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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-K/A (Amendment No. 2)
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2003, Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File Number 01-15739
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REUNION INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 06-1439715
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(State of Incorporation) (I.R.S. Employer Identification No.)
11 STANWIX STREET, SUITE 1400, PITTSBURGH, PENNSYLVANIA 15236
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(Address of principal executive offices, including zip code)
(412) 281-2111
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: COMMON STOCK, $.01 par value
Name of Each Exchange on Which Registered: AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Act). Yes No X
----- -----
At June 30, 2003, 16,278,519 shares of common stock were issued and
outstanding. As of June 30, 2003, the aggregate market value of the voting
stock held by non-affiliates of the registrant (computed by reference to the
average of the high and low sales prices on the American Stock Exchange) was
$1,151,414.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
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Reunion Industries, Inc. (the "Company", "Reunion Industries" or
"Reunion") hereby amends its Annual Report on Form 10-K for the year ended
December 31, 2003, as previously amended by Amendement No. 1 thereto(the "Form
10-K"), as follows:
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. The following is hereby added, on page F-21 of the Form 10-K, to the end
of "Note 7: LONG-TERM DEBT AND DEBT IN DEFAULT" of the Notes to Consolidated
Financial Statements:
Aggregate Maturities
Aggregate maturities of long-term debt, excluding the $9,214,000 of
Congress revolving credit facility borrowings at December 31, 2003, are as
follows (in thousands):
Year ended December 31,
Total 2004 2005 2006 2007 2008 2008+
------- ------- ------- ------- ------- ------- -------
$41,874 $ 9,827 $ 4,711 $26,069 $ 636 $ 631 $ -
======= ======= ======= ======= ======= ======= =======
2. The following is hereby added to the Exhibit Index in numerical order on
page E-5 of the Form 10-K:
10.46 Loan and Security Agreement dated December 3, 2003 between
Congress Financial Corporation and Reunion Industries, Inc.
Such Exhibit 10.46 is being filed herewith.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1. The first paragraph (including the table) under the heading "CONTRACTUAL
OBLIGATIONS" is hereby deleted and the following is hereby substituted
therefor:
The following represents the Company's contractual obligations at December
31, 2003 for each of the next five years and thereafter (in thousands).
Description Total 2004 2005 2006 2007 2008 2008+
------------------ ------- ------- ------- ------- ------- ------- -------
Congress revolving
credit facility $ 9,214 $ - $ - $ 9,214 $ - $ $
Congress term loan 3,175 636 636 636 636 631 -
Note payable 4,200 - - 4,200 - - -
Note payable 3,500 - - 3,500 - - -
13% senior notes 22,065 - - 22,065 - - -
Notes payable 4,161 4,161 - - -
Notes payable -
related parties 5,115 5,115 - - - - -
Capital lease
obligations
and SBA loans 56 47 9 - - - -
Noncancellable
operating lease
commitments 11,820 2,129 1,494 968 845 842 5,542
------- ------- ------- ------- ------- ------- -------
Total contractual
obligations $63,306 $12,088 $ 2,139 $40,583 $ 1,481 $ 1,473 $ 5,542
======= ======= ======= ======= ======= ======= =======
- 2 -
2. The first sentence of the second paragraph under the heading
"CONTRACTUAL OBLIGATIONS" on page 35 of the Form 10-K is hereby deleted and
the following two sentences are substituted therefor:
The above table shows the aggregate maturities of debt, including $9.2
million of revolving credit facility borrowings, and commitments under
noncancellable operating leases. The Congress revolving credit facility has a
three-year term, which began on December 3, 2003, and automatically renews for
additional one-year increments unless either party gives the other party
notice of termination at least 90 days prior to the beginning of the next one-
year term.
- 3 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: October 6, 2004 REUNION INDUSTRIES, INC.
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By: /s/ Charles E. Bradley, Sr.
----------------------------
Charles E. Bradley, Sr.
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K/A has been signed by the following persons in the
capacities and on this 4th day of October, 2004.
Signature Title
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/s/ Kimball J. Bradley President, Chief Operating Officer
--------------------------- and Director
Kimball J. Bradley
/s/ Joseph C. Lawyer Vice Chairman and Director
---------------------------
Joseph C. Lawyer
/s/ John M. Froehlich Executive Vice President, Chief
--------------------------- Financial Officer, Treasurer and
John M. Froehlich Assistant Secretary (chief financial
and accounting officer)
/s/ Thomas N. Amonett Director
---------------------------
Thomas N. Amonett
/s/ Thomas L. Cassidy Director
---------------------------
Thomas L. Cassidy
/s/ David E. Jackson Director
---------------------------
David E. Jackson
/s/ John G. Poole Director
---------------------------
John G. Poole
- 4 -
EXHIBIT 10.46
[EXECUTION]
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
REUNION INDUSTRIES, INC.
as Borrower
Dated: December 3, 2003
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 1
SECTION 2. CREDIT FACILITIES 23
2.1 Loans 23
2.2 Letter of Credit Accommodations 24
SECTION 3. INTEREST AND FEES 27
3.1 Interest 27
3.2 Commitment Fee 28
3.3 Servicing Fee 28
3.4 Unused Line Fee 28
3.5 Changes in Laws and Increased Costs of Loans 28
SECTION 4. CONDITIONS PRECEDENT 29
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations 29
4.2 Conditions Precedent to All Loans and Letter
of CreditAccommodations 32
4.3 Conditions Precedent to Life Insurance Availability 32
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST 33
5.1 Grant of Security Interest 33
5.2 Perfection of Security Interests 34
5.3 Exclusions from Collateral 38
SECTION 6. COLLECTION AND ADMINISTRATION 38
6.1 Borrower's Loan Account 38
6.2 Statements 38
6.3 Collection of Accounts 39
6.4 Payments 40
6.5 Authorization to Make Loans 41
6.6 Use of Proceeds 41
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS 41
7.1 Collateral Reporting 41
7.2 Accounts Covenants 43
7.3 Inventory Covenants 43
7.4 Equipment and Real Property Covenants 44
7.5 Power of Attorney 45
7.6 Right to Cure 46
7.7 Access to Premises 46
(i)
SECTION 8. REPRESENTATIONS AND WARRANTIES 46
8.1 Corporate Existence; Power and Authority 47
8.2 Name; State of Organization; Chief Executive
Officer; Collateral Locations 47
8.3 Financial Statements; No Material Adverse Change 47
8.4 Priority of Liens; Title to Properties 47
8.5 Tax Returns 48
8.6 Litigation 48
8.7 Compliance with Other Agreements and Applicable Laws 48
8.8 Environmental Compliance 48
8.9 Employee Benefits 49
8.10 Bank Accounts 50
8.11 Intellectual Property 50
8.12 Subsidiaries; Affiliates; Capitalization; Solvency 50
8.13 Labor Disputes 51
8.14 Restrictions on Subsidiaries 51
8.15 Material Contracts 51
8.16 Payable Practices 52
8.17 Accuracy and Completeness of Information 52
8.18 Survival of Warranties; Cumulative 52
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS 52
9.1 Maintenance of Existence 52
9.2 New Collateral Locations 52
9.3 Compliance with Laws, Regulations, Etc. 53
9.4 Payment of Taxes and Claims 54
9.5 Insurance 54
9.6 Financial Statements and Other Information 55
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. 56
9.8 Encumbrances 58
9.9 Indebtedness 60
9.10 Loans, Investments, Etc. 66
9.11 Dividends and Redemptions 67
9.12 Transactions with Affiliates 68
9.13 Compliance with ERISA 68
9.14 End of Fiscal Years; Fiscal Quarters 68
9.15 Change in Business 69
9.16 Limitation of Restrictions Affecting Subsidiaries 69
9.17 Fixed Charge Coverage Ratio 69
9.18 Minimum EBITDA 69
9.19 Minimum Excess Availability 69
9.20 Capital Expenditures 69
9.21 License Agreements 69
9.22 After Acquired Real Property 70
(ii)
9.23 Costs and Expenses 71
9.24 Further Assurances 71
9.25 Financial Consultant 72
9.26 Maximum Compensation 72
9.27 Retention of Investment Bank 72
SECTION 10. EVENTS OF DEFAULT AND REMEDIES 72
10.1 Events of Default 72
10.2 Remedies 75
10.3 Confession of Judgment 78
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW 79
11.1 Governing Law; Choice of Forum; Service of Process;
Jury TrialWaiver 79
11.2 Waiver of Notices 80
11.3 Amendments and Waivers 80
11.4 Waiver of Counterclaims 80
11.5 Indemnification 80
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS 81
12.1 Term 81
12.2 Interpretative Provisions 83
12.3 Notices 84
12.4 Partial Invalidity 85
12.5 Confidentiality 85
12.6 Successors 86
12.7 Entire Agreement 86
12.8 Counterparts, etc. 87
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A(1) Information Certificate
Exhibit B(1) Compliance Certificate
Schedule 1.32 Existing Lenders
Schedule 1.39 Inactive Subsidiaries
Schedule 1.65 Officers Life Insurance Policies
Schedule 1.67 Permitted Holders
Schedule 1.74 Private Fund Loan Agreements
Schedule 1.84 SFSC Agreements
Schedule 1.88 Term Loan Agreements
Schedule 1.90 Term Loan Collateral
Schedule 1.92 13% Senior Note Agreements
Schedule 8.9 ERISA Violations
Schedule 9.9(i) Existing Defaults under the 13%
Senior Noteholder Agreements
Schedule 9.17(1) Minimum Fixed Charge Coverage Ratio
Schedule 9.18(1) Minimum EBITDA
(1) Attached hereto.
(iv)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated December 3, 2003 is entered into by
and between Congress Financial Corporation, a Delaware corporation ("Lender")
and Reunion Industries, Inc., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment of a monetary obligation, whether or not earned by performance, which
is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed, assigned, or otherwise disposed of,
(b) for services rendered or to be rendered, (c) for a secondary obligation
incurred or to be incurred, or (d) from any credit card issuer, credit card
processor or other third party arising from sales of goods or rendition of
services to customers who have purchased such goods or services using a credit
or debit card and from any credit card issuer, credit card processor or other
third party in connection with the sale or transfer of Accounts arising
pursuant to the sale of goods or rendition of services to customers who have
purchased such goods or services using a credit card or a debit card,
including, but not limited to, all amounts at any time due or to become due
from any credit card issuer or credit card processor under all agreements now
or hereafter entered into by Debtor with any credit card issuer or any credit
card processor or otherwise.
1.2 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes(a) any Person which
beneficially owns or holds five (5%) percent or more of any class of
Voting Stock of such Person or other equity interests in such Person, (b) any
Person of which such Person beneficially owns or holds five (5%) percent or
more of any class of Voting Stock or in which such Person beneficially owns or
holds five (5%) percent or more of the equity interests and (c) any director
or executive officer of such Person. For the purposes of this definition, the
term "control" (including with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise.
1.3 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.4 "Borrowing Base" shall mean, at any time, the amount equal to:
(a)the lesser of:
(i)the amount equal to:
(A)eighty-five (85%) percent of the Net Amount of the
Eligible Accounts of Borrower, plus
(B)the lesser of (1) $5,000,000 or (2) the sum of: (1)
fifty (50%) percent multiplied by the Value of the Eligible Inventory of
Borrower consisting of finished goods and raw materials (other than Inserts),
plus (2) the lesser of (aa) $250,000 or (bb) thirty (30%) percent multiplied
by the Value of the Eligible Inventory of Borrower consisting of Inserts,
plus
(C)the Equipment Availability, plus
(D)the Life Insurance Availability on and after the date of
the satisfaction of the conditions set forth in Section 4.3 hereof, or
(ii)the Maximum Credit,
minus
(b)Reserves.
For purposes only of applying the sublimit on Loans based on Eligible
Inventory set forth in clause 1.4(a)(i)(B) above, Lender may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Loans to the extent Lender is in effect
basing the issuance of the Letter of Credit Accommodations on the Value of the
Eligible Inventory being purchased with such Letter of Credit Accommodations.
In determining the actual amounts of such Letter of Credit Accommodations to
be so treated for purposes of the sublimit, the outstanding Loans and Reserves
shall be attributed first to any components of the lending formulas set forth
above that are not subject to such sublimit, before being attributed to the
components of the lending formulas subject to such sublimit.
(2)
1.5 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business.
1.6 "Capital Expenditures" shall mean, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets
(including, without limitation, acquisition of fixed assets, leasehold
improvements, Capital Leases and installment purchases of machinery and
equipment) which are not, in accordance with GAAP, treated as expense items
for such Person in the year made or incurred or as a prepaid expense
applicable to a future year or years.
1.7 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.8 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.9 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or
directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof; provided, that, the full faith and
credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers' acceptances with a maturity of ninety (90)
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and unimpaired surplus of not less than
$1,000,000,000; (c) commercial paper (including variable rate demand notes)
with a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by
Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies,
Inc. or at least P-1 by Moody's Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial institution having combined capital and unimpaired surplus of not
less than $1,000,000,000; (e) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any governmental
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within ninety (90) days or less from the date
of acquisition; provided, that, the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (f) investments in money market funds
(3)
and mutual funds that are registered under the Investment Company Act of 1940
as amended which invest substantially all of their assets in securities of the
types described in clauses (a) through (e) above.
1.10 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of
Borrower to any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act); (b) the liquidation or dissolution of Borrower or the
adoption of a plan by the stockholders of Borrower relating to the dissolution
or liquidation of Borrower; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for one or
more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of Borrower
or the Board of Directors of Borrower; (d) during any period of two (2)
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of Borrower (together with any new directors who have
been appointed by any Permitted Holder, or whose nomination for election by
the stockholders of Borrower, as the case may be, was approved by a vote of at
least sixty-six and two-thirds (66 2/3%) percent of the directors then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of Borrower then
still in office; or (e) the failure of the Permitted Holders to own less than
forty (40%) percent of the voting power of the total outstanding Voting Stock
of Borrower.
1.11 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.12 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.13 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, by a lessor of premises to
Borrower, or any other person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who
has custody, control or possession of any such Collateral or is otherwise the
owner or operator of any premises on which any of such Collateral is located,
in favor of Lender waiving or subordinating any rights of such lessor other
person with respect to the Collateral and granting Lender certain rights.
1.14 "Collateral Assignment of Life Insurance Policies" shall have the
meaning set forth in Section 4.3(a) hereof.
1.15 "Consent Solicitation" shall mean the Borrower's Notice of Consent
Solicitation dated November 20, 2003 in respect of the 13% Senior Note
Indenture.
1.16 "Consolidated Pre-Tax Net Income" shall mean, with respect to any
Person for any period, the aggregate of the net income (loss) of such Person
and its Subsidiaries, on a consolidated basis, for such period (excluding to
the extent included therein any extraordinary and/or unusual and non-recurring
(4)
gains) after deducting all charges which should be deducted before arriving at
the net income (loss) for such period and, without duplication, before
deducting the Provision for Taxes for such period, all as determined in
accordance with GAAP; provided, that, (a) the net income of any Person that is
not a wholly-owned Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid or payable to such Person or a wholly-owned Subsidiary of
such Person; (b) except to the extent included pursuant to the foregoing
clause, the net income of any Person accrued prior to the date it becomes a
wholly-owned Subsidiary of such Person or is merged into or consolidated with
such Person or any of its wholly-owned Subsidiaries or that Person's assets
are acquired by such Person or by its wholly-owned Subsidiaries shall be
excluded; and (c) the net income (if positive) of any wholly-owned Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such wholly-owned Subsidiary to such Person or to any other
wholly-owned Subsidiary of such Person is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
wholly-owned Subsidiary shall be excluded. For the purposes of this
definition, net income excludes any gain together with any related Provision
for Taxes for such gain realized upon the sale or other disposition of any
assets that are not sold in the ordinary course of business (including,
without limitation, dispositions pursuant to sale and leaseback transactions)
or of any Capital Stock of such Person or a Subsidiary of such Person and any
net income realized or loss incurred as a result of changes in accounting
principles or the application thereof to such Person.
1.17 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.18 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any bank at which any deposit account of Borrower is at any time
maintained which provides that such bank will comply with instructions
originated by Lender directing disposition of the funds in the deposit account
without further consent by Borrower and such other terms and conditions as
Lender may require.
1.19 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to the Net Income of such Person and its Subsidiaries for such
period on a consolidated basis determined in accordance with GAAP, plus
depreciation, amortization and other non-cash charges (including, but not
limited to, imputed interest and deferred compensation) of such Person and its
Subsidiaries for such period (to the extent deducted in the computation of Net
Income of such Person and its Subsidiaries in such period), all in accordance
with GAAP, plus the Interest Expense of such Person and its Subsidiaries for
such period (to the extent deducted in the computation of Net Income in such
period), plus charges for Federal, Provincial, State, local and foreign income
taxes (to the extent included in the computation of Net Income in such
period).
(5)
1.20 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a)such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b)such Accounts are not unpaid more than the earlier of sixty(60)
days after the original due date for them or ninety (90) days after the date
of the original invoice for them;
(c)such Accounts comply with the terms and conditions contained in
Section 7.2(b) of this Agreement;
(d)such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e)the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements,
documents and instruments as may be required by Lender to perfect the security
interests of Lender in those Accounts of an account debtor with its chief
executive office or principal place of business in Canada in accordance with
the applicable laws of the Province of Canada in which such chief executive
office or principal place of business is located and take or cause to be taken
such other and further actions as Lender may request to enable Lender as
secured party with respect thereto to collect such Accounts under the
applicable Federal or Provincial laws of Canada) or, at Lender's option, if
the chief executive office and principal place of business of the account
debtor with respect to such Accounts is located other than in the United
States of America or Canada, then if either: (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Lender and payable only in the United States of America
and in U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and Borrower has
complied with the terms of Section 5.2(f) hereof with respect to the
assignment of the proceeds of such letter of credit to Lender or naming Lender
as transferee beneficiary thereunder, as Lender may specify, or such account
debtor's obligations are secured by a guaranty or banker's acceptance payable
in US dollars, in each case in terms and issued by parties acceptable to
Lender in its sole determination or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and in an amount
acceptable to Lender, or (iii) such Account is otherwise acceptable in all
respects to Lender (subject to such lending formula with respect thereto as
Lender may determine), provided, that, the aggregate amount of Loans
outstanding in respect of such Accounts described in clause (iii) hereof shall
not exceed $350,000;
(6)
(f)such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon Borrower's satisfactory completion of any further performance under the
agreement giving rise thereto), bill and hold invoices or retainage invoices,
except as to bill and hold invoices, if Lender shall have received an
agreement in writing from the account debtor, in form and substance
satisfactory to Lender, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice (provided, that,
the aggregate amount of Loans outstanding in respect of such Accounts shall
not exceed $750,000);
(g)the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and Borrower does not owe any
amounts to the account debtor with respect to such Accounts, and such account
debtor does not claim that Borrower owes any amounts to such account debtor,
that may give rise to any right of setoff or recoupment against such Accounts
(but the portion of the Accounts of such account debtor in excess of the
amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
(h)there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i)such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are
not, and were not at the time of the sale thereof, subject to any security
interests or liens except those permitted in this Agreement that are subject
to an intercreditor agreement in form and substance satisfactory to Lender
between the holder of such security interest or lien and Lender;
(j)neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower;
(k)the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any
similar State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l)there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m)such Accounts of a single account debtor or its affiliates do
not constitute more than ten (10%) percent of all otherwise Eligible Accounts
(7)
(but the portion of the Accounts not in excess of such percentage may be
deemed Eligible Accounts);
(n)such Accounts are not owed by an account debtor who has Accounts
unpaid more than the earlier of sixty (60) days after the original due date
for them or ninety (90) days after the date of the original invoice for them
which constitute more than fifty (50%) percent of the total Accounts of such
account debtor;
(o)the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit Borrower to seek judicial enforcement in such State of payment of such
Account, unless Borrower has qualified to do business in such state or has
filed a Notice of Business Activities Report or equivalent report for the then
current year or such failure to file and inability to seek judicial
enforcement is capable of being remedied without any material delay or
material cost;
(p)such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time in the ordinary
course of business consistent with its current practices as of the date hereof
and as is reasonably acceptable to Lender (but the portion of the Accounts not
in excess of such credit limit may be deemed Eligible Accounts); and
(q)such Accounts are owed by account debtors deemed creditworthy at
all times by Lender in good faith.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely
affect the Accounts in the good faith determination of Lender. Any Accounts
which are not Eligible Accounts shall nevertheless be part of the Collateral.
1.21 "Eligible Equipment" shall mean, Equipment owned by Borrower
included in the Initial Equipment Appraisal and which Equipment is in good
order, repair, running and marketable condition (ordinary wear and tear
excepted) and in each case acceptable to Lender in good faith based on the
criteria set forth below. In general, Eligible Equipment shall not include:
(a) Equipment at premises other than those owned or leased and controlled by
Borrower, provided, that, as to locations that are leased by Borrower, if
Lender shall not have received a Collateral Access Agreement from the owner
and lessor of such location, duly authorized, executed and delivered by such
owner and lessor (or Lender shall have determined to accept a Collateral
Access Agreement that does not include all required provisions or provisions
in the form otherwise required by Lender), Lender may, at its option,
establish such Reserves in respect of amounts at any time due or to become due
to the owner and lessor thereof as Lender shall in good faith determine
(provided that so long as no Default or Event of Default exists or has
(8)
occurred and is continuing such Reserves for a particular leased location
shall not exceed the amount equal to three months of payments due under the
applicable lease plus any amounts then owing in connection with such lease
that may be past due); (b) Equipment subject to a security interest or lien in
favor of any person other than Lender except those permitted hereunder (but
not including for the purpose of this exception (i) any purchase money
security interests or liens that may be permitted under this Agreement, or
(ii) any other security interests or liens that may have priority over the
security interests of Lender or (iii) any security interest or liens that are
not subject to an intercreditor agreement in form and substance satisfactory
to Lender between the holder of such security interest or lien and Lender);
(c) Equipment that is part of the Term Loan Collateral; (d) Equipment that is
not located in the continental United States of America; (e) Equipment that is
not subject to the first priority, valid and perfected security interest of
Lender; (f) damaged or defective Equipment or Equipment not used or usable in
the ordinary course of Borrower's business as presently conducted; (g)
computer hardware; (h) tooling; (i) Equipment acquired after the date of the
Initial Equipment Appraisal or (j) Equipment not used for the manufacturing of
Inventory or used in the warehousing or distribution of Inventory, in each
case, in the ordinary course of the business of Borrower. Any Equipment which
is not Eligible Equipment shall nevertheless be part of the Collateral.
1.22 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
raw materials (including Inserts) for such finished goods, in each case which
are acceptable to Lender based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) work-in-process; (b) components which
are not part of finished goods; (c) spare parts for equipment; (d) tooling;
(e) packaging and shipping materials; (f) supplies used or consumed in
Borrower's business; (g) Inventory at premises other than those owned and
controlled by Borrower, except any Inventory which would otherwise be deemed
Eligible Inventory that is not located at premises owned and operated by
Borrower may nevertheless be considered Eligible Inventory: (i) as to
locations which are leased by Borrower if Lender shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor or if Lender shall
not have received such Collateral Access Agreement (or Lender shall determine
to accept a Collateral Access Agreement that does not include all required
provisions or provisions in the form otherwise required by Lender), Lender
may, at its option, nevertheless consider Inventory at such location to be
Eligible Inventory to the extent Lender shall have established such Reserves
in respect of amounts at any time payable by Borrower to the owner and lessor
thereof as Lender shall determine, and (ii) as to locations owned and operated
by a third person, (A) if Lender shall have received a Collateral Access
Agreement from such owner and operator with respect to such location, duly
authorized, executed and delivered by such owner and operator or if Lender
shall not have received such Collateral Access Agreement (or Lender shall
determine to accept a Collateral Access Agreement that does not include all
required provisions or provisions in the form otherwise required by Lender),
Lender may, at its option, nevertheless consider Inventory at such location to
be Eligible Inventory to the extent Lender shall have established such
Reserves in respect of amounts at any time payable by Borrower to the owner
and operator thereof as Lender shall determine, and (B) in addition, as to
(9)
locations owned and operated by a third person, Lender shall have received, if
required by Lender: (1) UCC financing statements between the owner and
operator, as consignee or bailee and Borrower, as consignor or bailor, in form
and substance satisfactory to Lender, which are duly assigned to Lender and
the written authorization to file such financing statements in form
satisfactory to Lender and (2) a written notice to any lender to the owner
and operator of the first priority security interest in such Inventory of
Lender; (h) Inventory subject to a security interest or lien in favor of any
person other than Lender except those permitted in this Agreement that are
subject to an intercreditor agreement in form and substance satisfactory to
Lender between the holder of such security interest or lien and Lender (but
without limiting the right of Lender to establish any Reserves with respect to
amounts secured by such security interest or lien in favor of any Person even
if permitted herein); (i) bill and hold goods; (j) unserviceable, obsolete or
slow moving Inventory; (k) Inventory which is not subject to the first
priority, valid and perfected security interest of Lender; (l) returned,
damaged and/or defective Inventory; (m) Inventory purchased or sold on
consignment and (n) Inventory located outside the United States of America.
The criteria for Eligible Inventory set forth above may only be changed and
any new criteria for Eligible Inventory may only be established by Lender in
good faith based on either: (i) an event, condition or other circumstance
arising after the date hereof, or (ii) an event, condition or other
circumstance existing on the date hereof to the extent Lender has no written
notice thereof from Borrower prior to the date hereof, in either case under
clause (i) or (ii) which adversely affects or could reasonably be expected to
adversely affect the Inventory in the good faith determination of Lender. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
1.23 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses,
permits (including any conditions imposed therein), authorizations, judicial
or administrative decisions, injunctions or agreements between Borrower and
any Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource),
or to human health or safety, (b) relating to the exposure to, or the use,
storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to
all laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Federal Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state
counterparts to such laws, and (iii) any common law or equitable doctrine that
may impose liability or obligations for injuries or damages due to, or
(10)
threatened as a result of, the presence of or exposure to any Hazardous
Materials.
1.24 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment and computer hardware and software, whether owned or
licensed, and including embedded software, vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.25 "Equipment Availability" shall mean $3,175,000 on the date hereof;
provided, that, the Equipment Availability shall be permanently reduced as of
the first day of each month, commencing on the first day of the month after
the date of this Agreement, by an amount equal to $53,000.
1.26 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.27 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.28 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA; (c) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (d) the filing pursuant to Section 412 of the
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be
liable; (f) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or a cessation of operations which is
treated as such a withdrawal or notification that a Multiemployer Plan is in
reorganization; (g) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan; (h) 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 Plan;
(i) the imposition of any liability under Title IV of ERISA, other than the
Pension Benefit Guaranty Corporation premiums due but not delinquent under
Section 4007 of ERISA, upon Borrower or any ERISA Affiliate in excess of
$250,000; and (j) any other event or condition with respect to a Plan
including any Plan subject to Title IV of ERISA maintained, or contributed to,
by any ERISA Affiliate that could reasonably be expected to result in
liability of Borrower in excess of $250,000.
(11)
1.29 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.30 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the Borrowing
Base and (ii) the Maximum Credit (in each case under (i) and (ii) after
giving effect to any Reserves other than any Reserves in respect of Letter of
Credit Accommodations), minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations, plus (ii) the amount of all Reserves then
established in respect of Letter of Credit Accommodations, plus (iii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations (other than Indebtedness permitted pursuant to Section 9.9 hereof
which is subject and subordinate in right of payment to the right of Lender to
receive the prior indefeasible payment and satisfaction in full payment of all
of the Obligations pursuant to the terms of a subordination and /or
forbearance agreement between Lender and such third party, in form and
substance satisfactory to Lender) of Borrower which are more than sixty (60)
days past due as of such time.
1.31 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.32 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.32 hereto (and including Bank of America in its capacity as agent
acting for such lenders) and their respective predecessors, successors and
assigns.
1.33 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control
agreements, investment property control agreements, intercreditor agreements,
and all other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by Borrower or any Obligor in connection
with this Agreement.
1.34 "Fixed Charge Coverage Ratio" shall mean, with respect to
Borrower, on a combined basis (and including its Subsidiaries for this
purpose) as of the end of any period of determination, the ratio of (a)
EBITDA of Borrower during the period specified on Schedule 9.17 hereof to (b)
Fixed Charges of Borrower for the same period.
1.35 "Fixed Charges" shall mean, as to any Person and its Subsidiaries
with respect to any period, the sum of, without duplication, (a) all Interest
Expense, (b) all Capital Expenditures of such Person and its Subsidiaries,
(c) cash dividends, repurchases or redemptions paid by such Person and its
Subsidiaries (other than to such Person or such Person's Subsidiaries) during
such period in respect of Capital Stock, (d) all regularly scheduled (as
determined at the beginning of the respective period) principal payments of
Indebtedness for borrowed money and Indebtedness with respect to Capital
Leases (and without duplicating in items (a) and (b) of this definition, the
interest component with respect to Indebtedness under Capital Leases), and (e)
Federal, State, local and foreign income taxes paid in cash.
(12)
1.36 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are
applicable to the circumstances as of the date of determination consistently
applied, except that, for purposes of Sections 9.17, 9.18 and 9.20 hereof,
GAAP shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered to Lender prior to the date hereof.
1.37 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.38 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other
kind and/or type of pollutants or contaminants (including materials which
include hazardous constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.39 "Inactive Subsidiaries" shall mean, individually and collectively,
the Subsidiaries listed on Schedule 1.39 hereto.
1.40 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof) or evidenced by bonds, notes,
debentures or similar instruments; (b) representing the balance deferred and
unpaid of the purchase price of any property or services (except any such
balance that constitutes an account payable to a trade creditor (whether or
not an Affiliate) created, incurred, assumed or guaranteed by such Person in
the ordinary course of business of such Person in connection with obtaining
goods, materials or services that is not overdue by more than ninety (90)
days, unless the trade payable is being contested in good faith); (c) all
obligations as lessee under leases which have been, or should be, in
accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for
the payment of any indebtedness described in this definition of another
Person, including, without limitation, any such indebtedness, directly or
indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise
acquire such indebtedness, obligation or liability or any security therefor,
or to provide funds for the payment or discharge thereof, or to maintain
(13)
solvency, assets, level of income, or other financial condition; (e) all
obligations with respect to redeemable stock and redemption or repurchase
obligations under any Capital Stock or other equity securities issued by such
Person; (f) all reimbursement obligations and other liabilities of such Person
with respect to surety bonds (whether bid, performance or otherwise), letters
of credit, banker's acceptances, drafts or similar documents or instruments
issued for such Person's account; (g) all indebtedness of such Person in
respect of indebtedness of another Person for borrowed money or indebtedness
of another Person otherwise described in this definition which is secured by
any consensual lien, security interest, collateral assignment, conditional
sale, mortgage, deed of trust, or other encumbrance on any asset of such
Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time;
(h) all obligations, liabilities and indebtedness of such Person (marked to
market) arising under swap agreements, cap agreements and collar agreements
and other agreements or arrangements designed to protect such person against
fluctuations in interest rates or currency or commodity values; (i) the
principal and interest portions of all rental obligations of such person under
any synthetic lease or similar off-balance sheet financing where such
transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP and (j) all
obligations owed by such Person under License Agreements with respect to non-
refundable, advance or minimum guarantee royalty payments.
1.41 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and
the other Financing Agreements and the financing arrangements provided for
herein.
1.42 "Initial Equipment Appraisal" shall mean the appraisal of the
Equipment conducted by AccuVal Associates, Incorporated, the results of which
were sent to Lender by letter dated August 22, 2003, which is addressed to
Lender and upon which Lender is expressly permitted to rely.
1.43 "Inserts" means raw materials Inventory of the Borrower consisting
of metal inserts designed for screws and positioned in the dye just prior to
adding the mixed resin.
1.44 "Intellectual Property" shall mean Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, copyright applications, trademarks, service marks, trade names,
trade styles, trademark and service mark applications, and licenses and rights
to use any of the foregoing; all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing; all rights
to sue for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or the license of any
trademark); customer and other lists in whatever form maintained; and trade
secret rights, copyright rights, rights in works of authorship, domain names
(14)
and domain name registrations; software and contract rights relating to
software, in whatever form created or maintained.
1.45 "Intercreditor Agreement" shall mean the Intercreditor and
Subordination Agreement, dated of even date herewith, by and among Lender,
Term Loan Lender, Private Fund Lender and 13% Senior Noteholder Agent, on
behalf of the 13% Senior Noteholders, as acknowledged and agreed to by
Borrower, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.46 "Interest Expense" shall mean, for any period, as to any Person, all
of the following as determined in accordance with GAAP: (a) total interest
expense of such Person and its Subsidiaries on a consolidated basis for such
period, whether paid or accrued (including the interest component of Capital
Leases for such period), including, without limitation, all bank fees,
commissions, discounts and other fees and charges owed with respect to letters
of credit (but excluding amortization of discount and amortization of
deferred financing fees paid in cash in connection with the transactions
contemplated hereby, and interest (payable by addition to principal or in the
form of property other than cash) and any other interest expense not payable
in cash), minus (b) any net payments received by such Person and its
Subsidiaries on a consolidated basis during such period as interest income
received in respect of its investments in cash.
1.47 "Interest Rate" shall mean:
(a)Subject to clauses (b) and (c) below, a rate of two and one-
half (2 1/2%) percent per annum in excess of the Prime Rate.
(b)Notwithstanding anything to the contrary set forth in clause (a)
above, the Interest Rate shall mean, a rate one-quarter (1/4%) percent per
annum less than the rate set forth in clause (a) above, effective as of the
first day of the month after each of the following conditions is satisfied as
determined by Lender in good faith: (i) the Consolidated Pre-Tax Net Income
of Borrower and its Subsidiaries for the immediately preceding twelve (12)
month fiscal year (commencing with the fiscal year ending on December 31,
2004) calculated based on the audited financial statements of Borrower and its
Subsidiaries for such fiscal year delivered to Lender, together with the
unqualified opinion of the independent certified accountants, in accordance
with Section 9.6 hereof, shall exceed $2,000,000, and (ii) no Event of Default
shall exist or have occurred and be continuing; provided, that, in the event
that the Interest Rate is reduced as provided in this clause (b), if in any
subsequent fiscal year thereafter the Consolidated Net Income of Borrower and
its Subsidiaries is less than or equal to $2,000,0000, effective as of the
first day of the month after the receipt by Lender of the audited financial
statements of Borrower and its Subsidiaries for such fiscal year, the Interest
Rate shall increase to the rate set forth in clause (a) above.
(c)Notwithstanding anything to the contrary contained in clause (a)
or clause (b) above, the Interest Rate shall mean, at Lender's option, the
rate of four and one-half (4 1/2) percent per annum in excess of the Prime
Rate, (i) for the period (A) from and after the date of termination or non-
renewal hereof until Lender has received full and final payment of all Obliga-
tions in immediately available funds (notwithstanding entry of a judgment
against Borrower) and (B) from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender, and (ii) on the Loans at any time outstanding in excess
of the Borrowing Base (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
1.48 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by Borrower
(15)
as lessor; (b) are held by Borrower for sale or lease or to be furnished under
a contract of service; (c) are furnished by Borrower under a contract of
service; or (d) consist of raw materials, work in process, finished goods or
materials used or consumed in its business.
1.49 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any securities intermediary, commodity intermediary or other
person who has custody, control or possession of any investment property of
Borrower acknowledging that such securities intermediary, commodity
intermediary or other person has custody, control or possession of such
investment property on behalf of Lender, that it will comply with entitlement
orders originated by Lender with respect to such investment property, or other
instructions of Lender, and including such other terms and conditions as
Lender may require.
1.50 "Lender Payment Account" shall mean account no. 5000000030279 of
Lender at Wachovia Bank, National Association or such other account of Lender
as Lender may from time to time designate to Borrower as the Lender Payment
Account for purposes of this Agreement.
1.51 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from
time to time either (a) issued or opened by Lender for the account of Borrower
or any Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by Borrower of its
obligations to such issuer: sometimes being referred to herein individually as
a "Letter of Credit Accommodation".
1.52 "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.53 "Life Insurance Availability" shall mean the amount equal to the
lesser of: (a) $1,750,000 or (b) seventy-five (75%) percent of the aggregate
net cash surrender value of the Officers Life Insurance Policies pursuant to
which a Collateral Assignment of Life Insurance in favor of Lender is in full
force and effect, as determined by Lender on any date of determination;
provided, that, Life Insurance Availability shall be permanently reduced, by
the amount equal to any proceeds received by Lender as a result of payments
under any of the Collateral Assignments of Life Insurance Policies and applied
to the Loans.
1.54 "Loans" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.55 "Material Adverse Effect" shall mean a material adverse effect on
(16)
(a) the financial condition, business, performance or operations of Borrower
or the legality, validity or enforceability of this Agreement or any of the
other Financing Agreements; (b) the legality, validity, enforceability,
perfection or priority of the security interests and liens of Lender upon the
Collateral; (c) the Collateral or its value, (d) the ability of Borrower to
repay the Obligations or of Borrower to perform its obligations under this
Agreement or any of the other Financing Agreements as and when to be
performed; or (e) the ability of Lender to enforce the Obligations or realize
upon the Collateral or otherwise with respect to the rights and remedies of
Lender under this Agreement or any of the other Financing Agreements.
1.56 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in an amount in excess of $1,000,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party
as to which the breach, nonperformance, cancellation or failure to renew by
any party thereto would have a Material Adverse Effect.
1.57 "Maximum Credit" shall mean the amount of $25,000,000.
1.58 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by Borrower or
any ERISA Affiliate.
1.59 "Net Amount of Eligible Accounts" shall mean, the gross amount of
the Eligible Accounts of Borrower less (a) sales, excise or similar taxes
included in the amount thereof and (b) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.
1.60 "Net Income" shall mean, with respect to any Person, for any
period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period, excluding to the
extent included therein any extraordinary, one-time or non-recurring gains or
non-cash losses, after deducting all charges which should be deducted before
arriving at the net income (loss) for such period and after deducting the
Provision for Taxes for such period, all as determined in accordance with
GAAP. For the purpose of this definition, net income excludes any gain (or
non-cash loss) together with any related Provision for Taxes for such gain (or
non-cash loss) realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or of
any Capital Stock of such Person or a Subsidiary of such Person.
1.61 "Net Orderly Liquidation Value" shall mean, as to Eligible
Equipment, at any time, the value of such Eligible Equipment determined on an
orderly liquidation basis, reduced by commissions, fees, costs and expenses
reasonably contemplated in connection with the liquidation thereof, as set
forth in the most recent appraisal delivered to Lender in accordance with
Section 7.4 hereof, as to the Eligible Equipment, in form, scope and
(17)
methodology reasonably acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender and upon which Lender is expressly permitted to
rely.
1.62 "Non-Consenting 13% Senior Noteholders" shall mean the holders of
the 13% Senior Notes issued pursuant to the terms of the 13% Senior Noteholder
Agreements which have not executed the Consent Solicitation.
1.63 "Obligations" shall mean any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or
not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.64 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
1.65 "Officers Life Insurance Policies" shall mean the Officers Life
Insurance Policies listed on Schedule 1.65 hereto.
1.66 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
12.6 of this Agreement governing participations.
1.67 "Permitted Holders" shall mean the persons listed on Schedule 1.67
hereto and their respective successors and assigns.
1.68 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.69 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multiemployer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
1.70 "Prime Rate" shall mean the rate from time to time publicly
(18)
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank.
1.71 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.72 "Private Fund Lender" shall mean LC Capital Masterfund, Ltd., a
Cayman Islands corporation and its successors and assigns.
1.73 "Private Fund Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower or any
Obligor to Private Fund Lender, including principal, interest, charges, fees,
premiums, indemnities and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, arising under the Private Fund
Lender Agreements.
1.74 "Private Fund Loan Agreements" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the agreements,
documents and instruments set forth on Schedule 1.74 hereto; and (b) all other
agreements, documents and instruments at any time executed and/or delivered by
Borrower or Obligor or any other Person with, to or in favor of Private Fund
Lender in connection therewith or related thereto; sometimes being referred to
herein individually as a "Private Fund Loan Agreement".
1.75 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial,
county or local, and whether foreign or domestic, that are paid or payable by
any Person in respect of any period in accordance with GAAP.
1.76 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located.
1.77 "Receivables" shall mean all of the following now owned or
hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (c) all
payment intangibles of Borrower (d) letters of credit, indemnities,
guarantees, security or other deposits and proceeds thereof issued payable to
Borrower or otherwise in favor of or delivered to Borrower in connection with
any Account; or (e) all other accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing
to Borrower, whether from the sale and lease of goods or other property,
licensing of any property (including Intellectual Property or other general
intangibles), rendition of services or from loans or advances by Borrower to
or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of Borrower) or otherwise associated with any
Accounts, Inventory or general intangibles of Borrower (including, without
limitation, choses in action, causes of action, tax refunds, tax refund
(19)
claims, any funds which may become payable to Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to Borrower from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the
lives of employees on which Borrower is a beneficiary).
1.78 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of
Borrower with respect to the foregoing maintained with or by any other
person).
1.79 "Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Lender may from time to time designate.
1.80 "Refinancing Indebtedness" shall have the meaning set forth in
Section 9.9 hereof.
1.81 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.82 "Reserves" shall mean as of any date of determination, such amounts
as Lender may from time to time establish and revise in good faith reducing
the amount of Loans and Letter of Credit Accommodations which would otherwise
be available to Borrower under the lending formula(s) provided for herein:
(a) to reflect events, conditions, contingencies or risks which, as determined
by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's
good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to
reflect outstanding Letter of Credit Accommodations as provided in Section 2.2
hereof or (d) in respect of any state of facts which Lender determines in good
faith constitutes a Default or an Event of Default. Without limiting the
generality of the foregoing, Reserves may be established, at Lender's option,
to reflect that (i) dilution with respect to the Accounts (based on the ratio
of the aggregate amount of non-cash reductions in Accounts for any period to
the aggregate dollar amount of the sales of Borrower for such period) as
calculated by Lender for any period is or is reasonably anticipated to be
greater than five (5%) percent, (ii) the Net Orderly Liquidation Value of the
Equipment as set forth in the most recent appraisal with respect thereto
received by Lender in accordance with the terms hereof has declined so that
the amount of the Equipment Availability is greater than eighty (80%) percent
(20)
of the Net Orderly Liquidation Value of such Equipment as set forth in such
appraisal, (iii) returns, discounts, claims, credits and allowances of any
nature that are not paid pursuant to the reduction of Accounts, (iv) the
sales, excise or similar taxes included in the amount of any Accounts reported
to Lender, (v) a change in the turnover, age or mix of the categories of
Inventory that adversely affects the aggregate value of all Inventory, or (vi)
the liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (vii) seventy-five (75%) percent of the aggregate net cash
surrender value of the Officers Life Insurance Policies is less than
$1,750,000, or (viii) the full amount of any personal property taxes relating
to any property located in the States of Texas and Ohio or any other taxes
which are due or become due, or (ix) to reflect amounts due or to become due
but not paid in respect of any Plans. To the extent Lender may revise the
lending formulas used to determine the Borrowing Base or establish new
criteria or revise existing criteria for Eligible Accounts or Eligible
Inventory so as to address any circumstances, condition, event or contingency
in a manner satisfactory to Lender, Lender shall not establish a Reserve for
the same purpose. The amount of any Reserve established by Lender shall have
a reasonable relationship to the event, condition or other matter which is the
basis for such reserve as determined by Lender in good faith.
1.83 "SFSC" shall mean Stanwich Financial Services Corporation, a
Rhode Island corporation, and its successors and assigns.
1.84 "SFSC Agreements" shall mean, collectively, the following (as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced): (a) the promissory notes, documents and
instruments set forth on Schedule 1.84 hereto; and (b) all other agreements,
documents and instruments at any time executed and/or delivered by Borrower or
Obligor with, to or in favor of SFSC in connection therewith or related
thereto; sometimes being referred to herein individually as a "SFSC
Agreement".
1.85 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business
consistent with its practices as of the date hereof, and (b) the assets and
properties of such Person at a fair valuation (and including as assets for
this purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guarantees given by such Person) are
greater than the Indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such person has a
reasonable basis to believe, represents an amount which can reasonably be
expected to become an actual or matured liability (and including as to
contingent liabilities arising pursuant to any guarantee the face amount of
such liability as reduced to reflect the probability of it becoming a matured
liability).
1.86 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
(21)
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency), managers,
trustees or other controlling persons, or an equivalent controlling interest
therein, of such Person is, at the time, directly or indirectly, owned by such
Person and/or one or more subsidiaries of such Person.
1.87 "Term Loan Lender" shall mean Mercury Capital Corporation, a New
York corporation, and its successors and assigns.
1.88 "Term Loan Agreements" shall mean, collectively, the following (as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (a) the agreements, documents and
instruments set forth on Schedule 1.88 hereto; and (b) all other agreements,
documents and instruments at any time executed and/or delivered by Borrower or
Obligor with, to or in favor of Term Loan Lender in connection therewith or
related thereto; sometimes being referred to herein individually as a "Term
Loan Agreement".
1.89 "Term Loan Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower or any
Obligor to Term Loan Lender, including principal, interest, charges, fees,
premiums, indemnities, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, arising under the Term
Loan Agreements.
1.90 "Term Loan Collateral" shall mean the Real Property of Borrower and
fixtures of Borrower, the primary use of which relates to the ownership of
such Real Property, as more particularly described on Schedule 1.90 hereto.
1.91 "13% Senior Noteholders" shall mean the holders of the 13% Senior
Notes issued pursuant to the terms of the 13% Senior Noteholder Agreements.
1.92 "13% Senior Note Agreements" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the 13% Senior
Note Indenture, (b)the agreements, documents and instruments set forth on
Schedule 1.92 hereto; and (c) all other agreements, documents and instruments
at any time executed and/or delivered by Borrower or Obligor with, to or in
favor of the 13% Senior Noteholders in connection therewith or related
thereto; sometimes being referred to herein individually as a "13% Senior Note
Agreement".
1.93 "13% Senior Note Indenture" means the Indenture, dated as of May 1,
1993, by and between the Borrower (as successor by merger to Chatwins Group,
Inc.), as issuer, and U.S. Bank, National Association, as successor trustee to
State Street Bank and Trust, as successor to The First National Bank of
Boston, in connection with the issue of $50,000,000 13% Senior Notes due 2003
and 13% Senior Exchange Notes due 2003, as modified by (i) that certain First
Supplemental Indenture and Waiver of Covenants, dated as of June 20, 1995,
(ii) that certain Second Supplemental Indenture, dated as of June 20, 1995,
(iii) that certain Third Supplemental Indenture, dated as of May 28, 1999,
(22)
(iv) that certain Fourth Supplemental Indenture, dated as of March 8, 2000,
(v) that certain Fifth Supplemental Indenture, dated as of March 16, 2000, and
(vi) the Consent Solicitation, as the same now exists or may hereafter be
amended, supplemented, renewed, restated or replaced.
1.94 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York , and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial
Code as in effect in the State of New York on the date hereof shall continue
to have the same meaning notwithstanding any replacement or amendment of such
statute except as Lender may otherwise determine).
1.95 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Lender prior to the
date hereof, if any.
1.96 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.97 "Weighted Average Life to Maturity" shall mean when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the product
obtained by multiplying (i) the amount of each then outstanding installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (ii) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a)Subject to and upon the terms and conditions contained herein,
Lender agrees to make Loans to Borrower from time to time in amounts requested
by Borrower up to the amount equal to the Borrowing Base.
(b)Except in Lender's discretion, (i) the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall
(23)
not exceed the lesser of the Borrowing Base or the Maximum Credit, (ii) the
aggregate amount of Loans outstanding in respect of certain Eligible Accounts
consisting of foreign Accounts of Borrower as described in Section 1.19(e)
hereof shall not exceed $350,000, (iii) the aggregate amount of Loans
outstanding in respect of Eligible Accounts consisting of bill and hold
invoices shall not exceed $750,000, and (iv) the aggregate amount of Loans
outstanding in respect of Eligible Equipment shall not exceed the lesser of
Eligible Equipment Availability then in effect or eighty (80%) percent of the
Net Orderly Liquidation Value of Eligible Equipment as set forth in the most
recent appraisal of Eligible Equipment delivered to Lender pursuant to Section
7.4 hereof. In the event that the outstanding amount of any component of the
Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available pursuant to the Borrowing Base,
the Maximum Credit, the sublimits for Letter of Credit Accommodations set
forth in Section 2.2(e) or the Maximum Credit, the sublimits for Loans in
respect of Equipment Availability or Life Insurance Availability, as
applicable, such event shall not limit, waive or otherwise affect any rights
of Lender in that circumstance or on any future occasions and Borrower shall,
upon demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.
2.2 Letter of Credit Accommodations.
(a)Subject to and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Loans to Borrower
pursuant to this Section 2.
(b)In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to three
(3%) percent per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, except that
Borrower shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to five (5%) percent per annum on such daily
outstanding balance for: (i) the period from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or non-
renewal of this Agreement.
(c)Borrower shall give Lender two (2) Business Days' prior written
notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the
(24)
original face amount of the Letter of Credit Accommodation requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall
be a Business Day), the purpose for which such Letter of Credit Accommodation
is to be issued, and the beneficiary of the requested Letter of Credit
Accommodation. Borrower shall attach to such notice the proposed terms of the
Letter of Credit Accommodation.
(d)In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations
shall be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower shall have
delivered to the proposed issuer of such Letter of Credit Accommodation at
such times and in such manner as such proposed issuer may require, an
application in form and substance satisfactory to such proposed issuer and
Lender for the issuance of the Letter of Credit Accommodation and such other
documents as may be required pursuant to the terms thereof, and the form and
terms of the proposed Letter of Credit Accommodation shall be satisfactory to
Lender and such proposed issuer, (ii) as of the date of issuance, no order of
any court, arbitrator or other Governmental Authority shall purport by its
terms to enjoin or restrain money center banks generally from issuing letters
of credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter
of Credit Accommodation refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit Accommodation; and (iii)
the Excess Availability, prior to giving effect to any Reserves with respect
to such Letter of Credit Accommodations, on the date of the proposed issuance
of any Letter of Credit Accommodations, shall be equal to or greater than: (A)
if the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory and the documents of title with respect thereto
are consigned to the issuer, the sum of (1) the percentage equal to one
hundred (100%) percent minus the then applicable percentage with respect to
Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes,
duty and other amounts which Lender estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of Borrower's locations
for Eligible Inventory within the United States of America and (B) if the
proposed Letter of Credit Accommodation is for any other purpose or the
documents of title are not consigned to the issuer in connection with a Letter
of Credit Accommodation for the purpose of purchasing Inventory, an amount
equal to one hundred (100%) percent of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, a Reserve
shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e)Except in Lender's discretion, the amount of all outstanding
(25)
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$2,000,000.
(f)Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation except for such losses, claims, damages, liabilities,
costs or expenses that are a direct result of the gross negligence or wilful
misconduct of Lender as determined pursuant to a final non-appealable order of
a court of competent jurisdiction.. Borrower assumes all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrower assumes all risks for, and agrees to pay,
all foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to any Letter of Credit Accommodations or any documents, drafts
or acceptances thereunder. Borrower hereby releases and holds Lender harmless
from and against any acts, waivers, errors, delays or omissions, whether
caused by Borrower, by any issuer or correspondent or otherwise with respect
to or relating to any Letter of Credit Accommodation, except for the gross
negligence or wilful misconduct of Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(f) shall survive the payment of Obligations and the
termination or non-renewal of this Agreement.
(g)In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrower shall, at Lender's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in
which Lender holds a security interest to deliver them to Lender and/or
subject to Lender's order, and if they shall come into Borrower's possession,
to deliver them, upon Lender's request, to Lender in their original form.
Borrower shall also, at Lender's request, designate Lender as the consignee on
all bills of lading and other negotiable and non-negotiable documents.
(h)Borrower hereby irrevocably authorizes and directs any issuer
of a Letter of Credit Accommodation to name Borrower as the account party
therein and to deliver to Lender all instruments, documents and other writings
and property received by issuer pursuant to the Letter of Credit
Accommodations and to accept and rely upon Lender's instructions and
agreements with respect to all matters arising in connection with the Letter
of Credit Accommodations or the applications therefor. Nothing contained
herein shall be deemed or construed to grant Borrower any right or authority
to pledge the credit of Lender in any manner. Lender shall have no liability
of any kind with respect to any Letter of Credit Accommodation provided by an
issuer other than Lender unless Lender has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with
respect to such Letter of Credit Accommodation. Borrower shall be bound by
any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation
(26)
or any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower.
(i)So long as no Event of Default exists or has occurred and is
continuing, Borrower may, after notice to Lender, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery
orders, and (iv) with Lender's consent, grant any extensions of the maturity
of, time of payment for, or time of presentation of, any drafts, acceptances,
or documents, and agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letter of Credit Accommodations, or documents, drafts
or acceptances thereunder or any letters of credit included in the Collateral.
(j)At any time an Event of Default exists or has occurred and is
continuing, Lender shall have the right and authority to, and Borrower shall
not, without the prior written consent of Lender, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and all
applications for steamship or airway guaranties, indemnities or delivery
orders, (iv) grant any extensions of the maturity of, time of payments for, or
time of presentation of, any drafts, acceptances, or documents, and (v) agree
to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances
thereunder or any letters of credit included in the Collateral. Lender may
take such actions either in its own name or in Borrower's name.
(k)Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for
any Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall
be deemed to have been granted or undertaken by Borrower to Lender. Any
duties or obligations undertaken by Lender to any issuer or correspondent in
any application for any Letter of Credit Accommodation, or any other agreement
by Lender in favor of any issuer or correspondent relating to any Letter of
Credit Accommodation, shall be deemed to have been undertaken by Borrower to
Lender and to apply in all respects to Borrower.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a)Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or non-
renewal hereof shall be payable on demand.
(b)Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual
(27)
days elapsed. The interest rate on non-contingent Obligations shall increase
or decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall charges constituting interest
payable by Borrower to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or provision of
this Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
3.2 Commitment Fee. Borrower shall pay to Lender on the date hereof the
remaining portion of the commitment fee in the amount of $262,500.
3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $10,000 in respect of Lender's services for each month
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one-half of one (1/2%) percent per annum calculated
upon the amount by which the Maximum Credit exceeds the average daily
principal balance of the outstanding Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement
is in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be payable on the first day of each month in
arrears.
3.5 Changes in Laws and Increased Costs of Loans.
(a)If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of
any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof
by any Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof has or would have the effect
described below, or a Funding Bank or Lender complies with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, and in the case of
any event set forth in this clause (iii), such adoption, change or compliance
has or would have the direct or indirect effect of reducing the rate of return
on Lender's capital as a consequence of its obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank's or Lender's policies
with respect to capital adequacy) by an amount deemed by Lender to be
material, and the result of any of the foregoing events described in clauses
(i), (ii) or (iii) is or results in an increase in the cost to Lender of
(28)
funding or maintaining the Loans or the Letter of Credit Accommodations, then
Borrower shall from time to time upon demand by Lender pay to Lender
additional amounts sufficient to indemnify Lender against such increased cost
on an after-tax basis (after taking into account applicable deductions and
credits in respect of the amount indemnified). A certificate as to the amount
of such increased cost shall be submitted to Borrower by Lender and shall be
conclusive, absent manifest error.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a)Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the Existing Lenders to
Borrower of their respective financing arrangements with Borrower and the
termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of Borrower and each Obligor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by any Existing Lender or their predecessors, as secured
party and Borrower or any Obligor, as debtor and (ii) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by
Borrower or any Obligor in favor of such existing lender or lenders, in form
acceptable for recording with the appropriate Governmental Authority;
(b)all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory
in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or Governmental Authority (and
including a copy of the certificate of incorporation of Borrower certified by
the Secretary of State (or equivalent Governmental Authority) which shall set
forth the same complete corporate name of Borrower as is set forth herein and
such document as shall set forth the organizational identification number of
Borrower, if one is issued in its jurisdiction of incorporation);
(c)no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would
impair the ability of Borrower or any Obligor to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce the Obligations or realize upon the Collateral;
(d)Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
(29)
determine the amount of Loans available to Borrower (including, without
limitation, current perpetual inventory records and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which in each case shall be satisfactory to
Lender, not more than three (3) Business Days prior to the date hereof;
(e)Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, Collateral Access
Agreements by owners and lessors of leased premises of Borrower and by
warehouses at which Collateral is located;
(f)Lender shall have received (i) in form and substance satisfactory
to Lender, the limited joint and several guarantee of Kimball J. Bradley and
Charles E. Bradley, III (which Guarantee shall be limited to the amount of
$3,000,000, and the personal financial statements of each such individual
guarantor, each in form satisfactory to Lender, reflecting such financial
information of each individual guarantor as Lender may require as of and
through September 30, 2003;
(g)Lender shall have received, the Consent Solicitation in respect
of the 13% Senior Note Indenture, in form and substance satisfactory to
Lender, reflecting among other things that at least ninety (90%) percent of
the aggregate principal amount of the 13% Senior Notes of Borrower issued
pursuant to the 13% Senior Note Indenture shall have been restructured on
terms and conditions satisfactory to Lender, including, among other things,
that in exchange for the payment of up to $686,619 as a consent fee on the
date hereof, not less than $6,000,000 of past due interest and $2,500,000 of
principal shall be forgiven, quarterly interest payments shall not resume
until November 30, 2004, that the maturity date of such notes has been
extended to a date not earlier than the day after the scheduled termination
date of this Agreement and that the holders of such Indebtedness shall have
agreed to the subordination in right of payment of such restructured
Indebtedness to the prior payment and satisfaction in full of the Obligations
on terms and conditions satisfactory to Lender;
(h)Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrower has received not less than $4,000,000 in
immediately available funds as the proceeds of a term loan provided by Term
Loan Lender secured by certain real property of Borrower, on terms and
conditions satisfactory to Lender and its counsel, the proceeds of which shall
have been used to pay part of the portion of the amount owed to Existing
Lenders and the holders of the 13% Senior Notes issued pursuant to the 13%
Senior Note Indenture;
(i)the Excess Availability as determined by Lender, as of the date
(30)
hereof, shall be not less than $3,500,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(j)Lender shall have received, in form and substance satisfactory
to Lender, Deposit Account Control Agreements by and among Lender, Borrower
and each bank where Borrower has a deposit account, in each case, duly
authorized, executed and delivered by such bank and Borrower (or Lender shall
be the bank's customer with respect to such deposit account, as Lender may
specify);
(k)Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(l)Lender shall have received evidence, in form and substance
satisfactory to Lender, that the scheduled maturity date of (i) not less than
ninety (90%) percent of the amount of Indebtedness evidenced by the 13%
Senior Note Agreements, and outstanding immediately prior to giving effect to
this Agreement, and (ii) the PFL Agreements have been extended to a date not
earlier than the Renewal Date and that no principal payments in respect of any
such Indebtedness are due prior to such date;
(m)Lender shall have received originals of the stock certificates
representing all of the issued and outstanding shares of the Capital Stock of
each Subsidiary of Borrower, together with stock powers duly executed in blank
with respect thereto;
(n)Lender shall have received, in form and substance satisfactory
to Lender, the Term Loan Agreements by and among the Term Loan Lender,
Borrower and Obligors providing for, among other things, the terms of payment
in respect of the Term Loan Debt to the extent permitted under the
Intercreditor Agreement, duly authorized, executed and delivered by the Term
Loan Lender, and Borrower;
(o)Lender shall have received the Intercreditor Agreement, in form
and substance satisfactory to Lender, as duly authorized, executed and
delivered by all of the parties thereto;
(p)Lender shall have received, in form and substance satisfactory
to Lender, an amendment, duly authorized, executed and delivered by Private
Fund Lender and Borrower, extending the maturity date of the Indebtedness
evidenced by the Private Fund Loan Agreements to a date not earlier than the
Renewal Date;
(q)Lender shall have received, in form and substance satisfactory
to Lender, a forbearance agreement(s) in respect of the Indebtedness owed by
Borrower to Allan C. Bir;
(r)Lender shall have received and reviewed lien and judgment
search results for the jurisdiction of incorporation or organization of
Borrower, the jurisdiction of the chief executive office of Borrower and all
jurisdictions in which assets of Borrower are located, which search results
(31)
shall be in form and substance satisfactory to Lender;
(s)Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(t)Borrower shall have used its best efforts to cause John M.
Froehlich to execute and deliver in form and substance satisfactory to Lender
a validity guaranty, in favor of Lender;
(u)Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request; and
(v)the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a)all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct with the same effect as
though such representations and warranties had been made on and as of the date
of the making of each such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and
accurate on and as of such earlier date);
(b)no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or
providing the Letter of Credit Accommodations, or (B) the consummation of the
transactions contemplated pursuant to the terms hereof or the other Financing
Agreements or (ii) has or has a reasonable likelihood of having a Material
Adverse Effect; and
(c)no Default or Event of Default shall exist or have occurred and
be continuing on and as of the date of the making of such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto.
4.3 Conditions Precedent to Life Insurance Availability. Upon Lender's
notice to Borrower that each of the following conditions have been satisfied,
the Life Insurance Availability shall be included in the calculation of the
Borrowing Base effective on the date of such notice. Each of the following is
a condition precedent to the Life Insurance Availability being included in the
(32)
calculation of the Borrowing Base:
(a)Lender shall have received, in form and substance satisfactory
to Lender, the collateral assignment(s) of the Officers Life Insurance
Policies which shall have an aggregate net cash surrender value of not less
than $2,200,000 (collectively, the "Collateral Assignments of Life Insurance
Policies") as determined by Lender;
(b)Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid and enforceable, first priority
security interests in and liens upon each of the Officers Life Insurance
Policies, and that each Collateral Assignment of Life Insurance Policy is of
record with and has been acknowledged by the issuer of the applicable Officers
Life Insurance Policy and
(c)no Default or Event of Default shall exist or have occurred and
be continuing.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of
all Obligations, Borrower hereby grants to Lender a continuing security
interest in, a lien upon, and a right of set off against, and hereby assigns
to Lender as security, all personal and real property and fixtures and
interests in property and fixtures of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by
Lender, collectively, the "Collateral"), including:
(a)all Accounts;
(b)all general intangibles, including, without limitation, all
Intellectual Property;
(c)all goods, including, without limitation, Inventory and
Equipment;
(d)all Real Property and fixtures;
(e)all chattel paper (including, without limitation, all tangible
and electronic chattel paper);
(f)all instruments (including, without limitation all promissory
notes);
(g)all documents;
(h)all deposit accounts;
(i)all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j)all supporting obligations and all present and future liens,
(33)
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under
or relating to guaranties, contracts of suretyship, letters of credit and
credit and other insurance related to the Collateral, (ii) rights of stoppage
in transit, replevin, repossession, reclamation and other rights and remedies
of an unpaid vendor, lienor or secured party, (iii) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Receivables or other Collateral, including
returned, repossessed and reclaimed goods, and (iv) deposits by and property
of account debtors or other persons securing the obligations of account
debtors;
(k)all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of Borrower now or hereafter held or received by
or in transit to Lender or its Affiliates or at any other depository or other
institution from or for the account of Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;
(l)all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(m)to the extent not otherwise described above, all Receivables;
(n)all Records; and
(o)all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a)Borrower irrevocably and unconditionally authorizes Lender (or
its agent) to file at any time and from time to time such financing statements
with respect to the Collateral naming Lender or its designee as the secured
party and Borrower as debtor, as Lender may require, and including any other
information with respect to Borrower or otherwise required by part 5 of
Article 9 of the Uniform Commercial Code of such jurisdiction as Lender may
determine, together with any amendment and continuations with respect thereto,
which authorization shall apply to all financing statements filed on, prior to
or after the date hereof. Borrower hereby ratifies and approves all financing
statements naming Lender or its designee as secured party and Borrower as
debtor with respect to the Collateral (and any amendments with respect to such
financing statements) filed by or on behalf of Lender prior to the date hereof
and ratifies and confirms the authorization of Lender to file such financing
statements (and amendments, if any). Borrower hereby authorizes Lender to
adopt on behalf of Borrower any symbol required for authenticating any
electronic filing. In the event that the description of the collateral in any
financing statement naming Lender or its designee as the secured party and
Borrower as debtor includes assets and properties of Borrower that do not at
any time constitute Collateral, whether hereunder, under any of the other
(34)
Financing Agreements or otherwise, the filing of such financing statement
shall nonetheless be deemed authorized by Borrower to the extent of the
Collateral included in such description and it shall not render the financing
statement ineffective as to any of the Collateral or otherwise affect the
financing statement as it applies to any of the Collateral. In no event shall
Borrower at any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any financing statement (or
amendment or continuation with respect thereto) naming Lender or its designee
as secured party and Borrower as debtor.
(b)Borrower does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, Borrower
shall promptly notify Lender thereof in writing. Promptly upon the receipt
thereof by or on behalf of Borrower (including by any agent or
representative), Borrower shall deliver, or cause to be delivered to Lender,
all tangible chattel paper and instruments that Borrower may at any time
acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Lender may from time to time specify, in each case except
as Lender may otherwise agree. At Lender's option, Borrower shall, or Lender
may at any time on behalf of Borrower, cause the original of any such
instrument or chattel paper to be conspicuously marked in a form and manner
acceptable to Lender with the following legend referring to chattel paper or
instruments as applicable: "This [chattel paper][instrument] is subject to the
security interest of Congress Financial Corporation and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the
rights of such secured party."
(c)In the event that Borrower shall at any time hold or acquire an
interest in any electronic chattel paper or any "transferable record" (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), Borrower shall
promptly notify Lender thereof in writing. Promptly upon Lender's request,
Borrower shall take, or cause to be taken, such actions as Lender may
reasonably request to give Lender control of such electronic chattel paper
under Section 9-105 of the UCC and control of such transferable record under
Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as in effect in such jurisdiction.
(d)Borrower does not have any deposit accounts as of the date
hereof, except as set forth in the Information Certificate. Borrower shall
not, directly or indirectly, after the date hereof open, establish or maintain
any deposit account unless each of the following conditions is satisfied: (i)
Lender shall have received not less than five (5) Business Days prior written
notice of the intention of Borrower to open or establish such account which
notice shall specify in reasonable detail and specificity acceptable to Lender
the name of the account, the owner of the account, the name and address of the
bank at which such account is to be opened or established, the individual at
such bank with whom Borrower is dealing and the purpose of the account, (ii)
the bank where such account is opened or maintained shall be acceptable to
(35)
Lender, and (iii) on or before the opening of such deposit account, Borrower
shall as Lender may specify either (A) deliver to Lender a Deposit Account
Control Agreement with respect to such deposit account duly authorized,
executed and delivered by Borrower and the bank at which such deposit account
is opened and maintained or (B) arrange for Lender to become the customer of
the bank with respect to the deposit account on terms and conditions
acceptable to Lender. The terms of this subsection (d) shall not apply to
deposit accounts specifically and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of
Borrower's salaried employees.
(e)Borrower does not own or hold, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the
date hereof, or have any investment account, securities account, commodity
account or other similar account with any bank or other financial institution
or other securities intermediary or commodity intermediary as of the date
hereof, in each case except as set forth in the Information Certificate.
(i)In the event that Borrower shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities,
Borrower shall promptly endorse, assign and deliver the same to Lender,
accompanied by such instruments of transfer or assignment duly executed in
blank as Lender may from time to time specify. If any securities, now or
hereafter acquired by Borrower are uncertificated and are issued to Borrower
or its nominee directly by the issuer thereof, Borrower shall immediately
notify Lender thereof and shall as Lender may specify, either (A) cause the
issuer to agree to comply with instructions from Lender as to such securities,
without further consent of Borrower or such nominee, or (B) arrange for Lender
to become the registered owner of the securities.
(ii)Borrower shall not, directly or indirectly, after the date
hereof open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Lender shall have received not less
than five (5) Business Days prior written notice of the intention of Borrower
to open or establish such account which notice shall specify in reasonable
detail and specificity acceptable to Lender the name of the account, the owner
of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established,
the individual at such intermediary with whom Borrower is dealing and the
purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Lender, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, Borrower shall as Lender
may specify either (1) execute and deliver, and cause to be executed and
delivered to Lender, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Lender to
become the entitlement holder with respect to such investment property on
terms and conditions acceptable to Lender.
(36)
(f)Borrower is not the beneficiary or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that Borrower shall be entitled to or shall receive
any right to payment under any letter of credit, banker's acceptance or any
similar instrument, whether as beneficiary thereof or otherwise after the date
hereof, Borrower shall promptly notify Lender thereof in writing. Borrower
shall immediately, as Lender may specify, either (i) deliver, or cause to be
delivered to Lender, with respect to any such letter of credit, banker's
acceptance or similar instrument, the written agreement of the issuer and any
other nominated person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Lender, consenting to the assignment of the proceeds of the
letter of credit to Lender by Borrower and agreeing to make all payments
thereon directly to Lender or as Lender may otherwise direct or (ii) cause
Lender to become, at Borrower's expense, the transferee beneficiary of the
letter of credit, banker's acceptance or similar instrument (as the case may
be).
(g)Borrower has no commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that
Borrower shall at any time after the date hereof have any commercial tort
claims, Borrower shall promptly notify Lender thereof in writing, which notice
shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by Borrower to Lender
of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of a
security interest, the sending thereof by Borrower to Lender shall be deemed
to constitute such grant to Lender. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the
Collateral and shall be deemed included therein. Without limiting the
authorization of Lender provided in Section 5.2(a) hereof or otherwise arising
by the execution by Borrower of this Agreement or any of the other Financing
Agreements, Lender is hereby irrevocably authorized from time to time and at
any time to file such financing statements naming Lender or its designee as
secured party and Borrower as debtor, or any amendments to any financing
statements, covering any such commercial tort claim as Collateral. In
addition, Borrower shall promptly upon Lender's request, execute and deliver,
or cause to be executed and delivered, to Lender such other agreements,
documents and instruments as Lender may require in connection with such
commercial tort claim.
(h)Borrower does not have any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the
date hereof, except as set forth in the Information Certificate and except for
goods located in the United States in transit to a location of Borrower
permitted herein in the ordinary course of business of Borrower in the
possession of the carrier transporting such goods. In the event that any
goods, documents of title or other Collateral are at any time after the date
hereof in the custody, control or possession of any other person not referred
to in the Information Certificate or such carriers, Borrower shall promptly
notify Lender thereof in writing. Promptly upon Lender's request, Borrower
shall deliver to Lender a Collateral Access Agreement duly authorized,
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executed and delivered by such person and Borrower.
(i)Borrower shall take any other actions reasonably requested by
Lender from time to time to cause the attachment, perfection and first
priority of, and the ability of Lender to enforce, the security interest of
Lender in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that Borrower's signature thereon is required therefor, (ii)
causing Lender's name to be noted as secured party on any certificate of title
for a titled good if such notation is a condition to attachment, perfection or
priority of, or ability of Lender to enforce, the security interest of Lender
in such Collateral, (iii) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if compliance
with such provision is a condition to attachment, perfection or priority of,
or ability of Lender to enforce, the security interest of Lender in such
Collateral, (iv) obtaining the consents and approvals of any Governmental
Authority or third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking all
actions required by any earlier versions of the UCC or by other law, as
applicable in any relevant jurisdiction.
5.3 Exclusions from Collateral. Notwithstanding anything to the
contrary set forth in Section 5.1 above, the types or items of Collateral
described in such Section shall not include any rights or interests in any
license, or license agreement covering Intellectual Property licensed from
third parties, if under the terms of such contract, license, or license
agreement, or applicable law with respect thereto, the valid grant of a
security interest or lien therein to Lender is prohibited and such prohibition
has not been or is not waived or the consent of the other party to such
contract, lease, license, or license agreement has not been or is not
otherwise obtained or under applicable law such prohibition cannot be waived;
provided, that, the foregoing exclusion shall in no way be construed (a) to
apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or
9-408 of the UCC or other applicable law or (b) so as to limit, impair or
otherwise affect Lender's unconditional continuing security interests in and
liens upon any rights or interests of Borrower in or to monies due or to
become due under any such license, or license agreement (including any
Receivables).
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by
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Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Lender but shall, absent manifest errors
or omissions, be considered correct and deemed accepted by Borrower and
conclusively binding upon Borrower as an account stated except to the extent
that Lender receives a written notice from Borrower of any specific exceptions
of Borrower thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have rendered to
Borrower a written statement as provided above, the balance in Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to
Lender by Borrower.
6.3 Collection of Accounts.
(a)Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Receivables and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. Borrower shall
deliver, or cause to be delivered to Lender, a Depository Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and
from time to time Lender may become bank's customer with respect to the
Blocked Accounts and promptly upon Lender's request, Borrower shall execute
and deliver such agreements or documents as Lender may require in connection
therewith. Borrower shall cause all funds received or deposited into the
Blocked Accounts to be transferred each Business Day to the Lender Payment
Account. Borrower agrees that all payments made to such Blocked Accounts or
other funds received and collected by Lender, whether in respect of the
Receivables, as proceeds of Inventory or other Collateral or otherwise shall
be treated as payments to Lender in respect of the Obligations and therefore
shall constitute the property of Lender to the extent of the then outstanding
Obligations.
(b)For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Lender Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business
Day. For the purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of
receipt of immediately available funds by Lender in the Lender Payment Account
provided such payments or other funds and notice thereof are received in
accordance with Lender's usual and customary practices as in effect from time
to time and within sufficient time to credit Borrower's loan account on such
day, and if not, then on the next Business Day. In the event that at any time
or from time to time there are no Loans outstanding, Lender shall be entitled
to an administrative fee in an amount equivalent to the Interest Rate for
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Prime Rate Loans (on a per annum basis) multiplied by the amount of the funds
received in the Blocked Account for such day as calculated by Lender in
accordance with its customary practice.
(c)Borrower and its shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank or other financial institution at which a Blocked Account or
investment account is established or any other bank, financial institution or
other person involved in the transfer of funds to or from the Blocked Accounts
or any investment account arising out of Lender's payments to or
indemnification of such bank, financial institution or other person. The
obligation of Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 Payments.
(a)All Obligations shall be payable to the Lender Payment Account
as provided in Section 6.3 or such other place as Lender may designate from
time to time. Lender shall apply payments received or collected from Borrower
or for the account of Borrower (including the monetary proceeds of collections
or of realization upon any Collateral) as follows: first, to pay any fees,
indemnities or expense reimbursements then due to Lender from Borrower;
second, to pay interest due in respect of any Loans; third, to pay principal
due in respect of the Loans; fourth, to pay or prepay any other Obligations
whether or not then due, in such order and manner as Lender determines.
Notwithstanding anything to the contrary contained in this Agreement, to the
extent Borrower uses any proceeds of the Loans or Letter of Credit
Accommodations to acquire rights in or the use of any Collateral or to repay
any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the obligations shall be deemed applied first to the
Obligations arising from Loans and Letter of Credit Accommodations that were
not used for such purposes and second to the Obligations arising from Loans
and Letter of Credit Accommodations the proceeds of which were used to acquire
rights in or the use of any Collateral in the chronological order in which
Borrower acquired such rights or use.
(b)At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment
of, any of the Obligations, Lender is required to surrender or return such
payment or proceeds to any Person for any reason, then the Obligations
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intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Lender. Borrower shall be liable
to pay to Lender, and does hereby indemnify and hold Lender harmless for the
amount of any payments or proceeds surrendered or returned. This Section 6.4
shall remain effective notwithstanding any contrary action which may be taken
by Lender in reliance upon such payment or proceeds. This Section 6.4 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which
day shall be a Business Day) and the amount of the requested Loan. Requests
received after 12:01 p.m. New York City time on any day shall be deemed to
have been made as of the opening of business on the immediately following
Business Day. All Loans and Letter of Credit Accommodations under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrower when deposited to the credit of
Borrower or otherwise disbursed or established in accordance with the
instructions of Borrower or in accordance with the terms and conditions of
this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction letter furnished by
Borrower to Lender on or about the date hereof and (b) costs, expenses and
fees in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Financing Agreements. All other Loans made
or Letter of Credit Accommodations provided by Lender to Borrower pursuant to
the provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin security
or for the purposes of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans to be considered a "purpose credit"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
7.1 Collateral Reporting.
(a)Borrower shall provide Lender with the following documents in a
form satisfactory to Lender:
(i)on a regular basis as required by Lender, a schedule of
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sales made, credits issued and cash received;
(ii)as soon as possible after the end of each week (but in any
event within three (3) Business Days after the end thereof), or more
frequently as Lender may request, inventory reports by location and category
(including identifying Inventory at locations owned and operated by third
parties or on consignment);
(iii)as soon as possible after the end of each month (but in
any event within ten (10) days after the end thereof), or more frequently as
Lender may request, (A) agings of accounts payable (and including information
indicating the status of payments to owners and lessors of the leased premises
of Borrower), and (B) agings of accounts receivable (together with a
reconciliation to the previous month's aging and general ledger),
(iv)as soon as possible after the end of each calendar quarter
(but in any event within ten (10) days after the end thereof), or more
frequently as Lender may request, report, in form and substance satisfactory to
Lender, from each issuer of an Officers Life Insurance Policy indicating (A)
the net cash surrender value of such Officers Life Insurance Policy and (B) the
status of premium payments in respect of such policy;
(v) upon Lender's request, (A) copies of customer statements,
purchase orders, sales invoices, credit memos, remittance advices and reports,
and copies of deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower;
(vi)as soon as possible after the end of each calendar quarter
(but in any event within thirty (30) days after the end thereof), or more
frequently as Lender may request, Borrower shall furnish to Lender a report
indicating the status of all payments made or required to be made in respect
of all 401(k) plans and other Plans of Borrower or any Guarantor;
(vii)as soon as possible after the end of each calendar year
(but in any event within thirty (30) days after the end thereof), or more
frequently as Lender may request, Borrower shall cause each individual Obligor
to furnish to Lender, a personal financial statement in a form satisfactory to
Lender in reasonable detail fairly presenting the assets and liabilities
(including any contingent liabilities) of such individual Obligor for the
immediately preceding calendar year;
(viii)such other reports as to the Collateral as Lender shall
request from time to time; and
(b)If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor,
shipper or agent to deliver such records, reports, and related documents to
Lender and to follow Lender's instructions with respect to further services at
any time that an Event of Default exists or has occurred and is continuing.
(42)
7.2 Accounts Covenants.
(a)Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any significant
account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any significant account debtor, or any disputes with account
debtors, or any settlement, adjustment or compromise thereof, (ii) all
material adverse information relating to the financial condition of any
significant account debtor and (iii) any event or circumstance which, to
Borrower's knowledge would cause Lender to consider any then existing Accounts
as no longer constituting Eligible Accounts. No credit, discount, allowance
or extension or agreement for any of the foregoing shall be granted to any
account debtor without Lender's consent, except in the ordinary course of
Borrower's business in accordance with practices and policies previously
disclosed in writing to Lender and except as set forth in the schedules
delivered to Lender pursuant to Section 7.1(a) above. So long as no Event of
Default exists or has occurred and is continuing, Borrower shall settle,
adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred
and is continuing, Lender shall, at its option, have the exclusive right to
settle, adjust or compromise any claim, offset, counterclaim or dispute with
account debtors or grant any credits, discounts or allowances. For purposes
of this Section 7.2(a), an account debtor shall be deemed a "significant
account debtor" on any date if the aggregate amount of Accounts owed by such
account debtor exceeds $100,000 on such date.
(b)With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender
in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable foreign,
Federal, State or local laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all
such documentation will be legally enforceable in accordance with its terms.
(c)Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, Borrower's cost therefor and
daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct
(43)
a physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the
form and with such specificity as may be reasonably satisfactory to Lender
concerning such physical count; (c) Borrower shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written
consent of Lender, except for sales of Inventory in the ordinary course of
Borrower's business and except to move Inventory directly from one location
set forth or permitted herein to another such location and except for
Inventory shipped from the manufacturer thereof to Borrower which is in
transit to the locations set forth or permitted herein; (d) upon Lender's
request, Borrower shall, at its expense, no more than one (1) time in any
twelve (12) month period, but at any time or times as Lender may request on or
after an Event of Default, deliver or cause to be delivered to Lender written
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender and upon
which Lender is expressly permitted to rely; (e) Borrower shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes
farm products or the proceeds thereof; (g) Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (h) Borrower shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate Borrower to repurchase such Inventory; (i)
Borrower shall keep the Inventory in good and marketable condition; and (j)
Borrower shall not, without prior written notice to Lender or the specific
identification of such Inventory with respect thereto provided by Borrower to
Lender pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on
consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment: (a) upon Lender's request, Borrower shall, at its expense, no more
than two (2) times in any twelve (12) month period, but at any time or times
as Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender and upon which Lender is expressly permitted to rely,
provided, that, prior to the occurrence of an Event of Default, one of those
appraisals may be an update on a desktop basis of the most recent appraisal
of the Borrower's Equipment by Lender; (b) Borrower shall keep the Equipment
in good order, repair, running and marketable condition (ordinary wear and
tear excepted); (c) Borrower shall use the Equipment with all reasonable care
and caution and in accordance with applicable standards of any insurance and
in conformity with all applicable laws; (d) the Equipment is and shall be used
in Borrower's business and not for personal, family, household or farming use;
(e) Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or
to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
(44)
for the benefit of Borrower in the ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (g) Borrower assumes all responsibility and liability arising
from the use of the Equipment and Real Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's
name, to: (a) at any time an Event of Default exists or has occurred and is
continuing (i) demand payment on Receivables or other Collateral, (ii) enforce
payment of Receivables by legal proceedings or otherwise, (iii) exercise all
of Borrower's rights and remedies to collect any Receivable or other
Collateral, (iv) sell or assign any Receivable upon such terms, for such
amount and at such time or times as the Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or other similar document against an account debtor or other
obligor in respect of any Receivables or other Collateral, (viii) notify the
post office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds
of Collateral to an address designated by Lender, and open and dispose of all
mail addressed to Borrower and handle and store all mail relating to the
Collateral; and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement and the
other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Lender, (ii) have access to any lockbox or postal box
into which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii)
endorse Borrower's name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Lender and deposit the same
in Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
(v) clear Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs or foreign export control authorities in
Borrower's name, Lender's name or the name of Lender's designee, and to sign
and deliver to customs officials powers of attorney in Borrower's name for
such purpose, and to complete in Borrower's or Lender's name, any order, sale
or transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof, (vi) sign Borrower's name on any verification of
Receivables and notices thereof to account debtors or any secondary obligors
or other obligors in respect thereof. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
(45)
7.6 Right to Cure. Lender may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any material agreement with a
third party that affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and
remedies of Lender therein or the ability of Borrower to perform its
obligations hereunder or under the other Financing Agreements, (b) pay or bond
on appeal any judgment entered against Borrower, (c) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing
with respect to the Collateral and (d) pay any amount, incur any expense or
perform any act which, in Lender's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Lender
with respect thereto. Lender may add any amounts so expended to the
Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation to
effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrower. Any payment made or
other action taken by Lender under this Section shall be without prejudice to
any right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have
complete access to all of Borrower's premises during normal business hours and
after notice to Borrower, or at any time and without notice to Borrower if an
Event of Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender
may request, and (c) Lender or its designee may use during normal business
hours such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of Receivables and
realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence; Power and Authority. Borrower and each of its
Subsidiaries is a corporation duly organized and in good standing under the
laws of its state of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where
the nature and extent of the business transacted by it or the ownership of
assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
Borrower's financial condition, results of operation or business or the rights
of Lender in or to any of the Collateral. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within
Borrower's corporate powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of Borrower's certificate of incorporation,
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by-laws, or other organizational documentation, or any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower or its property
are bound and (d) will not result in the creation or imposition of, or require
or give rise to any obligation to grant, any lien, security interest, charge
or other encumbrance upon any property of Borrower. This Agreement and the
other Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a)The exact legal name of Borrower is as set forth on the
signature page of this Agreement and in the Information Certificate. Borrower
has not, during the five years immediately prior to the date of this
Agreement, been known by or used any other corporate or fictitious name or
been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property or assets out
of the ordinary course of business, except as set forth in the Information
Certificate.
(b)Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
Borrower or accurately states that Borrower has none and accurately sets forth
the federal employer identification number of Borrower.
(c)The chief executive office and mailing address of Borrower and
Borrower's Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 to the Information Certificate and its only
other places of business and the only other locations of Collateral, if any,
are the addresses set forth in Schedule 8.2 to the Information Certificate,
subject to the right of Borrower to establish new locations in accordance with
Section 9.2 below. The Information Certificate correctly identifies any of
such locations which are not owned by Borrower and sets forth the owners
and/or operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP (except as to
any interim financial statements, to the extent such statements are subject to
normal year-end adjustments and do not include any notes) and fairly present
the financial condition and the results of operation of Borrower as at the
dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrower to Lender prior to the date
of this Agreement, there has been no act, condition or event which has had or
is reasonably likely to have a Material Adverse Effect since the date of the
most recent audited financial statements of Borrower furnished by Borrower to
Lender prior to the date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
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Schedule 8.4 to the Information Certificate and the other liens permitted
under Section 9.8 hereof. Borrower has good and marketable fee simple title
to or valid leasehold interests in all of its Real Property and good, valid
and merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically
listed on Schedule 8.4 to the Information Certificate or permitted under
Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be
filed by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Except as set forth in item
30 of the Information Certificate, Borrower has paid or caused to be paid all
taxes due and payable or claimed due and payable in any assessment received by
it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and
payable and whether or not disputed.
8.6 Litigation. Except as set forth in Schedule 8.6 to the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrower's knowledge threatened, against or
affecting Borrower, any of its Subsidiaries, its or their assets or business
and there is no action, suit, proceeding or claim by any Person pending, or to
the best of Borrower's knowledge threatened, against Borrower, any of its
Subsidiaries or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrower has or could reasonably be expected to have a Material
Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth in the Information Certificate, Borrower is not in default in any
material respect under, or in violation in any material respect of any of the
terms of, any agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound and Borrower
is in compliance in all material respects with all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders of any
foreign, Federal, State or local Governmental Authority.
8.8 Environmental Compliance.
(a)Except as set forth on Schedule 8.8 to the Information
Certificate, Borrower and any Subsidiary have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in
any manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower and any Subsidiary complies in all material
respects with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder.
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(b)Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any
other person nor is any pending or to the best of Borrower's knowledge
threatened, with respect to any non-compliance with or violation of the
requirements of any Environmental Law by Borrower and any Subsidiary or the
release, spill or discharge, threatened or actual, of any Hazardous Material
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects Borrower or its
business, operations or assets or any properties at which Borrower has
transported, stored or disposed of any Hazardous Materials.
(c)Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d)Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental
Law and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a)Except as disclosed on Schedule 8.9 hereto, each Plan is in
material compliance with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service (or is the subject of a pending application for a
favorable determination letter) and to the best of Borrower's knowledge,
nothing has occurred which would cause the loss of such qualification.
Borrower and its ERISA Affiliates have satisfied the minimum funding
requirements applicable to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan
except as set forth on Schedule 8.9 hereto.
(b)There are no pending or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. Except as disclosed on Schedule 8.9
hereto, there has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan.
(c)(i)No ERISA Event has occurred or is reasonably expected to
occur; (ii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
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liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (iv) Borrower and its ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth in Schedule 8.10 to the Information
Certificate, subject to the right of Borrower to establish new accounts in
accordance with Section 5.2 hereof.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has
the right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrower does not have any Intellectual Property registered, or
subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State
thereof, any political subdivision thereof or in any other country, other than
those described in Schedule 8.11 to the Information Certificate hereto and has
not granted any licenses with respect thereto other than as set forth in
Schedule 8.11 to the Information Certificate. No event has occurred which
permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To the best of
Borrower's knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by
Borrower infringes any patent, trademark, servicemark, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting Borrower
contesting its right to sell or use any such Intellectual Property. Schedule
8.11 to the Information Certificate sets forth all of the agreements or other
arrangements of Borrower pursuant to which Borrower has a license or other
right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other arrangements of
Borrower as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by Borrower after the
date hereof, collectively, the "License Agreements" and individually, a
"License Agreement"). No trademark, servicemark or other Intellectual
Property at any time used by Borrower which is owned by another person, or
owned by Borrower subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than
Lender, is affixed to any Eligible Inventory, except to (a) to the extent
permitted under the term of the License Agreements listed on Schedule 8.11 to
the Information Certificate, and (b) to the extent the sale of Inventory to
which such Intellectual Property is affixed is permitted to be sold by
Borrower under applicable law (including the United States Copyright Act of
1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a)Borrower does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as
set forth in Schedule 8.12 to the Information Certificate.
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(b)Borrower is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of the Subsidiaries
listed on Schedule 8.12 to the Information Certificate as being owned by
Borrower and there are no proxies, irrevocable or otherwise, with respect to
such shares and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.
(c)The issued and outstanding shares of Capital Stock of Borrower
are directly and beneficially owned and held by the persons indicated in the
Information Certificate, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as disclosed in
writing to Lender prior to the date hereof.
(d)Each of the Inactive Subsidiaries (i) has no material
business operations and assets or (ii) has been dissolved or liquidated.
(e)Borrower is Solvent and will continue to be Solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder.
8.13 Labor Disputes.
(a)Set forth on Schedule 8.13 to the Information Certificate is a
list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to Borrower and any union, labor organization
or other bargaining agent in respect of the employees of Borrower on the date
hereof.
(b)There is (i) no significant unfair labor practice complaint
pending against Borrower or, to the best of Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against Borrower
or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual
or consensual restrictions on Borrower or any of its Subsidiaries which
prohibit or otherwise restrict (a) the transfer of cash or other assets (i)
between Borrower and any of its Subsidiaries or (ii) between any Subsidiaries
of Borrower or (b) the ability of Borrower or any of its Subsidiaries to incur
Indebtedness or grant security interests to Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which Borrower is a party or is bound as
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of the date hereof. Borrower has delivered true, correct and complete copies
of such Material Contracts to Lender on or before the date hereof. Borrower
is not in breach of or in default in any material respect of or under any
Material Contract and has not received any notice of the intention of any
other party thereto to terminate any Material Contract.
8.16 Payable Practices. Borrower has not made any material change in the
historical accounts payable practices from those in effect immediately prior
to the date hereof.
8.17 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material
fact necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to
have a Material Adverse Effect, which has not been fully and accurately
disclosed to Lender in writing prior to the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The representations
and warranties set forth herein shall be cumulative and in addition to any
other representations or warranties which Borrower shall now or hereafter
give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a)Borrower shall, and shall cause any Subsidiary (other than
Inactive Subsidiaries) at all times preserve, renew and keep in full force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted.
(b)Borrower shall not change its name unless each of the following
conditions is satisfied: (i) Lender shall have received not less than thirty
(30) days prior written notice from Borrower of such proposed change in its
corporate name, which notice shall accurately set forth the new name; and (ii)
Lender shall have received a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of
Borrower as soon as it is available.
(c)Borrower shall not change its chief executive office or its
mailing address or organizational identification number (or if it does not
have one, shall not acquire one) unless Lender shall have received not less
than thirty (30) days' prior written notice from Borrower of such proposed
change, which notice shall set forth such information with respect thereto as
Lender may require and Lender shall have received such agreements as Lender
may reasonably require in connection therewith. Borrower shall not change its
type of organization, jurisdiction of organization or other legal structure.
9.2 New Collateral Locations. Borrower may only establish new locations
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of its business or Collateral so long as such new location is within the
United States of America and Borrower (a) gives Lender thirty (30) days prior
written notice from Borrower of the intended opening of any such new location
and (b) executes and delivers, or causes to be executed and delivered, to
Lender such agreements, documents, and instruments as Lender may deem
necessary or desirable to protect its interests in the Collateral at such
location.
9.3 Compliance with Laws, Regulations, Etc.
(a)Borrower shall, and shall cause any Subsidiary (other than
Inactive Subsidiaries) to, at all times, comply in all material respects with
all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any foreign, Federal,
State or local Governmental Authority.
(b)Borrower shall give written notice to Lender immediately upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining
knowledge of, (i) the occurrence of any event involving the release, spill or
discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
applicable Environmental Law by Borrower or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the
ordinary course of business and other than as permitted under any applicable
Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrower to Lender. Borrower shall
take prompt and appropriate action to respond to any non-compliance with any
of the Environmental Laws and shall regularly report to Lender on such
response.
(c)Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at
Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's non-compliance or alleged non-compliance with such
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such non-
compliance, or Borrower's response thereto or the estimated costs thereof,
shall change in any material respect.
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(d)Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including attorneys' fees and legal
expenses) directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material, including the
costs of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation of
any closure, remedial or other required plans. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions
and governmental charges upon or against it or its properties or assets,
except for taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, as the case may be, and with respect to which adequate reserves
have been set aside on its books other than unpaid taxes identified in the
Information Certificate. Borrower shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for
herein and Borrower agrees to indemnify and hold Lender harmless with respect
to the foregoing, and to repay to Lender on demand the amount thereof, and
until paid by Borrower such amount shall be added and deemed part of the
Loans, provided, that, nothing contained herein shall be construed to require
Borrower to pay any income or franchise taxes attributable to the income of
Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary (other
than Inactive Subsidiaries) to, at all times, maintain with financially sound
and reputable insurers insurance with respect to the Collateral against loss
or damage and all other insurance of the kinds and in the amounts customarily
insured against or carried by corporations of established reputation engaged
in the same or similar businesses and similarly situated. Said policies of
insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies (other than those which relate solely to
Term Loan Collateral) shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation or reduction of coverage and that
Lender may act as attorney for Borrower in obtaining, and at any time an Event
of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be
named as a loss payee and an additional insured (but without any liability for
any premiums) under such insurance policies and Borrower shall obtain non-
contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be
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payable to Lender as its interests may appear and further specify that Lender
shall be paid regardless of any act or omission by Borrower or any of its
Affiliates. At its option, Lender may apply any insurance proceeds received
by Lender at any time to the cost of repairs or replacement of Collateral
and/or to payment of the Obligations, whether or not then due, in any order
and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a)Borrower shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business
of Borrower and its Subsidiaries in accordance with GAAP. Borrower shall
promptly furnish to Lender all such financial and other information as Lender
shall reasonably request relating to the Collateral and the assets, business
and operations of Borrower, and shall notify the auditors and accountants of
Borrower that Lender is authorized to obtain such information directly from
them. Without limiting the foregoing, Borrower shall furnish or cause to be
furnished to Lender, the following: (i) within thirty (30) days after the end
of each fiscal month, monthly unaudited consolidated financial statements and
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
Subsidiaries as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of Borrower, subject to normal year-end
adjustments and accompanied by a compliance certificate substantially in the
form of Exhibit B hereto, along with a schedule in form reasonably
satisfactory to Lender of the calculations used in determining, as of the end
of such month, whether Borrower was in compliance with the covenants set forth
in Sections 9.17, 9.18, 9.19 and 9.20 of this Agreement for such month and
(ii) within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements and unaudited consolidating financial
statements of Borrower and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements
of shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrower and its Subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrower and its Subsidiaries
as of the end of and for the fiscal year then ended.
(b)Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise,
(ii) any Material Contract of Borrower being terminated or amended or any new
Material Contract entered into (in which event Borrower shall provide Lender
(55)
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $250,000 shall have been entered against Borrower or any of its
properties or assets, (iv) any notification of violation of laws or
regulations received by Borrower, (v) any ERISA Event, and (vi) the occurrence
of any Default or Event of Default.
(c)Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d)Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to Borrower to any court
or other Governmental Authority, to any Affiliate of Lender or to any
participant or assignee or prospective participant or assignee. Borrower
hereby irrevocably authorizes and directs all accountants or auditors to
deliver to Lender, at Borrower's expense, copies of the financial statements
of Borrower and any reports or management letters prepared by such accountants
or auditors on behalf of Borrower and to disclose to Lender such information
as they may have regarding the business of Borrower. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to (and Lender does not
authorize Borrower to), directly or indirectly,
(a)merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it; or
(b)sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for:
(i)sales of Inventory in the ordinary course of business;
(ii)the disposition of worn-out or obsolete Equipment so
long as (A) any proceeds are paid to Lender, which proceeds shall be applied
to reduce the amount of Revolving Loans and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of $50,000 for all
such Equipment disposed of in any fiscal year of Borrower;
(iii)the issuance and sale by Borrower of Capital Stock of
Borrower after the date hereof; provided, that, (A) Lender shall have received
not less than ten (10) Business Days prior written notice of such issuance and
sale by Borrower, which notice shall specify the parties to whom such shares
are to be sold, the terms of such sale, the total amount which it is
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anticipated will be realized from the issuance and sale of such stock and the
net cash proceeds which it is anticipated will be received by Borrower from
such sale, (B) Borrower shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, (C) the terms of such Capital Stock, and the terms and conditions of
the purchase and sale thereof, shall not include any terms that include any
limitation on the right of Borrower to request or receive Loans or Letter of
Credit Accommodations or the right of Borrower to amend or modify any of the
terms and conditions of this Agreement or any of the other Financing
Agreements or otherwise in any way relate to or affect the arrangements of
Borrower with Lender or are more restrictive or burdensome to Borrower than
the terms of any Capital Stock in effect on the date hereof, and (D) except as
Lender may otherwise agree in writing, all of the proceeds from such sale and
issuance shall be paid to Lender for application to the Obligations in such
order and manner as Lender may determine;
(iv)the issuance of Capital Stock of Borrower consisting of
common stock pursuant to (A) an employee stock option or grant or similar
equity plan or 401(k) plans of Borrower or any Guarantor for the benefit of
its employees, directors and consultants and (B) the Warrant dated August 11,
2003 issued by Borrower to Private Fund Lender or (C) the warrants to be
issued by Borrower to the 13% Senior Noteholders in connection with the
amendments to the 13% Senior Noteholder Agreements or (D) the option to be
issued to the Term Loan Lender pursuant to the Term Loan Agreements;
(v)sales of Term Loan Collateral, provided, that, (A) all net
cash proceeds of any such sale shall be applied to permanently reduce the Term
Loan Debt permitted, under the terms of this Agreement, to be secured thereby
and (B) to the extent that Borrower shall remain on such real property after
such disposition as a tenant or otherwise, Borrower shall have delivered to
Lender, prior to any such disposition, a Collateral Access Agreement from the
applicable owner(s) and lessor(s) of leased premises; and
(c)wind up, liquidate or dissolve except, that, any Inactive
Subsidiary may wind up, liquidate or dissolve, provided, that, each of the
following conditions is satisfied as determined by Lender: (i) the winding up,
liquidation and dissolution of such Inactive Subsidiary shall not violate any
law or any order or decree of any court or other Governmental Authority in any
material respect and shall not conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage, deed of trust, or any
other agreement or instrument to which Borrower or Inactive Subsidiary is a
party or may be bound, (ii) such winding up, liquidation or dissolution shall
be done in accordance with the requirements of all applicable laws and
regulations, (iii) effective upon such winding up, liquidation or
dissolution, all of the assets and properties of such Inactive Subsidiary
shall be duly and validly transferred and assigned to Borrower, free and
clear of any liens, restrictions or encumbrances other than the security
interest and liens of Lender (and Lender shall have received such evidence
thereof as Lender may require) and Lender shall have received such deeds,
assignments or other agreements as Lender may request to evidence and confirm
the transfer of such assets to of such Inactive Subsidiary to Borrower, (iv)
Lender shall have received all documents and agreements that Borrower or
Inactive Subsidiary has filed with any Governmental Authority or as are
(57)
otherwise required to effectuate such winding up, liquidation or dissolution,
(v) neither Borrower nor any Subsidiary shall assume any Indebtedness,
obligations or liabilities as a result of such winding up, liquidation or
dissolution, or otherwise become liable in respect of any obligations or
liabilities of the entity that is winding up, liquidating or dissolving,
unless such Indebtedness is otherwise expressly permitted hereunder,
(vi) Lender shall have received not less than ten (10) Business Days prior
written notice of the intention of such Inactive Subsidiary to wind up,
liquidate or dissolve, and (vii) as of the date of such winding up,
liquidation or dissolution and after giving effect thereto, no Default or
Event of Default shall exist or have occurred; or
(d)agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume, suffer or permit to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral, or
file or permit the filing of, or permit to remain in effect, any financing
statement or other similar notice of any security interest or lien with
respect to any such assets or properties, except:
(a)the security interests and liens of Lender;
(b)liens securing the payment of taxes, either not yet overdue or
the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary,
as the case may be and with respect to which adequate reserves have been set
aside on its books;
(c)non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrower's or such
Subsidiary's business to the extent: (i) such liens secure Indebtedness which
is not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower or
such Subsidiary, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have
been set aside on its books;
(d)zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(e)purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f)the security interests in and mortgages and liens upon the Term
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Loan Collateral in favor of Term Loan Debt to secure the Term Loan Debt,
provided, that, the security interests in and mortgages and liens shall at all
times be subject to the terms of the Intercreditor Agreement;
(g)the security interests in and mortgages and liens upon the
Collateral in favor of Private Fund Lender to secure the Private Fund Debt,
provided, that, the security interests in and mortgages and liens upon the
Collateral in favor of Private Fund Lender are and shall at all times be
subject and subordinate to the security interests, and liens therein of Lender
pursuant to the terms of the Intercreditor Agreement;
(h)the security interests in and mortgages and liens upon the
Collateral (including without limitation the Term Loan Collateral) in favor of
the 13% Senior Noteholders to secure the Indebtedness evidenced by the 13%
Senior Noteholder Agreements, provided, that, the security interests in and
mortgages and liens upon the Collateral in favor of the 13% Senior Noteholders
are and shall at all times be subject and subordinate to the security
interests, and liens therein of Lender pursuant to the terms of the
Intercreditor Agreement;
(i)pledges and deposits of cash by Borrower after the date
hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
benefits consistent with the current practices of Borrower as of the date
hereof;
(j)pledges and deposits of cash by Borrower after the date
hereof to secure the performance of tenders, bids, leases, trade contracts
(other than for the repayment of Indebtedness), statutory obligations and
other similar obligations in each case in the ordinary course of business
consistent with the current practices of Borrower as of the date hereof;
provided, that, in connection with any performance bonds issued by a surety or
other person, the issuer of such bond shall have waived in writing any rights
in or to, or other interest in, any of the Collateral in an agreement, in form
and substance satisfactory to Lender;
(k)liens arising from (i) operating leases and the
precautionary UCC financing statement filings in respect thereof and
(ii) equipment or other materials which are not owned by Borrower located on
the premises of Borrower (but not in connection with, or as part of, the
financing thereof) from time to time in the ordinary course of business and
consistent with current practices of Borrower and the precautionary UCC
financing statement filings in respect thereof;
(l)judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate
proceedings diligently pursued, (ii) adequate reserves or other appropriate
provision, if any, as are required by GAAP have been made therefor, (iii) a
stay of enforcement of any such liens is in effect and (iv) Lender may
establish a Reserve with respect thereto; and
(m)the security interests and liens set forth on Schedule 8.4 to
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the Information Certificate.
9.9 Indebtedness. Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, suffer or permit to exist, any Indebtedness or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
performance, dividends or other obligations of any Person, except:
(a)the Obligations;
(b)purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property not to exceed $1,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to
any property of Borrower or any Subsidiary other than the Equipment or Real
Property so acquired, and the Indebtedness secured thereby does not exceed the
cost of the Equipment or Real Property so acquired, as the case may be;
(c)guarantees by any Subsidiaries of Borrower of the Obligations
in favor of Lender;
(d)Indebtedness of Borrower under interest swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
exchange agreements and similar contractual agreements entered into for the
purpose of protecting a Person against fluctuations in interest rates;
provided, that, such arrangements are with banks or other financial
institutions that have combined capital and unimpaired surplus of not less
than $1,000,000,000 and are not for speculative purposes and such Indebtedness
shall be unsecured;
(e)Indebtedness of Borrower to the Term Loan Lender evidenced by or
arising under the Term Loan Agreements (as in effect on the date hereof),
provided, that:
(i)the principal amount of such Indebtedness shall not exceed
$4,200,000, less the aggregate amount of all repayments, repurchases or
redemptions thereof, whether optional or mandatory, plus interest thereon at
the rate provided in the Term Loan Agreements as in effect on the date hereof,
(ii)as of the date hereof, no event of default, or event which
with notice or passage of time or both would constitute an event of default
exists, or has occurred under the Term Loan Agreements;
(iii)Lender shall have received true, correct and complete
copies of all of the Term Loan Agreements, as duly authorized, executed and
delivered by the parties thereto,
(iv)Borrower shall not, directly or indirectly, make, or be
required to make, any payments in respect of such Indebtedness, except, that,
Borrower may make (A) regularly scheduled payments of interest in respect of
the Term Loan Debt in accordance with the terms of the Term Loan Agreements as
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in effect on the date hereof, and (B) mandatory prepayments of principal with
the net cash proceeds received by Borrower from the sale or other disposition
of any of the Term Loan Collateral subject to the terms of the Intercreditor
Agreement;
(v)Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any of the material terms of such Indebtedness or any
of the Term Loan Agreements as in effect on the date hereof, except, that,
Borrower may, after prior written notice to Lender, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness other than pursuant to payments thereof, or to reduce the
interest rate or any fees in connection therewith, or to release any liens or
security interests in any assets or properties of Borrower, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, except with the
proceeds of Refinancing Indebtedness, and
(vi)Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its
behalf promptly after the receipt thereof, or sent by Borrower or on its
behalf concurrently with the sending thereof, as the case may be;
(f)Indebtedness of Borrower to the Private Fund Lender evidenced by
or arising under the Private Fund Loan Agreements (as in effect on the date
hereof), provided, that:
(i)the principal amount of such Indebtedness shall not exceed
$3,500,000 less the aggregate amount of all repayments, repurchases or
redemptions thereof, whether optional or mandatory, plus interest thereon at
the rate provided in the Private Fund Loan Agreement as in effect on the date
hereof,
(ii)as of the date hereof, no event of default, or event which
with notice or passage of time or both would constitute an event of default
exists, or has occurred under the Private Fund Loan Agreements;
(iii)Lender shall have received true, correct and complete
copies of all of the Private Fund Loan Agreements, as duly authorized,
executed and delivered by the parties thereto,
(iv)Borrower shall not, directly or indirectly, make, or be
required to make, any payments in respect of such Indebtedness, except, that,
Borrower may make (A) regularly scheduled payments of interest in respect of
the Private Fund Loan Debt in accordance with the Private Funds of the Private
Fund Loan Lender Agreements as in effect on the date hereof, provided, that,
as of the date of any such payment and after giving effect thereto, no Default
or Event of Default shall exist or have occurred and be continuing,
(v)Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any of the material terms of such Indebtedness or any
of the Private Fund Loan Agreements as in effect on the date hereof, except,
that, Borrower may, after prior written notice to Lender, amend, modify, alter
(61)
or change the Private Funds thereof so as to extend the maturity thereof or
defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness other than pursuant to payments thereof, or
to reduce the interest rate or any fees in connection therewith, or to release
any liens or security interests in any assets or properties of Borrower, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness,
or set aside or otherwise deposit or invest any sums for such purpose, and
(vi)Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf
promptly after the receipt thereof, or sent by Borrower or on its behalf
concurrently with the sending thereof, as the case may be;
(g)unsecured indebtedness of Borrower to SFSC evidenced by or
arising under the SFSC Agreements as in effect on the date hereof; provided,
that:
(i)the principal amount of such indebtedness shall not exceed
$5,900,000, less the aggregate amount of all repayments, repurchases or
redemptions, whether optional or mandatory in respect thereof, plus interest
thereon at the rate provided for in the SFSC Agreements as in effect on the
date hereof,
(ii)such indebtedness of Borrower is subject and subordinate
in right of payment to the right of Lender to receive the prior final payment
and satisfaction in full of all of the Obligations,
(iii)Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except, that, Borrower may make
payments of interest when due in accordance with the terms of the SFSC
Agreements as in effect on the date hereof; provided, that: each of the
following conditions is satisfied as determined by Lender: (A) as of the date
of any such payment and after giving effect thereto, Excess Availability for
each of the immediately preceding thirty (30) consecutive days shall have been
not less than $3,500,000, (B) as of the date of any such payment and after
giving effect thereto, Excess Availability shall be not less than $3,500,000,
(C) Lender shall have received the good faith projections of Borrower, that,
as of the date of any such payment and after giving effect thereto, set forth
the aggregate Excess Availability for the immediately succeeding thirty (30)
consecutive days after the date of any such payment will not be less than
$3,500,000, and (D) as of the date of any such payment and after giving effect
thereto, no Default or Event of Default, shall exist or have occurred and be
continuing,
(iv)Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, except, that Borrower may, after prior
written notice to Lender, amend, modify, alter or change the terms thereof so
as to extend the maturity thereof or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such indebtedness
other than pursuant to payments thereof, or to contribute such indebtedness as
an equity capital contribution, or to reduce the interest rate or any fees in
connection therewith, or to release any liens or security interests in any
(62)
assets and properties of Borrower, or to make any covenants contained therein
less restrictive or burdensome as to Borrower or otherwise more favorable to
Borrower, or (B) redeem, retire, defease, purchase or otherwise acquire such
indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and
(v)Borrower shall furnish to Lender all notices, demands or
other materials concerning such indebtedness either received by Borrower or on
its behalf, promptly after receipt thereof, or sent by such Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(h)the unsecured Indebtedness of Borrower listed on Schedule 9.9
hereto, provided, that, each of the following conditions has been satisfied as
of the date hereof as determined by Lender: (i) such Indebtedness shall be on
terms and conditions acceptable to Lender and shall be subject and subordinate
in right of payment to the right of Lender to receive the prior indefeasible
payment and satisfaction in full payment of all of the Obligations pursuant to
the terms of a subordination and /or forbearance agreement between Lender and
such third party, in form and substance satisfactory to Lender (and Lender
shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such Indebtedness
), provided, that, to the extent such Indebtedness has not been expressly
subordinated to the payment of the Obligations, such Indebtedness shall only
be permitted hereunder to the extent that the holder of such Indebtedness has
not commenced any legal proceeding against Borrower or the Collateral in
respect of such Indebtedness, (ii) except as Lender may otherwise agree in
writing, the principal amount of such Indebtedness shall not be increased
above the amount outstanding on the date hereof, (iii) Borrower shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto, except,
that, Borrower may, after prior written notice to Lender, amend, modify, alter
or change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce
the interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted in the applicable subordination
agreement), or set aside or otherwise deposit or invest any sums for such
purpose, and (iv) Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its
behalf promptly after the receipt thereof, or sent by Borrower or on its
behalf concurrently with the sending thereof, as the case may be;
(i)Indebtedness of Borrower to the 13% Senior Noteholders
evidenced
by or arising under the 13% Senior Noteholder Agreements (as in effect on the
date hereof), provided, that:
(i)the principal amount of such Indebtedness shall not exceed
$23,000,000, less the aggregate amount of all repayments, repurchases or
redemptions thereof, whether optional or mandatory, plus interest thereon at
the rate provided in the 13% Senior Noteholder Agreements as in effect on the
date hereof,
(63)
(ii)as of the date hereof, no event of default, or event which
with notice or passage of time or both would constitute an event of default
exists, or has occurred under the 13% Senior Noteholder Agreements other than
as set forth on Schedule 9.9(i) hereto;
(iii)Lender shall have received true, correct and complete
copies of all of the 13% Senior Noteholder Agreements, as duly authorized,
executed and delivered by the parties thereto,
(iv)Borrower shall not, directly or indirectly, make, or be
required to make, any payments in respect of such Indebtedness, except, that,
Borrower may make, (A) regularly scheduled payments of interest in accordance
as set forth in the 13% Senior Noteholder Agreements (as in effect on the date
hereof) commencing no earlier than November 31, 2004, provided, that, as to
each such payment of interest, each of the following conditions is satisfied:
(1) (a) for the period commencing December 1, 2004 through and including June
30, 2005, as of the date of any such payment and after giving effect thereto,
Excess Availability shall be not less than $3,500,000, and (b) for the period
commencing June 30, 2005 at and all times thereafter, as of the date of any
such payment and after giving effect thereto, Excess Availability shall be not
less than $2,500,000, and (2) as of the date of any such payment and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing, and (B) the scheduled payment of principal due on
no earlier than thirty (30) days after the third anniversary of the date of
this Agreement so long as on the date of any such payment and after giving
effect thereto, no Default or Event of Default shall exist or have occurred
and be continuing;
(v)Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any of the material terms of such Indebtedness or any
of the 13% Senior Noteholder Agreements as in effect on the date hereof,
except, that, Borrower may, after prior written notice to Lender, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof
or defer the timing of any payments in respect thereof, or to forgive or
cancel any portion of such Indebtedness other than pursuant to payments
thereof, or to reduce the interest rate or any fees in connection therewith,
or to release any liens or security interests in any assets or properties of
Borrower, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, except as otherwise permitted in clause (iv) above, and
(vi)Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its
behalf promptly after the receipt thereof, or sent by Borrower or on its
behalf concurrently with the sending thereof, as the case may be;
(j)unsecured Indebtedness representing amounts payable to
trade creditors which is not overdue by more than one hundred twenty (120)
days; provided, that, the aggregate amount of such Indebtedness does not
exceed $500,000 at any time outstanding;
(k)Indebtedness issued in exchange for, or the proceeds of which
are used to extend, refinance, replace or substitute for, Indebtedness
(64)
permitted under Section 9.9(e), (the "Refinancing Indebtedness"); provided,
that, as to any such Refinancing Indebtedness, each of the following
conditions is satisfied: (i) Lender shall have received not less than ten (10)
Business Days' prior written notice of the intention to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory
to Lender, the anticipated amount of such Indebtedness, the schedule of
repayments and maturity date with respect thereto and such other information
with respect thereto as Lender may request, (ii) promptly upon Lender's
request, Lender shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties
thereto, (iii) such Indebtedness incurred by any Borrower or Guarantor shall
be at rates and with fees or other charges no higher or greater than the
prevailing market rates of interest, charges and fees at the time of
incurrence of such Refinancing Indebtedness, (iv) the Refinancing Indebtedness
shall have a Weighted Average Life to Maturity and a final maturity equal to
or greater than the Weighted Average Life to Maturity and the final maturity,
respectively, of the Indebtedness being extended, refinanced, replaced, or
substituted for, (v) as of the date of incurring such Indebtedness and after
giving effect thereto, no Event of Default shall exist or have occurred and be
continuing, (vi) the principal amount of such Refinancing Indebtedness shall
not exceed the principal amount of and interest on the Indebtedness so
extended, refinanced, replaced or substituted for (plus the amount of
reasonable refinancing fees and expenses incurred in connection therewith),
(vii) the Refinancing Indebtedness shall be subject to the same restrictions
set forth in this Agreement and the Intercreditor Agreement, as the
Indebtedness so refinanced, (viii) the Refinancing Indebtedness shall not at
any time include any terms that include any limitation on the right of
Borrowers to request or receive Loans or Letter of Credit Accommodations or
the right of Borrowers or Guarantors to amend, modify, supplement, replace,
renew or extend any of the terms or conditions of this Agreement, any of the
other Financing Agreements, or otherwise in any way adversely affect the
arrangements of Borrowers and Guarantors with Lender and such Refinancing
Indebtedness shall not at any time include terms and conditions which in any
manner adversely affect Lender or any rights of Lender and Lenders as
determined by Lender in good faith, (ix) Borrowers and Guarantors shall not,
directly or indirectly, (A) amend, modify, alter or change in any material
respect the terms of the agreements with respect to such Indebtedness, except,
that, Borrowers and Guarantors may, after prior written notice to Lender,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith,
or to make the provisions thereof less restrictive or burdensome as to
Borrowers or Guarantors, or (B) redeem, retire, defease, purchase or otherwise
acquired such Indebtedness, or set aside or otherwise deposit or invest any
sums for such purpose, except as expressly required pursuant to the terms
thereof or pursuant to regularly scheduled payments permitted herein or with
the proceeds of any other Refinancing Indebtedness permitted hereunder, and
(x) Borrowers and Guarantors shall furnish to Lender all notices or demands in
connection with such Indebtedness received by any Borrower or Guarantor or on
its behalf promptly after the receipt thereof, or sent by any Borrower or
Guarantor, concurrently with the sending thereof, as the case may be;
(65)
(l)unsecured Indebtedness of Borrower to the Non-Consenting 13%
Senior Noteholders evidenced by or arising under the 13% Senior Noteholder
Agreements (without giving effect to the Consent Solicitation), provided,
that:
(i)the principal amount of such Indebtedness shall not exceed
$3,000,000, less the aggregate amount of all repayments, repurchases or
redemptions thereof, whether optional or mandatory, plus interest thereon at
the rate provided in the 13% Senior Noteholder Agreements as in effect on the
date hereof but without giving effect to the Consent Solicitation,
(ii)no proceeding is commenced by any of the Non-Consenting
13% Senior Noteholders against Borrower for the payment of such Indebtedness,
and
(iii)Borrower shall furnish to Lender all notices or demands
in connection with such Indebtedness either received by Borrower or on its
behalf promptly after the receipt thereof, or sent by Borrower or on its
behalf concurrently with the sending thereof, as the case may be;
(m)the Indebtedness set forth on Schedule 9.9 to the Information
Certificate and not subject to Section 9.9(a) through (l) above; provided,
that, (i) Borrower may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof except, that, Borrower may, after prior written notice to Lender,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith,
or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrower shall furnish to Lender all notices or demands in
connection with such Indebtedness either received by Borrower or on its
behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, make, or suffer or permit to exist,
any loans or advance money or property to any person, or any investment in (by
capital contribution, dividend or otherwise) or purchase or repurchase the
Capital Stock or Indebtedness or all or a substantial part of the assets or
property of any person, or form or acquire any Subsidiaries, or agree to do
any of the foregoing, except:
(a)the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b)investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) the terms and conditions of Section 5.2
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hereof shall have been satisfied with respect to the deposit account or
investment account in which such cash or Cash Equivalents are held;
(c)the existing equity investments of Borrower as of the date
hereof in its Subsidiaries and Affiliates, as listed on Schedule 8.12 as set
forth in the Information Certificate, provided, that, Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries;
(d)stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon
Lender's request, together with such stock power, assignment or endorsement by
Borrower as Lender may request;
(e)obligations of account debtors to Borrower arising from
Accounts which are past due evidenced by a promissory note made by such
account debtor payable to Borrower; provided, that, promptly upon the receipt
of the original of any such promissory note by Borrower, such promissory note
shall be endorsed to the order of Lender by Borrower and promptly delivered to
Lender as so endorsed;
(f)loans and advances by Borrower to employees of Borrower not to
exceed the principal amount of $50,000 in the aggregate at any time
outstanding for reasonably and necessary work-related travel or other ordinary
business expenses to be incurred by such employee in connection with their
work for Borrower; and
(g)the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i)
Borrower shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) Borrower shall furnish to Lender all notices or
demands in connection with such loans and advances either received by Borrower
or on its behalf, promptly after the receipt thereof, or sent by Borrower or
on its behalf, concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of Borrower or such Subsidiary now or hereafter outstanding, or
set aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that:
(a)Borrower or any Subsidiary may declare and pay such
dividends or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of Capital Stock for consideration in the form of shares of
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common stock (so long as after giving effect thereto no Change of Control or
other Default or Event of Default shall exist or occur);
(b)any Subsidiary of Borrower may pay dividends to a Borrower;
(c)Borrower may repurchase Capital Stock consisting of common
stock held by employees pursuant to any employee stock ownership plan thereof
upon the termination, retirement or death of any such employee in accordance
with the provisions of such plan, provided, that, as to any such repurchase,
each of the following conditions is satisfied: (i) as of the date of the
payment for such repurchase and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, (ii) such
repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which Borrower is a party or by which
Borrower or its property are bound, and (iv) the aggregate amount of all
payments for such repurchases in any calendar year shall not exceed $100,000.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director, agent or other
person affiliated with Borrower, except in the ordinary course of and pursuant
to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain
in a comparable arm's length transaction with an unaffiliated person or (b)
make any payments of management, consulting or other fees for management or
similar services, or of any Indebtedness (except as otherwise permitted in
Section 9.9 hereof) owing to any officer, employee, shareholder, director or
other Affiliate of Borrower except reasonable compensation to officers,
employees and directors for services rendered to Borrower in the ordinary
course of business.
9.13 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan (other than a Multiemployer Plan)
in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal and State law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such qualification; (c)
not terminate any of such Plans so as to incur any liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated
to pay under Section 302 of ERISA, Section 412 of the Code or the terms of
such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) not
allow or suffer to exist any occurrence of a reportable event or any other
event or condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such Plan that is a single
employer plan, which termination could result in any liability to the Pension
Benefit Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Borrower shall, for financial
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reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years
to end on December 31 of each year and (b) fiscal quarters to end on March 31,
June 30, September 30 and December 31 of each year.
9.15 Change in Business. Borrower shall not engage in any business other
than the business of Borrower on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which Borrower is
engaged on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make
loans or advances to Borrower or any Subsidiary of Borrower, (c) transfer any
of its properties or assets to Borrower or any Subsidiary of Borrower; or (d)
create, incur, assume or suffer to exist any lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, other than
encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of Borrower or any of its
Subsidiaries, (iv) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of Borrower or its
Subsidiary, (v) any agreement relating to permitted Indebtedness incurred by a
Subsidiary of Borrower prior to the date on which such Subsidiary was acquired
by Borrower and outstanding on such acquisition date, and (vi) the extension
or continuation of contractual obligations in existence on the date hereof;
provided, that, any such encumbrances or restrictions contained in such
extension or continuation are no less favorable to Lender than those
encumbrances and restrictions under or pursuant to the contractual obligations
so extended or continued.
9.17 Fixed Charge Coverage Ratio. Borrower and its Subsidiaries, on a
combined basis, shall, shall maintain, a Fixed Charge Coverage Ratio of not
less than the ratio as set forth on Schedule 9.17 hereto for the periods
specified therein.
9.18 Minimum EBITDA. Borrower and its Subsidiaries, on a combined
basis, shall, at all times have, and shall maintain, EBITDA of not less than
the amount set forth on Schedule 9.18 hereto for the periods specified
therein.
9.19 Minimum Excess Availability. The amount of the Excess Availability
of Borrower shall at all times be not less than $500,000.
9.20 Capital Expenditures. Borrower shall not, directly or indirectly,
make any Capital Expenditures in excess of $1,000,000 in any calendar year.
9.21 License Agreements.
(a) Borrower shall (i) promptly and faithfully observe and perform
all of the material terms, covenants, conditions and provisions of the
material License Agreements to be observed and performed by it, at the times
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set forth therein, if any, (ii) not do, permit, suffer or refrain from doing
anything could reasonably be expected to result in a default under or breach
of any of the terms of any material License Agreement, (iii) not cancel,
surrender, modify, amend, waive or release any material License Agreement in
any material respect or any term, provision or right of the licensee
thereunder in any material respect, or consent to or permit to occur any of
the foregoing; except, that, subject to Section 9.21(b) below, Borrower may
cancel, surrender or release any material License Agreement in the ordinary
course of the business of Borrower; provided, that, Borrower shall give
Lender not less than thirty (30) days prior written notice of its intention to
so cancel, surrender and release any such material License Agreement, (iv)
give Lender prompt written notice of any material License Agreement entered
into by Borrower after the date hereof, together with a true, correct and
complete copy thereof and such other information with respect thereto as
Lender may request, (v) give Lender prompt written notice of any material
breach of any obligation, or any default, by any party under any material
License Agreement, and deliver to Lender (promptly upon the receipt thereof by
Borrower in the case of a notice to Borrower, and concurrently with the
sending thereof in the case of a notice from Borrower) a copy of each notice
of default and every other notice and other communication received or
delivered by Borrower in connection with any material License Agreement which
relates to the right of Borrower to continue to use the property subject to
such License Agreement, and (vi) furnish to Lender, promptly upon the request
of Lender, such information and evidence as Lender may require from time to
time concerning the observance, performance and compliance by Borrower or the
other party or parties thereto with the terms, covenants or provisions of any
material License Agreement.
(b)Borrower will either exercise any option to renew or extend the
term of each material License Agreement in such manner as will cause the term
of such material License Agreement to be effectively renewed or extended for
the period provided by such option and give prompt written notice thereof to
Lender or give Lender prior written notice that Borrower does not intend to
renew or extend the term of any such material License Agreement or that the
term thereof shall otherwise be expiring, not less than sixty (60) days prior
to the date of any such non-renewal or expiration. In the event of the
failure of Borrower to extend or renew any material License Agreement, Lender
shall have, and is hereby granted, the irrevocable right and authority, at its
option, to renew or extend the term of such material License Agreement,
whether in its own name and behalf, or in the name and behalf of a designee or
nominee of Lender or in the name and behalf of Borrower, as Lender shall
determine at any time that an Event of Default shall exist or have occurred
and be continuing. Lender may, but shall not be required to, perform any or
all of such obligations of Borrower under any of the License Agreements,
including, but not limited to, the payment of any or all sums due from
Borrower thereunder. Any sums so paid by Lender shall constitute part of the
Obligations.
9.22 After Acquired Real Property. If Borrower hereafter acquires any
Real Property, or fixtures and such Real Property, fixtures or other property
at any one location has a fair market value in an amount equal to or greater
than $250,000 (or if a Default or Event of Default exists, then regardless of
the fair market value of such assets), without limiting any other rights of
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Lender, or duties or obligations of Borrower, upon Lender's request, Borrower
shall execute and deliver to Lender a mortgage, deed of trust or deed to
secure debt, as Lender may determine, in form and substance satisfactory to
Lender and in form appropriate for recording in the real estate records of the
jurisdiction in which such Real Property or other property is located granting
to Lender a first and only lien and mortgage on and security interest in such
Real Property, fixtures or other property (except as Borrower would otherwise
be permitted to incur hereunder or as otherwise consented to in writing by
Lender) and such other agreements, documents and instruments as Lender may
require in connection therewith.
9.23 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) costs and
expenses and fees for insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees, costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (c)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters);
(f) all out-of-pocket expenses and costs heretofore and from time to time
hereafter incurred by Lender during the course of periodic field examinations
of the Collateral and Borrower's operations, plus a per diem charge at the
then standard rate of Lender per person per day for Lender's examiners in the
field and office (which rate is currently $850) per person per eight (8) hour
day and $100 for each hour thereafter); and (g) the fees and disbursements of
counsel (including legal assistants) to Lender in connection with any of the
foregoing.
9.24 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Lender may at any time and from time to time request a
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certificate from an officer of Borrower representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Lender,
Lender may, at its option, cease to make any further Loans or provide any
further Letter of Credit Accommodations until Lender has received such
certificate and, in addition, Lender has determined that such conditions are
satisfied.
9.25 Financial Consultant. At the request of Lender, Borrower hereby
agrees to retain a financial consultant(s) or such other professional
financial and management and consulting firm acceptable to Lender
("Consultant"), which shall assist Borrower in the management of its business
and properties and Borrower shall as part of any such retention irrevocably
authorize and direct the Consultant to share with Lender all budgets, records,
projections, financial information, reports and other information relating to
the Collateral, or the financial condition or operations of the Borrower's
business. Borrower agrees to provide the Consultant with complete access to
all of the Borrower's books and records, all of Borrower's premises and to
Borrower's management as and when deemed necessary by the Consultant. The
Consultant shall also be given an office at the Borrower's premises in which
to render its services. Borrower shall instruct the Consultant to deliver to
Borrower and Lender, simultaneously, any and all reports or information
prepared by the Consultant in connection with any such engagement and to
provide Lender with any additional information or analysis which Lender
requests from Consultant.
9.26 Maximum Compensation. Borrower shall not increase the aggregate
compensation (including, without limitation, bonuses) paid to any of its
executive officers in any fiscal year by more than five (5%) percent over the
compensation paid to such executive officer by Borrower in the immediately
preceding fiscal year.
9.27 Retention of Investment Bank. If at any time after a date that
is eighteen (18) months after the date hereof a payment default occurs under
the 13% Senior Note Agreements, then, in such case, at the option of the 13%
Senior Noteholders (exercised by the vote of the holders of a majority of the
principal amount of the 13% Senior Notes issued pursuant to the terms of the
13% Senior Noteholder Agreements), Borrower shall attempt to sell all or a
portion of its assets, provided, however, that Borrower shall not complete
such sale or enter into a contract for such sale without the prior written
consent of Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a)(i) Borrower fails to pay any of the Obligations when due or
(ii) Borrower or Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.13, 9.14, and 9.16 of this Agreement and such failure
shall continue for fifteen (15) days; provided, that, such fifteen (15) day
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period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such fifteen
(15) day period or which has been the subject of a prior failure within a six
(6) month period or (B) an intentional breach by Borrower or Obligor of any
such covenant or (iii) Borrower or Obligor fails to perform any of the terms,
covenants, conditions or provisions contained in this Agreement or any of the
other Financing Agreements other than those described in Sections 10.1(a)(i)
and 10.1(a)(ii) above;
(b)any representation, warranty or statement of fact made by
Borrower or any Obligor to Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any
material respect;
(c)any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of, any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d)any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$250,000 in the aggregate (provided, that, the entry of a judgment against
Borrower in the Chapter 11 proceeding against Stanwich Financial Services
Corporation, pending the United States Bankruptcy Court, District of
Connecticut, Bridgeport Division, Case No. 01-50831 (AHWS), shall not be
deemed an Event of Default unless and until such judgment is converted to a
lien) and shall remain undischarged or unvacated for a period in excess of
thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
the Collateral having a value in excess of $250,000;
(e)any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f)Borrower or any of its Subsidiaries (other than Inactive
Subsidiaries) becomes insolvent (however defined or evidenced), makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors in
connection with a moratorium or adjustment of the Indebtedness due to them;
(g)a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within forty-
five (45) days after the date of its filing or Borrower or any Obligor shall
file any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
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proceeding or the relief requested is granted sooner;
(h)a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a
law or equity) is filed by Borrower or any Obligor or for all or any part of
its property; or
(i)any default in respect of any Indebtedness of Borrower or any
Obligor (other than Indebtedness owing to Lender), in any case in an amount in
excess of $250,000 (other than the existing defaults in respect of the
Indebtedness described at Section 9.9(h) hereof), which default continues for
more than the applicable cure period, if any, with respect thereto, or any
default by Borrower or any Obligor under any Material Contract, which default
continues for more than the applicable cure period, if any, with respect
thereto and/or is not waived in writing by the other parties thereto;
(j)any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable
with respect to any party hereto or thereto (other than Lender) in accordance
with its terms, or any such party shall challenge the enforceability hereof or
thereof, or shall assert in writing, or take any action or fail to take any
action based on the assertion that any provision hereof or of any of the other
Financing Agreements has ceased to be or is otherwise not valid, binding or
enforceable in accordance with its terms, or any security interest provided
for herein or in any of the other Financing Agreements shall cease to be a
valid and perfected first priority security interest in any of the Collateral
purported to be subject thereto (except as otherwise permitted herein or
therein);
(k)an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of Borrower in an aggregate amount in
excess of $250,000;
(l)any Change of Control;
(m)the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower, any
Obligor or Lender receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Lender, under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against Borrower
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of (i) any of the Collateral having a value in
excess of $250,000 or (ii) any other property of Borrower which is necessary
or material to the conduct of its business;
(n)there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(o)any party (other than Borrower) to any of the Split Dollar
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Agreements (as such terms are defined in each of the Collateral Assignments of
Life Insurance Policies), revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of, such Split Dollar Agreement or other agreement of such party in
favor of Lender;
(p)there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a)At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law,
all of which rights and remedies may be exercised without notice to or consent
by Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies
and powers granted to Lender hereunder, under any of the other Financing
Agreements, the UCC or other applicable law, are cumulative, not exclusive and
enforceable, in Lender's discretion, alternatively, successively, or
concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any of
the other Financing Agreements. Lender may, at any time or times, proceed
directly against Borrower or any Obligor to collect the Obligations without
prior recourse to any Obligor or any of the Collateral.
(b)Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and,
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair
of all or any portion of the Collateral, (iii) require Borrower, at Borrower's
expense, to assemble and make available to Lender any part or all of the
Collateral at any place and time designated by Lender, (iv) collect,
foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose, (vi) sell,
lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem reasonable, for cash,
upon credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future
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delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Lender to
Borrower designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
Borrower waives the posting of any bond which might otherwise be required. At
any time an Event of Default exists or has occurred and is continuing, upon
Lender's request, Borrower will either, as Lender shall specify, furnish cash
collateral to the issuer to be used to secure and fund Lender's reimbursement
obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the Letter of Credit
Accommodations. Such cash collateral shall be in the amount equal to one
hundred ten (110%) percent of the amount of the Letter of Credit
Accommodations plus the amount of any fees and expenses payable in connection
therewith through the end of the expiration of such Letter of Credit
Accommodations.
(c)Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, enforce Borrower's rights against
any account debtor, secondary obligor or other obligor in respect of any of
the Accounts or other Receivables. Without limiting the generality of the
foregoing, Lender may at such time or times (i) notify any or all account
debtors, secondary obligors or other obligors in respect thereof that the
Receivables have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all account debtors, secondary
obligors and other obligors to make payment of Receivables directly to Lender,
(ii) extend the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms or conditions,
any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or
other obligors in respect thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and Lender shall not be liable for
its failure to collect or enforce the payment thereof nor for the negligence
of its agents or attorneys with respect thereto and (iv) take whatever other
action Lender may deem necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and
Borrower shall deliver to Lender such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Lender may require. In the event any account debtor returns
Inventory when an Event of Default exists or has occurred and is continuing,
Borrower shall, upon Lender's request, hold the returned Inventory in trust
for Lender, segregate all returned Inventory from all of its other property,
dispose of the returned Inventory solely according to Lender's instructions,
and not issue any credits, discounts or allowances with respect thereto
without Lender's prior written consent.
(76)
(d)To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrower acknowledges and agrees that it is not
commercially unreasonable for Lender (i) to fail to incur expenses reasonably
deemed significant by Lender to prepare Collateral for disposition or
otherwise to complete raw material or work in process into finished goods or
other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain consents of any Governmental
Authority or other third party for the collection or disposition of Collateral
to be collected or disposed of, (iii) to fail to exercise collection remedies
against account debtors, secondary obligors or other persons obligated on
Collateral or to remove liens or encumbrances on or any adverse claims against
Collateral, (iv) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other persons, whether or not in the same business as Borrower for
expressions of interest in acquiring all or any portion of the Collateral,
(vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that
provide for the auction of assets of the types included in the Collateral or
that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or
credit enhancements to insure Lender against risks of loss, collection or
disposition of Collateral or to provide to Lender a guaranteed return from the
collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by Lender, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Lender in the
collection or disposition of any of the Collateral. Borrower acknowledges that
the purpose of this Section is to provide non-exhaustive indications of what
actions or omissions by Lender would not be commercially unreasonable in
Lender's exercise of remedies against the Collateral and that other actions or
omissions by Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to Borrower or to impose any duties on Lender that would not have been
granted or imposed by this Agreement or by applicable law in the absence of
this Section.
(e)For the purpose of enabling Lender to exercise the rights and
remedies hereunder, Borrower hereby grants to Lender, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to Borrower) to use, assign, license or
sublicense any of the trademarks, service-marks, trade names, business names,
trade styles, designs, logos and other source of business identifiers and
other Intellectual Property and general intangibles now owned or hereafter
acquired by Borrower, wherever the same maybe located, including in such
license reasonable access to all media in which any of the licensed items may
be recorded or stored and to all computer programs used for the compilation or
(77)
printout thereof.
(f)Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of
the Collateral to payment of the Obligations, in whole or in part and in such
order as Lender may elect, whether or not then due. Borrower shall remain
liable to Lender for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
(g)Without limiting the foregoing, upon the occurrence of a
Default or Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower (ii) terminate any provision of this Agreement providing
for any future Loans or Letter of Credit Accommodations to be made by Lender
to Borrower and/or (iii) establish such Reserves as Lender determines without
limitation or restriction, notwithstanding anything to the contrary contained
herein.
10.3 Confession of Judgment.
(a)Borrower, to the extent permitted by law, and without the
further consent of or notice to Borrower, hereby irrevocably and
unconditionally authorizes the Prothonontary, Clerk of Court, or any attorney
of any court of record in the Commonwealth of Pennsylvania, or any other
jurisdiction, as attorney for Borrower to appear for Borrower in such court
and confess judgment against Borrower and in favor of Lender, at any time on
or after an Event of Default exists or has occurred and is continuing, for all
or any portion of the Obligations (including, but not limited to, principal,
interest, fees, costs and expenses and including reasonable attorneys' fees
and legal expenses not to exceed ten (10%) percent of the outstanding and
unpaid Obligations), for which this Agreement or a verified copy hereof shall
be sufficient warrant. The authority to enter judgment shall not be exhausted
by one exercise hereof, but, to the extent permitted by law, shall continue
from time to time until final payment and satisfaction in full of all of the
Obligations. The foregoing right and remedy is in addition to and not in lieu
of any other right or remedy available to Lender under this Agreement, the
other Financing Agreements, applicable law or otherwise.
(b)Borrower, being fully aware of its right to notice and a
hearing concerning the validity of any and all claims that may be asserted
against Borrower by Lender before a judgment can be entered hereunder or
before execution may be levied on such judgment against any and all property
of Borrower, hereby waives each of these rights and agrees and consents to
judgment being entered by confession in accordance with the terms hereof and
execution being levied on such judgment against any and all property of
Borrower, in each case without first giving notice and the opportunity to be
heard on the validity of the claim or claims upon which such judgment is
entered.
(78)
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a)The validity, interpretation and enforcement of this Agreement
and
the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York but
excluding any principles of conflicts of law or other rule of law that would
cause the application of the law of any jurisdiction other than the laws of
the State of New York.
(b)Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the Supreme Court of the State of New York in New
York County and the United States District Court for the Southern, District of
New York, whichever Lender may elect, and waive any objection based on venue
or forum non conveniens with respect to any action instituted therein arising
under this Agreement or any of the other Financing Agreements or in any way
connected with or related or incidental to the dealings of the parties hereto
in respect of this Agreement or any of the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Lender shall have the right to bring
any action or proceeding against Borrower or its property in the courts of any
other jurisdiction which Lender deems necessary or appropriate in order to
realize on the Collateral or to otherwise enforce its rights against Borrower
or its property).
(c)Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth herein and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
(d)BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(79)
(e)Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and non-
appealable judgment or court order binding on Lender, that the losses were the
result of acts or omissions constituting gross negligence or willful
misconduct of Lender. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement. Except as prohibited by law, Borrower waives any right which it
may have to claim or recover in any litigation with Lender any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Borrower: (i) certifies that neither Lender nor
any representative, agent or attorney acting for or on behalf of Lender has
represented, expressly or otherwise, that Lender would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement
or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Lender is
relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give
shall entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of Lender. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Lender of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Lender would otherwise have on any
future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and
(80)
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant
thereto, including amounts paid in settlement, court costs, and the fees and
expenses of counsel. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrower shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. To the extent permitted by applicable
law, Borrower shall not assert, and Borrower hereby waives, any claim against
Lender, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any of the other Financing
Agreements or any undertaking or transaction contemplated hereby. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a)This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from
the date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving
to the other party at least ninety (90) days prior written notice; provided,
that, this Agreement and all other Financing Agreements must be terminated
simultaneously. In addition, Borrower may terminate this Agreement at any
time upon ten (10) days prior written notice to Lender (which notice shall be
irrevocable) and Lender may terminate this Agreement at any time on or after
an Event of Default. Upon the effective date of termination or non-renewal of
this Agreement, Borrower shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender (or at Lender's
option, a letter of credit issued for the account of Borrower and at
Borrower's expense, in form and substance satisfactory to Lender, by an issuer
acceptable to Lender and payable to Lender as beneficiary) in such amounts as
Lender determines are reasonably necessary to secure (or reimburse) Lender
from loss, cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent Obligations, including issued and
outstanding Letter of Credit Accommodations and checks or other payments
provisionally credited to the Obligations and/or as to which Lender has not
yet received final and indefeasible payment and any continuing obligations of
Lender to any bank or other financial institution under or pursuant to any
Deposit Account Control Agreement. The amount of such cash collateral (or
letter of credit, as Lender may determine) as to any Letter of Credit
Accommodations shall be in the amount equal to one hundred ten (110%) percent
(81)
of the amount of the Letter of Credit Accommodations plus the amount of any
fees and expenses payable in connection therewith through the end of the
latest expiration date of such Letter of Credit Accommodations. Such payments
in respect of the Obligations and cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrower for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrower to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York time.
(b)No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing Agreements
and applicable law, shall remain in effect until all such Obligations have
been fully and finally discharged and paid. Accordingly, Borrower waives any
rights which it may have under the UCC to demand the filing of termination
statements with respect to the Collateral, and Lender shall not be required to
send such termination statements to Borrower, or to file them with any filing
office, unless and until this Agreement is terminated in accordance with its
terms and all of the Obligations are paid and satisfied in full in immediately
available funds.
(c)If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's
lost profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
(i)two (2%) percent of From the date hereof to and
the Maximum Credit including December 3, 2004
(ii)one (1%) percent of From December 4, 2004 to and
the Maximum Credit including December 3, 2005
(iii)one-half (.50%) From December 4, 2005 to and
percent of the Maximum including December 2, 2006 or if
Credit the term of this Agreement is
extended, at any time prior to
the end of the then current
term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In
addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h)
(82)
hereof, even if Lender does not exercise its right to terminate this
Agreement, but elects, at its option, to provide financing to Borrower or
permit the use of cash collateral under the United States Bankruptcy Code.
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations.
12.2 Interpretative Provisions.
(a)All terms used herein which are defined in Article 1 or Article
9 of the UCC shall have the meanings given therein unless otherwise defined in
this Agreement.
(b)All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c)All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d)The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e)The word "including" when used in this Agreement shall mean
"including, without limitation".
(f)All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower shall have the burden of proving any lack of good faith
on the part of Lender alleged by Borrower at any time.
(g)An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Lender, if such Event of Default is capable
of being cured as determined by Lender.
(h)Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be
computed unless otherwise specifically provided herein, in accordance with
GAAP as consistently applied and using the same method for inventory valuation
as used in the preparation of the financial statements of Borrower most
recently received by Lender prior to the date hereof. Notwithstanding
anything to the contrary contained in GAAP or any interpretations or other
pronouncements by the Financial Accounting Standards Board or otherwise, the
term "unqualified opinion" as used herein to refer to opinions or reports
provided by accountants shall mean an opinion or report that is not only
unqualified but also does not include any explanatory note or language,
(83)
including any explanation, supplemental comment or other comment concerning
the ability of the applicable person to continue as a going concern or
otherwise.
(i)In the computation of periods of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
(j)Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing
Agreement, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, recodifying, supplementing or interpreting the statute or
regulation.
(k)The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(l)This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(m)This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Lender and
the other parties, and are the products of all parties. Accordingly, this
Agreement and the other Financing Agreements shall not be construed against
Lender merely because of Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests
and demands upon the parties are to be given to the following addresses (or to
such other address as any party may designate by notice in accordance with
this Section):
If to Borrower: Reunion Industries, Inc.
11 Stanwix Street, Suite 1400
Pittsburgh, Pennsylvania 15222
Attention: President
Telephone No.: 412-281-2111
Telecopy No.: 412-281-4700
(84)
If to Lender: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Portfolio Manager -
Reunion Industries
Telephone No.: 212-545-4230
Telecopy No.: 212-545-4420
12.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Confidentiality.
(a)Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information
is furnished by Borrower to Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, in connection with any
litigation to which Lender is a party, (iii) to Participant or to any
Affiliate of Participant (or prospective Participant) or Affiliate of Lender,
so long as such Person shall have been instructed to treat such information as
confidential in accordance with this Section 12.5, or (iv) to counsel for
Lender or Participant (or prospective Participant).
(b)In the event that Lender receives a request or demand to
disclose any confidential information pursuant to any subpoena or court order,
Lender, agrees (i) to the extent permitted by applicable law or if permitted
by applicable law, to the extent Lender determines in good faith that it will
not create any risk of liability to Lender, Lender will promptly notify
Borrower of such request so that Borrower may seek a protective order or other
appropriate relief or remedy and (ii) if disclosure of such information is
required, disclose such information and, subject to reimbursement by Borrower
of Lender's expenses, cooperate with Borrower in the reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will
be accorded to such portion of the disclosed information which Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Borrower or Lender determines in good faith
that it will not create any risk of liability to Lender.
(c)In no event shall this Section 12.5 or any other provision
of this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by Borrower, or any third party or otherwise becomes generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
(85)
becomes available to Lender (or any Affiliate of Lender) on a non-
confidential basis from a person other than Borrower, (iii) to require Lender
to return any materials furnished by Borrower to Lender or prevent Agent
Lender from responding to routine informational requests in accordance with
the Code of Ethics for the Exchange of Credit Information promulgated by The
Robert Morris Associates or other applicable industry standards relating to
the exchange of credit information. The obligations of Lender under this
Section 12.5 shall supersede and replace the obligations of Lender under any
confidentiality letter signed prior to the date hereof.
(d)Notwithstanding anything to the contrary set forth herein or in
any of the other Financing Agreements or any other written or oral
understanding or agreement, (i) any obligations of confidentiality contained
herein, in any of the other Financing Agreements or any such other
understanding or agreement do not apply and have not applied from the
commencement of discussions between the parties to the tax treatment and tax
structure of the transactions contemplated herein (and any related
transactions or arrangements), and (ii) each party (and each of its employees,
representatives, or other agents) may disclose to any and all persons the tax
treatment and tax structuring of the transactions contemplated herein and all
materials of any kind (including opinions or other tax analyses) that are
provided to such party relating to such tax treatment and tax structure, all
within the meaning of Treasury Regulation Section 1.6011-4; provided, that,
each party recognizes that the privilege that it may, in its discretion,
maintain with respect to the confidentiality of a communication relating to
the transactions contemplated herein, including a confidential communication
with its attorney or a confidential communication with a federally authorized
tax practitioner under Section 7525 of the Internal Revenue Code, is not
intended to be affected by the foregoing. Borrower does not intend to treat
the Loans and related transactions as being a "reportable transaction" (within
the meaning of Treasury Regulation Section 1.6011-4). In the event Borrower
determines to take any action inconsistent with such intention, it will
promptly notify Lender thereof. Borrower acknowledges that Lender may treat
the Loans as part of a transaction that is subject to Treasury Regulation
Section 1.6011-4 or Section 301.6112-1, and the Lender may file such IRS forms
or maintain such lists and other records as it may determine is required by
such Treasury Regulations.
12.6 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution
or other person on terms and conditions acceptable to Lender.
12.7 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered
or to be delivered in connection herewith or therewith represents the entire
(86)
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between
the terms of this Agreement and any schedule or exhibit hereto, the terms of
this Agreement shall govern.
12.8 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall
be an original, but all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of this Agreement or any
of the other Financing Agreements by telefacsimile shall have the same force
and effect as the delivery of an original executed counterpart of this
Agreement or any of such other Financing Agreements. Any party delivering an
executed counterpart of any such agreement by telefacsimile shall also deliver
an original executed counterpart, but the failure to do so shall not affect
the validity, enforceability or binding effect of such agreement.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER
CONGRESS FINANCIAL CORPORATION
By:
Title:
Address:
1133 Avenue of the Americas
New York, New York 10036
BORROWER
REUNION INDUSTRIES, INC.
By:
Title:
Chief Executive Office:
11 Stanwix Street, Suite 1400
Pittsburgh, Pennsylvania 15236
(87)
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
Compliance Certificate
To: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 9.6 of the Loan Agreement
(as defined below) as follows:
1. I am the duly elected Chief Financial Officer of Reunion Industries,
Inc., a Delaware corporation ("Borrower"). Capitalized terms used herein
without definition shall have the meanings given to such terms in the Loan and
Security Agreement, dated ______, 2003, by and between Congress Financial
Corporation ("Lender") and Borrower (as such Loan and Security Agreement is
amended, modified or supplemented, from time to time, the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have made, or
have caused to be made under my supervision, a review in reasonable detail of
the transactions and the financial condition of Borrower and each of its
Subsidiaries, during the immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and I have no knowledge
of the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action
which Borrower or any Obligor has taken, is taking, or proposes to take with
respect to such condition or event.
4. I further certify that, based on the review described in Section 2
above, Borrower and its Subsidiaries have not at any time during or at the end
of such fiscal month, except as specifically described on Schedule II attached
hereto or as permitted by the Loan Agreement, done any of the following:
(a)Changed its respective corporate name, or transacted
business under any trade name, style, or fictitious name,
other than those previously described to you and set forth
in the Financing Agreements.
(b)Changed the location of its chief executive office, changed
its jurisdiction of incorporation, changed its type of
organization or changed the location of or disposed of any
of its properties or assets (other than pursuant to the sale
of Inventory in the ordinary course of its business or as
otherwise permitted by Section 9.7 of the Loan Agreement),
or established any new asset locations.
(c)Materially changed the terms upon which it sells goods
(including sales on consignment) or provides services, nor
has any vendor or trade supplier to Borrower or any Obligor
during or at the end of such period materially adversely
changed the terms upon which it supplies goods to Borrower
or such Obligor.
(d)Permitted or suffered to exist any security interest in or
liens on any of its properties, whether real or personal,
other than as specifically permitted in the Financing
Agreements.
(e)Received any notice of, or obtained knowledge of any of the
following not previously disclosed to Lender: (i) the
occurrence of any event involving the release, spill or
discharge of any Hazardous Material in violation of
applicable Environmental Law in a material respect or (ii)
any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any non-
compliance with or violation of any applicable Environmental
Law by Borrower or any Obligor in any material respect or
(B) the release, spill or discharge of any Hazardous
Material in violation of applicable Environmental Law in a
material respect or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production
or disposal of any Hazardous Materials in violation of
applicable Environmental Laws in a material respect or (D)
any other environmental, health or safety matter, which has
a material adverse effect on Borrower or any Obligor or its
business, operations or assets or any properties at which
Borrower or such Obligor transported, stored or disposed of
any Hazardous Materials.
(f)Become aware of, obtained knowledge of, or received
notification of, any breach or violation of any material
covenant contained in any instrument or agreement in respect
of Indebtedness for money borrowed by Borrower or any
Obligor.
5. Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrower is in
compliance with the covenants set forth in Section 9.17, Section 9.18 and 9.20
of the Loan Agreement for such fiscal month.
The foregoing certifications are made and delivered this day of
___________, 20__.
Very truly yours,
REUNION INDUSTRIES, INC.
By:_______________________
Title:______________________
SCHEDULE 9.18
Minimum EBITDA
Period Minimum EBITDA
------ --------------
(for the twelve consecutive
Months then ended)
(i) January 31, 2004 $450,000
(ii) February 29, 2004 $450,000
(iii) March 31, 2004 $550,000
(iv) April 30, 2004 $600,000
(v) May 31, 2004 $650,000
(vi) June 30, 2004 $650,000
(vii) July 31, 2004 $550,000
(viii) August 31, 2004 $550,000
(ix) September 30, 2004 $650,000
(x) October 31, 2004 $650,000
(xi) November 30, 2004 $600,000
(xii) December 31, 2004 $600,000
(xiii) January 31, 2005 $550,000
(xiv) February 29, 2005 $600,000
(xv) March 31, 2005 $650,000
(xvi) April 30, 2005 $650,000
(xvii) May 31, 2005 $700,000
(xviii) June 30, 2005 $700,000
(xix) July 31, 2005 $600,000
(xx) August 31, 2005 $600,000
(xxi) September 30, 2005 $700,000
(xxii) October 31, 2005 $750,000
(xxiii) November 30, 2005 $650,000
(xxiv) December 31, 2005 $650,000
(xxv) January 31, 2006 $650,000
(xxvi) February 28, 2006 $650,000
(xxvii) March 31, 2006 $700,000
(xxviii) April 30, 2006 $700,000
(xxix) May 31, 2006 $750,000
(xxx) June 30, 2006 $750,000
(xxxi) July 31, 2006 $650,000
(xxxii) August 31, 2006 $650,000
(xxxiii) September 30, 2006 $750,000
(xxxiv) October 31, 2006 $800,000
(xxxv) November 30, 2006 $700,000
(xxxvi) December 31, 2006 and as $700,000
at the end of each
calendar month
thereafter
SCHEDULE 9.17
Minimum Fixed Charge Coverage Ratio
Period Minimum Fixed Charge Coverage Ratio
------ -----------------------------------
(for the twelve consecutive
months then ended unless
otherwise specified below)
(i)for the three (3) months .65 to 1
ended March 31, 2004
(ii)for the six (6) months .77 to 1
ended June 30, 2004
(iii)for the nine (9) months .77 to 1
ended September 30, 2004
(iv)December 31, 2004 .80 to 1
(v)March 31, 2005 .83 to 1
(vi)June 30, 2005 .85 to 1
(vii)September 30, 2005 .85 to 1
(viii)December 31, 2005 .90 to 1
(ix)March 31, 2006 .95 to 1
(xi)June 30, 2006 and at the
end of each fiscal quarter
thereafter 1 to 1