permitted Protest.
6.12 INSURANCE.
(a) Borrower, at its expense, shall and shall cause Guarantor to
keep the Worldwide Collateral and the Real Property insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall and shall cause Guarantor to maintain
business interruption, public liability, product liability, and property damage
insurance relating to Borrower's or Guarantor's, as applicable, ownership and
use of the Worldwide Collateral and the Real Property, as well as insurance
against larceny, embezzlement, and criminal misappropriation.
(b) 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 such policies of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing Foothill as
sole loss payee thereof, and shall contain a waiver of warranties, and shall
specify that the insurer must give at least ten (10) days prior written notice
to Foothill before canceling its policy for any reason. Borrower shall deliver
to Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor. All proceeds payable under any such policy
(other than with respect to business interruption) shall be payable to Foothill
to be applied on account of the Obligations and all proceeds under any such
policy with respect to business interruption shall be payable to Foothill to be
applied to the revolving credit facility set forth under Section 2.1 hereof.
The foregoing notwithstanding, Foothill agrees to exercise its reasonable
judgment in determining whether to permit Borrower to receive all or a portion
of the proceeds payable under any such policy in order to permit it to replace
or rebuild any Equipment or Real Property that was the subject of the applicable
casualty loss.
6.13 FINANCIAL COVENANTS. Borrower shall maintain:
(a) Net Worth. A consolidated net worth, determined in
accordance with GAAP, of Borrower and its Subsidiaries of not less negative
Thirty Million Dollars (<$30,000,000>), measured on a fiscal quarter-end basis.
(b) Interest Coverage Ratio. An Interest Coverage Ratio,
determined in accordance with GAAP, of Borrower and its Subsidiaries of not less
one and three-quarters to one (1.75:1.00), measured on a fiscal quarter-end
basis.
Anything herein to the contrary notwithstanding, the financial covenants set
forth in this Section 6.13 shall be determined with reference to all Obligations
in respect of revolving advances outstanding under Section 2.1 as current
liabilities of Borrower without regard to whether they would be deemed to be so
under GAAP.
6.14 NO SETOFFS OR COUNTERCLAIMS. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made 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.
6.15 LOCATION OF INVENTORY AND EQUIPMENT. Borrower and Canadian
Guarantor shall keep the Inventory and Equipment only at the locations
identified on Schedule 6.15; provided, however, that Borrower and Canadian
Guarantor may amend Schedule 6.15 so long as such amendment occurs by written
notice to Foothill not less than thirty (30) days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States (or, with respect to the
Inventory of Canadian Guarantor, within Canada), and so long as, at the time of
such written notification, Borrower and Canadian Guarantor provide any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provide to Foothill a
landlord's waiver in form and substance satisfactory to Foothill.
6.16 COMPLIANCE WITH LAWS. Borrower shall and shall cause Guarantor
to comply with the requirements of all applicable laws, rules, regulations, and
orders of any governmental authority, including, in the case of Borrower, 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 have
a material adverse effect on the business, operations, condition (financial or
otherwise), finances, or prospects of Borrower or Guarantor, or on the value of
the Collateral, the collateral that is the subject of the Security Agreement,
and the Real Property to Foothill.
6.17 EMPLOYEE BENEFITS.
(a) Borrower shall deliver to Foothill a written statement by the
chief financial officer of Borrower or Guarantor, as applicable, specifying the
nature of any of the following events and the actions which Borrower or
Guarantor, as applicable, proposes to take with respect thereto promptly, and in
any event within ten (10) days of becoming aware of any of them, and when known,
any action taken or threatened by the Internal Revenue Service, PBGC, Department
of Labor, or other party with respect thereto: (i) an ERISA Event (or
comparable event under Canadian law) with respect to any Plan; (ii) the
incurrence of an obligation to pay additional premium to the PBGC under Section
4006(a)(3)(E) of ERISA (or comparable event under Canadian law) with respect to
any Plan; and (iii) any lien on the assets of Borrower or Guarantor arising in
connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill copies prepared
or received by Borrower or an ERISA Affiliate of: (i) at the request of
Foothill, each annual report (Internal Revenue Service Form 5500 series) and all
accompanying schedules, actuarial reports, financial information concerning the
financial status of each Plan, and schedules showing the amounts contributed to
each Plan by or on behalf of Borrower or its ERISA Affiliates for the most
recent three (3) plan years; (ii) all notices of intent to terminate or to have
a trustee appointed to administer any Plan; (iii) all written demands by the
PBGC under Subtitle D of Title IV of ERISA; (iv) all notices required to be sent
to employees or to the PBGC under Section 302 of ERISA or Section 412 of the
IRC; (v) all written notices received with respect to a Multiemployer Plan
concerning (x) the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA, (y) a termination described in Section 4041A of ERISA, or
(z) a reorganization or insolvency described in Subtitle E of Title IV of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate; (vii) the adoption of
any amendment to any Plan that is subject to Title IV of ERISA or Section 412 of
the IRC, if such amendment results in a material increase in benefits or
Unfunded Benefit Liability; or (viii) the commencement of contributions by
Borrower or any ERISA Affiliate to any Plan that is subject to Title IV of ERISA
or Section 412 of the IRC.
6.18 LEASES. Borrower shall and shall cause Guarantor to pay when due
all rents and other amounts payable under any leases to which Borrower or
Guarantor, as applicable, is a party or by which Borrower's or Guarantor's
properties and assets are bound, unless such payments are the subject of a good
faith Permitted Protest. To the extent that Borrower or Guarantor fails timely
to make payment of such rents and other amounts payable when due under its
leases, Foothill shall be entitled, in its discretion, and without the necessity
of declaring an Event of Default, to reserve an amount equal to such unpaid
amounts from the loan availability created under Section 2.1 hereof.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not, and will not permit Guarantor to, do any of the following without
Foothill's prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, the Equipment/Real
Property Term Note, or the New Equipment Term Note;
(b) Indebtedness set forth in the latest financial statements of
Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) Indebtedness permitted under Section 7.6 hereof;
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) 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 Borrower or Guarantor,
as applicable, (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, or cause
Guarantor to create, incur, assume, or permit to exist, directly or indirectly,
any lien on or with respect to any of Borrower's or Guarantor's 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 secure only
those assets or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, 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 business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
of the properties, assets, stock, or other evidence of beneficial ownership of
any Person.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into or
cause Guarantor to enter into any transaction not in the ordinary and usual
course of Borrower's or Guarantor's, as applicable, business, including the
sale, lease, or other disposition of, moving, relocation, or transfer, whether
by sale or otherwise, of any of Borrower's or Guarantor's, as applicable,
properties, assets (other than sales of Inventory to buyers in the ordinary
course of Borrower's or Guarantor's, as applicable, business as currently
conducted).
7.5 CHANGE NAME. Change Borrower's or Guarantor's business structure
or identity or, except upon thirty (30) days prior written notification to
Foothill, change Borrower's or Guarantor's name, FEIN, 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 by endorsement of
instruments or items of payment for deposit to the account of Borrower or
Guarantor, as applicable, or which are transmitted or turned over to Foothill.
The foregoing notwithstanding, (a) [intentionally omitted], (b) [intentionally
omitted], (c) [intentionally omitted], (d) Borrower may continue its guaranties
of the Indebtedness of the Joint Venture that, as of the Original Closing Date,
are in a maximum amount of Four Hundred Fifty Thousand Dollars ($450,000), (e)
Borrower may guaranty the Indebtedness of the Joint Venture, so long as the
aggregate amount of all such guarantees (inclusive of those under clause (d)
above) do not exceed Two Million Two Hundred Fifty Thousand Dollars ($2,250,000)
at any one time outstanding, and (f) Borrower may guaranty Indebtedness of
Guarantor so long as such Indebtedness could have been incurred hereunder
directly by Borrower.
7.7 RESTRUCTURE. Make any change in Borrower's or Guarantor's
financial structure, the principal nature of Borrower's or Guarantor's business
operations, or the date of its fiscal year.
7.8 PREPAYMENTS. Except in connection with a refinancing permitted
by Section 7.1(d), or those required or permitted by this Agreement, prepay any
Indebtedness owing to any third Person.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CAPITAL EXPENDITURES. Make any capital expenditure, or any
commitment therefor, in excess of Two Million Dollars ($2,000,000) for any
individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in any fiscal year, is in excess of Ten
Million Dollars ($10,000,000). The foregoing notwithstanding, Borrower shall be
entitled to purchase or lease on a capitalized lease basis all or any portion of
those twenty-one looms that it currently leases on an operating lease basis from
Toyota Tsusho America.
7.11 XXXX AND HOLDS. Sell, or cause, suffer, or permit Guarantor to
sell, any Inventory on xxxx and hold terms of sale. Consign, or cause, suffer,
or permit Guarantor to consign, any Inventory other than in the ordinary course
of its business consistent with its past practices.
7.12 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash) on, or purchase, acquire, redeem, or retire any of
Borrower's or Guarantor's capital stock, of any class, whether now or hereafter
outstanding.
7.13 ACCOUNTING METHODS. Except to the extent required by GAAP or the
Financial Accounting Standards Board, modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's or Guarantor's accounting
records without said accounting firm or service bureau agreeing to provide
Foothill information regarding the Collateral and the Real Property or
Borrower's or Guarantor's financial condition. Borrower waives and shall cause
Guarantor to waive 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 or any other Loan Document, and agrees that Foothill may contact
directly any such accounting firm or service bureau in order to obtain such
information.
7.14 INVESTMENTS. Directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to, any
Person; provided, however that the foregoing shall not prohibit: (a) loans or
advances by Borrower to Canadian Guarantor or by Canadian Guarantor to Borrower;
provided, however, that the amount of all such loans or advances made by
Borrower to Canadian Guarantor during the term of this Agreement shall not
exceed One Million Five Hundred Thousand Dollars ($1,500,000) at any one time
outstanding; (b) the maintenance of Borrower's existing beneficial interests in,
or loans, advances, or capital contributions to, the Joint Venture, which as of
the Old Fourth Amendment Closing Date do not exceed Three Hundred Thousand
Dollars ($300,000); (c) the making or acquisition of additional beneficial
interests in, or the making of additional loans, advances, or capital
contributions to, the Joint Venture; provided, however, that the aggregate
amount of all such investments made by Borrower during the term of this
Agreement shall not exceed Six Hundred Thousand Dollars ($600,000) at any one
time outstanding; provided, however, that, if the amount of Borrower's
investments in the Joint Venture and guaranties on it behalf would, after giving
effect to any proposed investment or guaranty, exceed Two Million Dollars
($2,000,000) then, before making such additional investment or guaranty,
Borrower shall grant security interests to Foothill, pursuant to agreements in
form and substance satisfactory to Foothill, in all of Borrower's investments
(including, if applicable, the investment to be acquired) in the Joint Venture;
(d) the maintenance of Borrower's existing beneficial interests in, or loans,
advances, or capital contributions to, NSC-UK, which as of the Original Closing
Date do not exceed the Original Closing Date UK Investment Amount; and (e) the
making or acquisition of additional beneficial interests in, or the making of
additional loans, advances, or capital contributions to, NSC-UK (including
without limitation the intercompany loan referred to in the second proviso of
Section 7.17); provided, however, that (i) the aggregate outstanding amount of
all such investments (including loans, advances, and capital contributions) made
by Borrower in NSC-UK, whether as of the Original Closing Date or during the
term of this Agreement, shall not at any time exceed the sum of the Original
Closing Date UK Investment Amount plus the then applicable UK Borrowing Base
Component, and (ii) all claims of Borrower against NSC-UK with respect to such
any such investments shall be unsecured, shall be evidenced by book entries,
shall not be evidenced by promissory notes or negotiable instruments, and shall
be subordinated to the Obligations of NSC-UK to Foothill pursuant to the NSC-UK
Subordination Agreement.
7.15 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's or
Guarantor's business, upon fair and reasonable terms, that are fully disclosed
to Foothill, and that are no less favorable to Borrower or Guarantor, as
applicable, than would be obtained in arm's length transaction with a non-
Affiliate.
7.16 SUSPENSION. Suspend or go out of a substantial portion of its
business, or cause, suffer, or permit Guarantor to do the same.
7.17 USE OF PROCEEDS. Use the proceeds of the advances made hereunder
for any purpose other than: (a) to pay transactional costs and expenses incurred
in connection with this Agreement; (b) consistent with the terms and conditions
hereof, for its lawful and permitted corporate purposes; provided, however,
that, on the Old Fourth Amendment Closing Date, the proceeds of a revolving
advance by Foothill to Borrower in an amount equal to the Midland Bank Payoff
Amount shall be used by Borrower to make an unsecured intercompany open account
loan to NSC-UK, which shall in turn be used by NSC-UK to pay off its obligations
to Midland Bank.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Borrower covenants and agrees that it will not, and
will not permit Guarantor to, without thirty (30) days prior written
notification to Foothill, relocate its or Guarantor's chief executive office to
a new location and so long as, at the time of such written notification,
Borrower or Guarantor, as applicable, provides any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a landlord's waiver in form and
substance satisfactory to Foothill. The Inventory and Equipment shall not at
any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent.
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 Borrower fails 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)
unless in any case under this Section 8.1 (except as set forth in the following
proviso) such payment is made within five days after the date such payment was
first due; provided, however, that the five day grace period set forth herein
shall not apply to (i) Overadvances that are not caused by the charging of
interest or Foothill Expenses to Borrower's loan account with Foothill, or (ii)
any payment obligation that arises in connection with or as a result of any
fraudulent act, deceit, or intentional or grossly negligent misrepresentation on
the part of Borrower;
8.2 (a) If Borrower fails or neglects to perform, keep, or observe
any term, provision, condition, covenant, or agreement contained in Sections
6.3, 6.7, and 6.9 of this Agreement and such failure continues for a period of
five (5) days from the date of such failure or neglect; (b) If Borrower fails or
neglects to perform, keep, or observe any term, provision, condition, covenant,
or agreement contained in Sections 6.2, 6.4, 6.5, 6.6, 6.10, 6.11, 6.15, 6.16,
6.17, or 6.18 of this Agreement and such failure continues for a period of
fifteen (15) days from the date of such failure or neglect; or (c) If Borrower
fails or neglects to perform, keep, or observe any other 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 Borrower and
Foothill (other than any such term, provision, condition, covenant, or agreement
that is the subject of another provision of this Article 8);
8.3 If there is, in Foothill's judgment, a material impairment of the
prospect of repayment of any portion of the Obligations owing to Foothill or a
material impairment of the value or priority of Foothill's security interests in
any of the Worldwide Collateral or the Real Property;
8.4 If any material portion of 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 Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and any
of the following events occur: (a) Borrower consents to the institution of the
Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; provided, however, that, during the
pendency of such period, Foothill shall be relieved of its obligation to make
additional advances or issue additional L/Cs or L/C Guarantees hereunder;
(c) the petition commencing the Insolvency Proceeding is not dismissed within
forty-five (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 make additional advances or issue additional L/Cs or L/C
Guarantees hereunder; (d) an interim trustee is appointed to take 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, Borrower; or (e) an order for
relief shall have been issued or entered therein;
8.7 If 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 (a) If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or if any taxes or debts owing
at any time hereafter to the United States Government, or any department,
agency, or instrumentality thereof, becomes a lien, whether xxxxxx or otherwise,
upon any of Borrower's properties and assets; or (b) if a notice of lien, levy,
or assessment is filed of record with respect to any material portion of
Borrower's assets by any state, county, municipal, or governmental agency, or if
any taxes or debts in an aggregate amount of $100,000, or more, owing at any
time hereafter to any one or more of such entities becomes a lien, whether
xxxxxx or otherwise, upon any of Borrower's properties or assets and the same is
not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a lien or encumbrance upon
any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which Borrower
is a party with one or more third Persons resulting in a right by such third
Persons, irrespective of whether exercised, to accelerate the maturity of
Borrower's obligations thereunder, which default is continuing and has not been
cured or waived;
8.11 If Borrower makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
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, at the
time when made, whether made now or hereafter in any warranty, representation,
statement, or report made to Foothill by Borrower or Guarantor or any officer,
employee, agent, or director of Borrower or Guarantor, or if any such warranty
or representation is withdrawn;
8.13 If the obligation of Guarantor or other third Person under any
Loan Document is limited or terminated by operation of law or by Guarantor or
other third Person thereunder, or Guarantor or any other such third Person
becomes the subject of an Insolvency Proceeding; or
8.14 With respect to any Plan, the occurrence of any of the
following which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower: (i) the violation of any of the
provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the incurrence of
liability under Title IV of ERISA; (iv) a failure to make full payment when due
of all amounts which, under the provisions of any Plan or applicable law,
Borrower or any ERISA Affiliate is required to make; (v) the filing of a notice
of intent to terminate a Plan under Sections 4041 or 4041A of ERISA; (vi) a
complete or partial withdrawal of Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of a Plan that the PBGC
has instituted proceedings to terminate such Plan or appoint a trustee to
administer such Plan; (viii) a commencement or increase of contributions to, or
the adoption of or the amendment of, a Plan; and (ix) the assessment against
Borrower or any ERISA Affiliate of a tax under Section 4980B of the IRC.
8.15 If an event of default occurs under the Canadian Security
Agreement or the NSC-UK Guaranty/Debenture.
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 Borrower:
(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 Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower 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 or the Real Property
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 Borrower's 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 Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Without notice to or demand upon Borrower or Guarantor, make
such payments and do such acts as Foothill considers necessary or reasonable to
protect its security interests in the Collateral. Borrower agrees to assemble
the Collateral if Foothill so requires, and to make the Collateral available to
Foothill as Foothill may designate. 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 Borrower's owned premises,
Borrower hereby grants Foothill a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(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 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 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 Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits
of 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, 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 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 Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower 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 Borrower as provided in Section 12, at least five (5) days
before the date fixed for the sale, or at least five (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 Borrower
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 five
(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 Borrower. Any excess
will be returned, without interest and subject to the rights of third Persons,
by Foothill to Borrower.
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 Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons, or fails to make any
deposits or furnish 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 Borrower could have a material adverse effect on Foothill's
interests in the Collateral or the Real Property, in its discretion and without
prior notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in Borrower's
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 6.12, 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, security
interest, encumbrance, 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. The foregoing to the contrary notwithstanding, Borrower and
Guarantor shall not be required to pay or discharge any such assessment or tax
(other than payroll taxes or any taxes that are the subject of a Federal tax
lien), and Foothill shall not have the foregoing rights with respect thereto, if
the validity thereof shall be the subject of a Permitted Protest.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, 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 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 Borrower.
11.3 INDEMNIFICATION. Borrower agrees to defend, indemnify, save, and
hold Foothill and its officers, employees, and agents harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person arising out of or relating to the transactions contemplated by this
Agreement or any other Loan Document, and (b) all losses (including attorneys
fees and disbursements) in any way suffered, incurred, or paid by Foothill as a
result of or in any way arising out of, following, or consequential to the
transactions contemplated by this Agreement or any other Loan Document, except,
in each case, to the extent that such obligation, demand, claim, liability, or
loss was caused by the gross negligence or wilful misconduct of Foothill. This
provision shall survive the termination of this Agreement.
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, or by prepaid telex, TWX, telefacsimile, or telegram (with
messenger delivery specified) to Borrower or to Foothill, as the case may be, at
its address set forth below:
If to Borrower: NATIONAL-STANDARD COMPANY
0000 Xxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
with a copy to: XXXXXXXXX, WILL & XXXXX
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn.: Xxxxxxxxx X. Xxxxx, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn.: Business Finance Division Manager
with a copy to: XXXXXXX, XXXXXXX & XXXXXXXX
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxx Xxxxxxx Hilson, Esq.
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 three
(3) days after the deposit thereof in the mail. 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 transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO 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
SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
FOOTHILL'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE FOOTHILL ELECTS TO
BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH
OF BORROWER AND FOOTHILL WAIVES, 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. 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. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS 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 BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to Foothill may be destroyed or otherwise disposed of by Foothill four (4)
months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower 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 Borrower may not 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 Borrower from its Obligations. Foothill may assign this Agreement
and its rights and duties hereunder; provided, however, that, in the event that
the rights and duties of Foothill hereunder are assigned (other than in
connection with the sale or merger of Foothill or the sale of a substantial
portion of its loan portfolio), Foothill shall not make any such assignment
without the prior written consent of Borrower, which consent shall not be
unreasonably withheld. 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 Borrower or 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 Borrower and such assignment shall effect a novation
between Borrower 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 Borrower,
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 cannot be changed or
terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations, if any, are merged into this Agreement.
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 a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually 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 Borrower or Guarantor of the Obligations or the
transfer by either or both of such parties to Foothill of any property of either
or both of 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 Borrower or Guarantor automatically
shall be revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
15.9 REFERENCES TO EXISTING LOAN AGREEMENT. Upon the execution and
delivery of this Agreement, each reference in the Loan Documents (other than
this Agreement) to the "Loan Agreement", "thereunder", "therein", "thereof", or
words of like import referring to the Existing Loan Agreement shall mean and
refer to this Agreement.
15.10 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, whether before or after the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written and delivered in Los Angeles,
California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By__________________________
Title:_______________________
NATIONAL-STANDARD COMPANY,
an Indiana corporation
By__________________________
Title:_______________________
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
NATIONAL-STANDARD COMPANY
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF SEPTEMBER 17, 1997
TABLE OF CONTENTS
Page(s)
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . 21
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . . . . 22
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . 22
2.1 Revolving Advances. . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Letters of Credit and Letter of Credit Guarantees. . . . . . . . 23
2.3 Equipment/Real Property Term Loan, and New Equipment Term Loan
Commitment; Voluntary Prepayment; Mandatory Prepayment . . . . . 25
2.4 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Interest: Rates, Payments, and Calculations . . . . . . . . . . 29
2.6 Crediting Payments; Application of Collections . . . . . . . . . 31
2.7 Statements of Obligations . . . . . . . . . . . . . . . . . . . . 32
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . 33
3.1 Conditions Precedent to Initial Advance, Initial L/C or L/C
Guaranty, the Equipment/Real Property Term Loan, or Initial
Funding under the New Equipment Term Loan Commitment . . . . . . 33
3.2 Conditions Precedent to All Advances, L/Cs, L/C Guarantees, the
Equipment/Real Property Term Loan, or Fundings under the New
Equipment Term Loan Commitment. . . . . . . . . . . . . . . . . . 35
3.3 Conditions Subsequent to All Advances, L/Cs, L/C Guarantees, the
Equipment/Real Property Term Loan, and Fundings under the New
Equipment Term Loan Commitment. . . . . . . . . . . . . . . . . . 36
3.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.5 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Early Termination by Borrower . . . . . . . . . . . . . . . . . . 36
3.7 Termination Upon Event of Default . . . . . . . . . . . . . . . . 37
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . 37
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . 37
4.2 Negotiable Collateral . . . . . . . . . . . . . . . . . . . . . . 37
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4 Delivery of Additional Documentation Required . . . . . . . . . . 38
4.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . 38
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . 39
5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 39
5.1 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . . . . 39
5.2 Eligible Accounts . . . . . . . . . . . . . . . . . . . . . . . . 39
5.3 Eligible Inventory . . . . . . . . . . . . . . . . . . . . . . . 39
5.4 Location of Inventory and Equipment . . . . . . . . . . . . . . . 40
5.5 Inventory Records . . . . . . . . . . . . . . . . . . . . . . . . 40
5.6 Location of Chief Executive Office; FEIN . . . . . . . . . . . . 40
5.7 Due Organization and Qualification; Subsidiaries . . . . . . . . 40
5.8 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . 40
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.10 . . No Material Adverse Change in Financial Condition . . . . . 41
5.11 . . . . . . . . . . . . . . . . . . . . . . Solvency . . . . . 41
5.12 . . . . . . . . . . . . . . . . . . Employee Benefits . . . . . 41
5.13 . . . . . . . . . . . . . . . Environmental Condition . . . . . 42
5.14 . . . . . . . . . . Reliance by Foothill; Cumulative . . . . . 43
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 44
6.1 Accounting System . . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . 44
6.3 Schedules of Accounts . . . . . . . . . . . . . . . . . . . . . . 44
6.4 Financial Statements, Reports, Certificates . . . . . . . . . . . 44
6.5 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.6 Guarantor Reports . . . . . . . . . . . . . . . . . . . . . . . . 46
6.7 Designation of Inventory . . . . . . . . . . . . . . . . . . . . 46
6.8 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.9 Title to Equipment . . . . . . . . . . . . . . . . . . . . . . . 47
6.10 Maintenance of Equipment . . . . . . . . . . . . . . . . . . . . 47
6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.13 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . 48
6.14 No Setoffs or Counterclaims . . . . . . . . . . . . . . . . . . . 49
6.15 Location of Inventory and Equipment . . . . . . . . . . . . . . . 49
6.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 49
6.17 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . 49
6.18 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.2 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3 Restrictions on Fundamental Changes . . . . . . . . . . . . . . . 51
7.4 Extraordinary Transactions and Disposal of Assets . . . . . . . . 52
7.5 Change Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.6 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.7 Restructure . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.8 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.9 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 52
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 52
7.11 Xxxx and Holds . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.12 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.13 Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . 53
7.14 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 54
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.17 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.18 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9. FOOTHILL'S RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . 57
9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . 57
9.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . 59
10. TAXES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . 60
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 60
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . . . . . 60
11.2 Foothill's Liability for Collateral . . . . . . . . . . . . . . 60
11.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 60
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER . . . . . . . . . . . . . 62
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . . 62
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 63
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 . . . . . . . . . . . . . 64
15.8 Revival and Reinstatement of Obligations . . . . . . . . . . . 64
15.9 References to Existing Loan Agreement . . . . . . . . . . . . . 64
15.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SCHEDULES
Schedule A-1 Abandoned Equipment
Schedule E-1 Eligible Inventory
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.9 Litigation
Schedule 5.12 Employee Benefits
Schedule 6.15 Location of Inventory and Equipment
EXHIBITS
Exhibit C-1 Form of Consignment Agreement
Exhibit C-2 Form of Copyright Security Agreement
Exhibit E-1 Form of Equipment/Real Property Term Note
Exhibit G-1 Form of Guaranty
Exhibit L-1 LIBOR Supplement
Exhibit N-1 Form of New Equipment Term Note
Exhibit P-1 Form of Patent Security Agreement
Exhibit P-2 Pound Advance Supplement
Exhibit R-1 Form of Reaffirmation Agreement
Exhibit S-1 Form of Security Agreement
Exhibit S-2 Form of Stock Pledge Agreement
Exhibit T-1 Form of Trademark Security Agreement
Exhibit W-1 Form of Existing Warrant
Exhibit W-2 Form of Warrant Amendment
